Overview of Renewable Portfolio Standards (RPS)
A renewable portfolio standard (RPS) is a standard that requires a set percentage of a state’s electricity utilities to come from renewable sources. Currently, 31 states, Washington D.C, and two U.S. territories have created RPS to help their states diversify their energy portfolios and reduce emissions. Eligible renewable energy sources included in most RPS standards include solar, wind, geothermal, biomass, and some hydroelectric facilities. However, the exact mix of eligible sources, as well as specific RPS targets, varies by state. Most states have existing requirements around 40%, but many, including Virginia, Washington, Nevada, and New Mexico, are beginning to renew and increase their requirements to 100%. The metric used to measure standards also differs by state, but the most common is the percentage of retail electric sales, followed by specific amounts of renewable energy capacity, and percentage of peak demand.
Another set of related energy policies that have risen in popularity in recent years are clean energy standards (CES). Though similar to RPS, some “clean” energy sources under CES are not also “renewable,” enabling the distinction. A “clean” energy source is one that is carbon-free, and a “renewable” energy source is one that is not depleted when used. Nuclear energy is one such “clean” energy source because it has zero carbon emissions, but it is not renewable. Due to the broader definition of CES, most CES policies also have an RPS component. For example, if a CES policy sets a 90% requirement, a sub-RPS policy might require 30% from renewable sources and the remaining 60% can come from any eligible carbon-free or carbon-neutral source.
Arguments in Favor of RPS
Proponents of RPS argue that its policies provide a valuable opportunity for economic growth, diversification of state energy sources, and carbon emission reductions. Though increased adoption of RPS has positive impacts on the environment, most states view environmental impact as a secondary goal. Instead, many states are pursuing RPS policies as an opportunity for economic development through diversification of their respective energy supplies. Due to their positive economic impact, most RPS policy proposals have bipartisan support, but some questions posed by their rising popularity include: How high should future targets be set? And should favored status be given to some renewable energy sources that aren’t as popular because of higher costs to promote their development?
Evidence suggests state RPS policies have helped reduce carbon emissions while also boosting the economy. A recent study found that the greenhouse gas and air pollution reductions from state RPS policies saved the U.S. $7.4 billion in 2013, while a different study from the same team found average annual costs to be about $1 billion, indicating that the benefits outweigh the costs. In addition, 200,000 jobs centered around renewable energy were created in 2013, partially due to the increasing adoption of state RPS. Some smaller benefits from state RPS include lower national water consumption.
One state that has been particularly successful with RPS is Texas. Similar to most states, Texas’s eligible mix of resources was determined by its existing mix of energy and the potential sources of renewable energy given location. Wind energy quickly emerged as a prime area for energy development as a result of high wind speeds in West Texas. The 1999 legislation that put an RPS into place for the state established a robust system for the success of renewable energy in the state including a renewable energy credit program, a transparent market transaction process, and an alternative compliance mechanism. The state has since renewed their RPS many times and now has a standard of 10,000 megawatts of renewable energy.
Given the success of most state RPS, some scholars suggest a national RPS is necessary to more efficiently promote renewable energy and reduce greenhouse gas emissions. Keeping RPS policies at the state level allows for states to utilize their most abundant natural resources to create an energy portfolio that minimizes costs for their specific state. States like Texas can utilize naturally occurring high wind speeds and states like Florida and California can create robust solar energy systems. The challenge, though, is that state-based RPS allows for some states to choose not to implement or renew their RPS, thereby not contributing to the national transition to renewable energy. Due to its larger scope, a national RPS would allow for the benefits of renewable energy to be distributed nationwide without the need for individual state action.
Challenges Facing RPS
In general, RPS is thought to encourage economic development through the increased production of domestic energy. However, skeptics of RPS have argued against the adoption of a national RPS for a few primary reasons. First, “renewable” and “low greenhouse gas emissions” are not synonymous, as there are other cheaper forms of electricity with low CO2 emissions, such as nuclear energy, that are not renewable. Second, the spread out locations of renewable energy sources requires building infrastructure to get energy to people, which is unlikely to happen due to time and resource constraints. Wind and solar energy collection farms, in particular, need to be sited in areas with low population density, but demand for energy in these areas is low compared to further areas with higher population density. To transport the energy to areas with higher demand would require robust transmission line infrastructure, which can be costly and time-intensive to buil.
Following these broad concerns are a few logistical challenges. The first is that areas with a lot of renewable energy and low population density, means that supply of renewable energy can and likely will exceed demand. This presents an even larger problem given the variability of primary renewable energy sources. Supply of these resources is dependent on non-controllable factors such as weather and time of day. As a result, resources such as wind and solar power do not generate energy during times of peak demand. Another resulting logistical issue is that variable energy generation poses challenges for the electricity grid as operators seek to match levels of electricity supply and demand. Variable energy generation increases the risk of supply disruptions and blackouts. Because the grid is highly interconnected, disturbances can quickly spread and impact larger regions. Another problem is that a national RPS policy would likely rely heavily on expanding wind energy. Wind and geothermal energy have the nation’s highest growth percentage among renewable energy sources, however wind is more cost-effective. For its cost-efficacy and high rate of growth, wind will likely become a key vehicle for expanding RPS. Consequently, setting a national RPS requirement of even 15% would mean wind would have to expand exponentially in a short period of time.
Siting issues also present a challenge for the rollout of renewable energy technology. Siting issues could also lead to public discontent in states with high population density around viable sites. Wind and solar farms require large areas of land to generate significant amounts of energy, which can alter habitats for wildlife and result in aesthetic degradation.
