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Renewable energy explained Portfolio standards

What are renewable portfolio standards?

Renewable portfolio standards (RPS), also referred to as renewable electricity standards (RES), are policies designed to increase the use of renewable energy sources for electricity generation. These policies require or encourage electricity suppliers to provide their customers with a stated minimum share of electricity from eligible renewable resources. Although national RPS or other clean energy policies have been proposed, no federal RPS or similar policy is currently in place. However, most states have enacted their own RPS programs.

A photograph of a wind turbine and power lines.

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As of July 2018, 29 states and the District of Columbia had enforceable renewable portfolio standards (RPS) or other mandated renewable energy policies, and 8 states had voluntary goals or objectives for renewable energy generation.

How have RPS programs been implemented?

State RPS programs vary widely in terms of program structure, enforcement mechanisms, size, and application. No two state programs are exactly the same.

A wide range of policies fall under the RPS umbrella. In general, RPS set a minimum requirement for the share of electricity supply that comes from designated renewable energy resources by a certain date or year. Generally, these resources include wind, solar, geothermal, biomass, and some types of hydroelectricity, but they may also include other resources such as landfill gas, municipal solid waste, and ocean energy. Some programs also give credits for various types of renewable space heating and water heating, fuel cells, energy efficiency measures, and advanced fossil-fueled technologies.

Some states set targets for specific types of renewable energy sources or technologies to encourage the development and use of those resources. Some states focus the RPS requirement on large investor-owned utilities, while others apply the standards to all utilities. Details on state RPS programs are available in the Database of State Incentives for Renewables & Efficiency® (DSIRE).

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A common feature of RPS policies is a renewable electricity credit (REC) trading system that reduces the cost to comply with the RPS. A utility that generates more renewable electricity than the RPS requirement may either trade or sell RECs to other electricity suppliers who may not have enough RPS-eligible electricity to meet their RPS requirements. Some states make a certain number of credits available for sale. In general, only one entity&#mdash;the generator or the REC holder—may take credit for the renewable attribute of generation from RPS-eligible sources. In addition to the cost control mechanism of a REC, many RPS programs have escape clauses if renewable generation exceeds a specified cost threshold.

Does an RPS program increase levels of electricity generation from eligible renewable resources?

States with and without RPS policies have seen increases in the amount of electricity generation from renewable resources. A combination of federal incentives and market conditions, as well as state RPS policies and other programs, have driven increases in renewable electricity generation.

About half of all growth in U.S. renewable electricity generation and generation capacity from 2000 through 2016 was associated with state RPS requirements. By the end of 2016, most states with RPS had met or exceeded interim RPS targets with renewable generation from qualifying RPS generation sources or purchases of RECs. Details on the status of compliance with state RPS in 2016 are available in the report U.S. Renewables Portfolio Standards: 2017 Annual Status Report

A number of factors helped create an environment favorable for RPS compliance:

  • RPS-qualified generation projects that take advantage of federal incentives
  • Reductions in the cost of wind, solar, and other renewable technologies
  • Complementary state and local policies that either reduce costs (for example, equipment rebates) or increase revenue streams (for example, net metering) associated with RPS-eligible technologies

Although some regions may produce excess RPS-qualifying generation, others may produce just enough to meet the requirement or may need to import electricity from nearby regions to meet state targets.

Last updated: October 12, 2018