|What are Renewable Portfolio Standards?||Return to top of page|
Overview: A Renewable Portfolio Standard (RPS), alternately known as a Renewable Electricity Standard or a Renewable Energy Standard, places an obligation on electricity supply companies to source a specified proportion of their electricity sales from eligible renewable energy sources.
Aim: The aim of RPS programs is to promote the development of renewable generation technologies such as wind, solar, biomass, landfill gas, and others. Despite technological improvements and expanding economies of scale, the renewable power industry, absent outside support, has difficulty competing economically with conventional power sources such as coal and natural gas fired plants. By obliging energy supply companies to source a given percentage of their sales from renewable sources, a market demand for that power is enhanced or created.
Mechanism: Each RPS program is different. The prevailing mechanism for achieving the above Aim is for the state to require electricity suppliers to acquire certain minimum amounts of renewable energy certificates (RECs). RECs are acquired from qualified renewable energy producers and demonstrate that the supplier has sourced an appropriate amount of electricity from renewable sources, per state regulation. These certificates are subsequently submitted to the relevant state body as proof of purchase of renewable power. If the energy supply company fails to produce sufficient certificates, it may be subject to penalties or an alternative compliance payment (ACP). The specifics of the compliance mechanisms vary widely among state programs.
Adoption: In the United States, 30 states (including D.C.) currently (as of March 2009) have mandatory renewable portfolio standards and a further 6 have renewable portfolio goals. Furthermore, draft legislation currently exists for a federal renewable portfolio standard which will likely pass congress later in 2009. The passage of federal RPS, though, is unlikely to pre-empt or override state programs already in place given the complexity of the programs and state-specific considerations.
|Why The RPS Edge™||Return to top of page|
MJB developed The RPS Edge™ to meet a clear client need for an up-to-date, standardized, searchable and comparable RPS resource. The RPS Edge™ is the only application that enables users to quickly identify, search, compare and/or analyze the key characteristics and parameters of one or more state programs. Advanced analysis and reporting tools mean that users can generate output that suit their specific needs and not have to sift through volumes of unrelated data. The result is substantial time saving on the part of all users, but particularly for those who regularly return for up-to-date and accurate information.
Up-to-date Information: MJB staff regularly contact state utility commissions' staff and industry sources to gather the most up-to-date program data. The RPS Edge™ database is updated regularly to ensure that the data provided to users accurately reflects program developments and status.
Standard Format: Each state RPS program is different, in program characteristics, targets, language, scope and impact. It can be extremely time consuming — and frustrating — to read through paragraphs of descriptive text to find the key, relevant points of the RPS program in question. Information in The RPS Edge™ is presented in standard, easy to read formats that allow the user to save significant time and effort in identifying and analyzing the key characteristics of a state's program, as well in comparing characteristics of multiple states' programs.
Advanced Reporting: Advanced search, comparison and reporting tools allow the user to quickly generate specific results and detailed reports for a particular state or program characteristic. For more specific needs, the comparison report feature enables user-tailored reports for selected states, program targets and characteristics.
The result is accurate, up-to-date information in a in a form that suits your needs and saves time and effort.
|Information in The RPS Edge™||Return to top of page|
The RPS Edge™ is a compendium of critical information on all state RPS programs. The information is presented in a variety of standardized forms so users can quickly evaluate a specific state program, compare multiple characteristics of multiple programs, and/or query specific state program characteristics. For users that demand even more detail, links to program legislation and contact details for regulatory agencies are included.
Users can benefit from a quick overview of a state RPS program by scanning its basic information. This information includes whether the target is mandatory or voluntary, the ultimate target amount and year, the existence of interim targets, credit trading, penalties or incentives, and any favoritism toward particular technology types.
Many states that have mandatory Renewable Portfolio Standards also have additional voluntary targets either for the total proportion of renewable energy or for a particular technology type. These targets are spelled out here.
Program coverage refers to those entities that are expected or obliged to meet the renewable portfolio targets and goals. In many states, municipalities and cooperatives are exempt from the RPS target, have a lower target, or are required to develop their own targets. Furthermore, in some states such as Minnesota, individual utilities (e.g., Xcel Energy) are singled out for special treatment.
