A renewable portfolio standard, often called an RPS, is a regulatory requirement obligating utilities, generation authorities, or load-serving entities to acquire a specific percentage of their supply from renewable sources. In the United States, RPSs are mandated by numerous states. These states have created the requirements as a strategy to foster decarbonization, cleaner air, and local economic development. As an alternative to mandates, some states have created renewable portfolio goals that do not carry penalties for failure to comply. Other states have used a clean energy standard (CES) as an alternative. CESs include non-renewable resources that are considered clean or carbon-free, such as nuclear power. In some cases, states have a CES that includes a component for renewable-only power. This then embeds an RPS into a CES mandate.
Each state defines the resources that qualify as renewable. These often include solar, wind, geothermal, biomass, and certain hydroelectric resources. In some states other resources such as landfill gas, coal-mine methane, hydrokinetic, combined-heat and power, and energy efficiency are included. Some states also require a minimum amount of a specific technology such as solar, rooftop solar, or distributed energy resources (DERs).
The percentage of renewable supply required and the date by which the standard must be met varies by state. And many states specify an early date requirement plus a later date requirement. For instance, as of 2021, Colorado has a 30% requirement by 2020 with a 100% requirement by 2050 for utilities serving 500,000 or more customers. As of late 2021, 30 states plus the District of Columbia have an RPS standard while another eight states have goals. RPSs in the U.S. vary from 15% to 100% required renewables. Although most state RPSs are based on the amount of energy sold or generated by the regulated entity, some are based on generation capacity.
An RPS requirement can be met in multiple ways:
- Renewable energy can be generated by a facility owned by the regulated entity.
- Renewable energy can be purchased by the regulated entity from an owner of a renewable facility.
- And in some states, renewable energy credits (RECs) can be purchased from an owner of a renewable facility. (RECs are tradeable financial instruments that allows the owner of a renewable facility to sell the renewable attribute separately from the energy that the facility generates.)
Implementing an RPS likely means that a region’s renewable energy generation will grow more quickly than if generation planning was solely based on market forces or on traditional reliability-based supply planning.