Background

As of September 2004, sixteen states had enacted renewable portfolio standards. SERC used the best aspects of these state plans to craft the Renewable Portfolio Standards Sustainable Energy Act.

In drafting RPS legislation, it is critical that renewables are defined in a way that doesn’t advance technologies that do not net environmental benefits. According to the “New Rules Project,” the following conditions should be met when installing a Renewable Portfolio Standard as part of electric restructuring:

• A good RPS will lead to an absolute annual increase in renewable energy generating capacity;
• Over time, a good RPS will lead to an increase of installed renewable energy capacity on a per capita basis; and
• Qualifying facilities under an RPS should NOT include waste-to-energy facilities (incinerators) or high-head hydropower resources.

State RPS Activity

• In June 2001, Nevada Governor Kenny Guinn signed the country’s most aggressive renewable portfolio standard into law. SB 372 requires that 15 percent of all electricity generated in Nevada be derived from new renewables by 2013. The law phases in the renewable energy commitment so that there are 5 percent of new renewables in 2003, 7 percent in 2005, 9 percent in 2007, 11 percent in 2009, 13 percent in 2011, and 15 percent in 2013.
• In Texas, the new utility restructuring legislation requires that 2,000 megawatts (MW) of new renewable energy be built in the state by 2009. This Renewables Portfolio Standard – equivalent to about 3 percent of the state’s electricity production – is expected to result in substantial new wind energy development. The Texas RPS also requires 1,280 MW of generating capacity from renewable technologies by January 2003 – increasing to 1,730 MW by January 2005, 2,280 MW by January 2007, and 2,880 MW by January 2009 (equal to 3 percent). The program has been so successful that the deadlines above will likely be met years in advance of what is required.
• Wisconsin adopted a requirement that 2.2 percent of state electricity demand in 2011 be met by renewable resources. This RPS could lead to the development of 400 MW of new renewable capacity.
• In Iowa, the American Wind Energy Association (AWEA) and other groups have called for an RPS of 10 percent by 2015. If adopted, approximately 1,200 MW of renewable energy generating capacity would be added, with most of it expected to come from wind. Such an RPS could save Iowa consumers more than $300 million over a 25-year period.
• New Jersey, which has adopted an RPS of 6.5 percent by 2012, is also supporting renewable energy through a “public benefit fund,” under which a small charge is levied on each kilowatt-hour (kWh) of electricity sold in the state and used for public interest objectives. The state is expected to channel some $100 million over four years from this fund to renewable energy development.
• Arizona’s RPS has a special provision to take advantage of their most available renewable resource – the sun. The Arizona Corporate Commission (ACC) adopted an Environmental Portfolio Standard that requires the state’s regulated utilities to generate a minimum of 0.2 percent of their total retail energy sales from renewable sources in 2001, increasing to 1.1 percent by 2007. Solar electric technologies must be used to meet half of the requirement through 2003, and then must be used to meet 60 percent of the requirement in 2007.

Please see SERC’s “RPS Renewable Energy” State Activity Page.

Barriers to Passing the RPS Sustainable Energy Act

Several challenges persist:

• New Technology. Most renewables require a new way of thinking about power systems. Renewables involve concepts such as intermittency (e.g., wind turbines run three minutes out of ten, rather than eight minutes out of ten as with coal plants), distributed generation (power located near the user – typically, in small units compared to large, central-station power plants), and new fuel supply networks (in the case of biomass). These issues present a “disruptive” managerial challenge requiring early adopters on both the supplier and consumer end. For a discussion of disruptive technologies and renewables, see REPP’s analysis of PV solar markets.
  
  The non-partisan Congressional Research Service noted that, “because the great bulk of incentives support mature fossil and nuclear equipment, the existing subsidy structure markedly distorts the marketplace for energy in a direction away from renewables.”
  
• Cost Concerns. Even though renewables’ costs have been reduced by over 80 percent since 1980, renewables still cost more than other sources of power. Wind power costs half-a-cent per kilowatt-hour more than natural gas power plants; geothermal, biomass, and photovoltaic (PV) technologies also cost more. Fortunately, in many cases, government research and development as well as corporate innovation have lowered costs beyond the expectations of observers across the political spectrum. In the Northwest, utilities such as Bonneville Power Administration and PacifiCorp are developing wind power because it is nearly competitive with natural gas, but with a much lower risk of high power prices associated with fuel price escalations.
  
  It is worth noting the costs of pollution on human health are not factored into this economic equation. For further analysis of price performance and more background, read: “Winner, Loser or Innocent Victim: Has Renewable Energy Performed as Expected?”
  
• Regulatory Issues. There are a range of regulatory barriers to hooking up renewables to the electricity grid. Transmission concerns affect large renewables plants like wind, geothermal, and biomass. Issues include charging more for intermittent renewables like wind, and charging more to new power plants hooking up to the grid.
  
• Distribution Grid Issues. Small-scale micropower units often include overly-burdensome technical requirements to connect, charging unnecessary fees to connect, and even requiring excessive and needless equipment in spite of established, third-party standards for products such as PV. Distribution grid policies directly affect small customers trying to, for example, put a small wind turbine on their property. Fortunately, California is perhaps more advanced than any other state in easing installation of micropower (or distributed generation such as fuel cells, photovoltaic, or microturbines).