Most states with RPS programs have associated renewable energy certificate trading programs. RECs provide a mechanism by which to track the amount of renewable power being sold and to financially reward eligible power producers. For each unit of power that an eligible producer generates, a certificate or credit is issued. These can then be sold either in conjunction with the underlying power or separately to energy supply companies. A market exists for RECs because energy supply companies are required to redeem certificates equal to their obligation under the RPS program. State specific programs or various applications (e.g., WREGIS, M-RETS, NEPOOL GIS) are used to track REC issuance and ownership. These credits can in some programs be 'banked' (for use in future years) or borrowed (to meet current year commitments). There is a great deal of variety among the states in the handling and functioning of RECs and this will be a major issue in integrating state and federal programs.
Terminology: Renewable Energy Certificates are alternately known as Green Tags, Renewable Energy Credits, Renewable Obligation Certificates, Tradable Renewable Certificates, and Green Certificates.
For states with REC trading programs, a Renewable Energy Certificate is issued to eligible producers for each MWh of renewable energy production. Some state programs, in order to promote specific renewable technology types, apply a credit multiplier by which a MWh of electricity produced by a particular technology receives more than one REC. For example, a wind multiplier of 3 means that one MWh of electricity produced with wind technology provides the producer of that electricity with 3 certificates.
Many state programs promote particular technology types by establishing sub-targets known as carve outs or set-asides. In addition to meeting the overall RPS targets, energy supply companies need to show that they have acquired a particular percentage of their power sales from the designated technology type. In some instances, multiple technology types are bundled together in 'tiers' or 'classes' with similar effect. Not all states have set-asides or tiers (some preferring to promote particular technologies through credit multipliers) and each state that groups technologies together in a tier does so differently.
Terminology: Tiers are alternately known as Classes. Set Asides are alternately known as Carve Outs or sub-standards.
Every state defines 'renewable' technologies differently. Ohio, for example, is the only state that counts advanced nuclear power generation as an eligible technology. States often start with an assessment whether the renewable technology is economically feasible in the absence of an RPS program. This is best personified by distinguishing between small and large hydroelectric facilities. Many states exclude existing facilities from benefiting from an RPS program for the same reason. A state's definition of eligible technologies is also driven by the objectives of the program. Programs designed to promote diversity in generation types may include or promote technologies different from programs designed to achieve environmental goals.
In order to motivate compliance, states that have enforceable standards will have penalties for utilities that fail to reach the specified targets. States may chose to set penalty values or make arbitrary penalty amounts when suppliers fail to meet a renewable target. Where specific technologies are promoted through either tiers or set-aside provisions, the penalties for missing these targets are typically separate and higher. Some states have higher penalties for repeat violations and others escalate penalties on a yearly basis according to price indices.
All states either place caps on the cost of the program or include some form of 'escape clause' whereby the regulatory authority can suspend the program or exempt utilities from meeting its requirements. The need for such measures arises from the difficulties in estimating in advance the actual cost of the RPS program. The realized cost to the utility and the ratepayer is not known until the supply and cost base of renewable power, along with actual demand, is established.
With few exceptions, utilities are allowed to recover the additional cost of procuring renewable power. The method by which this achieved varies by state. Some states opt for a ratepayer surcharge while others require utilities to include costs in rate base. In some instances, utilities are even able to recover the cost of penalties associated with non-compliance.
Information on the relevant legislation and regulatory order along with contact information for the regulatory authority is provided. In addition, for users wishing to view the source documentation, links are provided.
Final and year-by-year program targets are included in The RPS Edge™. In addition, year-by-year targets for tiers and specific technologies are also provided. Where individual utilities have specific targets and/or where publicly owned utilities have separate targets, the distinction is noted and the specific targets included.
|Key Tools||Return to top of page|
The RPS Edge™ provides the following tools for users to quickly and easily find and digest critical information on state RPS programs:
|Return to top of page|