Increase Renewables with Portfolio Standards
Legislators may increase the proportion of renewable energy purchased within a particular jurisdiction by introducing Renewable Portfolio Standards (RPS) which require electricity suppliers to provide a certain share of their load from renewable electricity. RPS may be supplemented by a market-based system of tradable renewable energy credits as an effective and low-cost compliance mechanism. RPS has been very successful in Texas and as of July 2002 a total new capacity of 942 MW wind and 10 MW hydropower had been achieved there.
Renewable Portfolio Standards (RPS) can play an important role in increasing the proportion of renewables in the energy supply of a particular jurisdiction. RPS require electricity suppliers to supply a specific portion of their retail load with eligible renewable energy sources. This specified portion would usually increase over time until it reaches a designated level. An RPS will often include a market-based system of tradable energy credits, which works as a low-cost compliance mechanism.
An RPS will typically be implemented through legislation, which can be adopted at either federal or state level, but this is not always the case. In Arizona and New York, for example, statewide RPS programmes have been developed through administrative action by utility regulators.
Texas is widely seen as one of the most successful examples of RPS. The programme was enacted in 1999, and requires 2000 MW of new renewable energy capacity to be used by electricity suppliers by 2009. This would effectively triple the current amount of renewable power produced and raise renewables to about 3% of the total electricity supply. This quota was met years in advance and new, additional RPS is expected to result in 15% renewables by 2025. Texas has stringent penalties for non-compliance, and uses flexible credit trading mechanisms to lower enforcement costs. In July 2002 a total new capacity of 942MW wind and 10MW hydropower was in place, exceeding the targets set for 2003.
When developing RPS, there are a number of important factors that legislators must take into account. Perhaps the most important of these is how to define RPS eligible resources. Maine has been cited as an example where RPS has failed to lead to the development of any new renewable energy resources despite imposing a 30% renewable requirement. The reason, according to UNEP, is the overly broad eligibility criteria, which is so broad in fact that it includes fossil-fuel cogeneration.
Getting the size of the RPS mandate right is also important. It must be achievable, yet high enough to provide real incentives for renewable energy growth. The question of enforcement is also important. Both monetary penalties, such as fines, and non-monetary penalties, such as license revocation, could be considered. A further important consideration for legislators is that they must determine whether RPS eligibility will be limited to renewable electricity produced inside the area covered by the programme, or whether it will extend to imported renewable electricity.