Renewable Portfolio Standards
Trailblazing the renewable energy frontier, in 1983 Iowa became the first state to implement a renewable portfolio standard. Though modest – the RPS only required the state’s two biggest utilities to procure 105 megawatts of renewable generation capacity – the policy positioned Iowa to become a renewable energy leader. Fast forward to today and you will find that 29 states and the District of Columbia have RPS policies in place.
A renewable portfolio standard (RPS), also known as a renewable electricity standard (RES), is a policy that sets hard targets for renewable energy in the near- and long-term to diversify our electricity supply, spur local economic development, reduce pollution, cut water consumption and save consumers money. An RPS requires electric utilities to gradually increase the amount of renewable energy that they deliver to customers. By design, an RPS does not hand-pick a technology; rather all renewables are forced to compete, incentivizing cost reductions and efficiency gains. As a result, RPS policies encourage the growth of additional homegrown sources that diversify our energy portfolios and help hold down electric rates and save ratepayers money, all while boosting private investments for state economies.
Today, 29 states plus the District of Columbia have RPS mandates, while a further eight states have non-binding renewable energy goals. RPS policies apply to approximately 55% of total U.S. electricity sales and will drive the development of 60 gigawatts (GW) of new renewable energy capacity through 2030, according to Lawrence Berkeley National Laboratory (LBNL). Historically, compliance with RPS requirements has been high. LBNL reports that states met roughly 95% of their interim RPS targets in 2014, with some states ahead of schedule. In addition, wind energy has made up the majority (64%) of all RPS-driven renewable capacity growth to date.
Most importantly, consumers are not experiencing substantially higher electric bills as the result of RPS policies. In fact, a 2016 LBNL study found that renewable energy developed to meet state RPS requirements in 2013 reduced consumer electricity bills by up to $1.2 billion. In many areas, adding renewable electricity is saving ratepayers money:
- Xcel, Colorado’s largest utility, says that the state’s RPS will ultimately save consumers as much as $100 million over 25 years.
- A Michigan Public Service Commission (MPSC) report found that Michigan’s RPS resulted in over $2.2 billion in investment in the state.
- A 2010 New England Wind Integration Study found that wholesale electricity prices would decline anywhere from $5 per MWh to $11 per MWh if the region generated 20% of its power from wind, depending on which sites were used for wind production.
Finally, RPS policies are positively impacting the American economy. A 2013 report from the Union of Concerned Scientists identified the following economic benefits provided by RES:
- The renewable energy industry supports American jobs. More than 119,000 people worked in solar-related industries in 2012, while wind energy development employed 75,000 full-time workers across the U.S., including 30,000 jobs at manufacturing facilities throughout the country.
- Renewable energy development promotes investments in the U.S. economy. In 2012, wind power made up 42 percent of all new U.S. electric capacity additions, representing a $25 billion investment in the U.S. economy.
- Renewable energy development outperforms fossil fuels in two important ways when it comes to driving job growth: 1) Renewable energy development is relatively labor intensive, so it creates more jobs per dollar invested than fossil fuel resources and 2) Installing renewable energy facilities uses primarily local workers, so investment dollars are kept in local communities.
- Local landowners benefit from renewable energy development. When wind turbines are installed on privately owned land, the land owners typically receive payments in the form of lease, royalty, or right-of-way payments. These payments can be an important source of income for rural families.
- Renewable energy projects pay property and income taxes that help support states and local communities. For example, wind projects in Iowa, which now generates more than 20 percent of its electricity with wind, provided more than $19.5 million in annual property tax payments to state and local governments in 2011.
- AWEA's State RPS Market Assessments review RPS compliance to-date and estimate remaining RPS demand moving forward, providing wind industry participants with a better understanding of the magnitude of RPS market opportunity.
- The Database of State Incentives for Renewables and Efficiency (DSIRE) regularly updates a summary map of RPS policies by state, and provides detailed information on each state's RPS.
- LBNL's 2016 U.S. Renewables Portfolio Standards Annual Status Report summarizes RPS policy experience to date.
- A 2013 report from the Union of Concerned Scientists examines the economic impact of RES policies, concluding that RES provide economic benefits at 'little or no' cost.