Renewable portfolio standards: What you need to know

Following the 2018 elections, there was a flurry of state-level action on climate change and clean energy to begin the new year. Outside of proposals at the federal level for a Green New Deal, many states proposed and passed a suite of climate-related legislation, from emission reduction goals to clean energy procurement targets. Perhaps the most common policy instrument for growing clean energy at the state level is the renewable portfolio standard (RPS).

At their core, renewable portfolio standards–also known as renewable energy standards or RPS–are laws that require a certain percentage of a state’s electricity consumption to be generated by renewable resources. In most cases, an RPS passes through state legislative bodies before being signed by governors, meaning they are less susceptible to changes in state administrations. As a result, renewable portfolio standards are an example of states leveraging long-term policy stability to help grow the renewable energy industry locally.

Renewable portfolio standards typically require an increasing percentage of either state electricity consumption or in-state generation from renewable resources. Some states, like Massachusetts, are net electricity importers, meaning they purchase electricity generated by power plants in other states. Other states, like Wyoming, are net exporters of electricity, meaning that they produce more electricity than they can use in-state and therefore sell their excess generation to utilities and customers in other nearby states. As a result, the distinction between whether a renewable portfolio standard requires in-state electricity consumption or all in-state electricity production to be met with renewable energy is important.

Each state can decide which types of resources are eligible to comply with renewable portfolio standards. The two primary resources always included in renewable portfolio standards are solar energy and wind power. Beyond those two resources, there’s wide variability across renewable portfolio standards: many include hydropower, though some do not; a handful of states include geothermal energy as an eligible resource; and there’s a variety of approaches to including biomass and biofuels within renewable portfolio standards.

The differences in eligible resources can help paint a picture of a state’s broader policy goals and realities. For instance, North Carolina’s RPS includes swine waste and poultry waste as eligible resources, finding a use for the waste products from some of the state’s largest industries. Connecticut’s RPS includes fuel cells as qualified resources, supporting a major manufacturing industry in the state.

Equally important as which resources are eligible to comply with renewable portfolio standards are which generation resources are not eligible. Recently, some states have considered introducing incentives for nuclear power plants. While the electricity generated from nuclear units is carbon-free, nuclear energy is not typically considered renewable. As a result, state policies that include nuclear energy are typically referred to as clean energy targets or emission-free electricity targets rather than as renewable portfolio standards.

An alternative approach to renewable energy policy-making, more often referred to as renewable procurement targets, is for a state to require a specific quantity, as opposed to a percentage, of electricity from a particular resource. For instance, many East Coast states now have mandates to install a certain level of offshore wind capacity, such as New York’s current target of 9,000 megawatts of offshore wind capacity by 2035 and New Jersey’s target of 7,500 megawatts by the same year.

However, some renewable portfolio standards include a “solar carve-out” mechanism. Most renewable portfolio standards set a list of eligible resources and a target percentage of consumption to be met by any combination of those resources. On the other hand, the solar carve-out requires that a fraction of the RPS target is met specifically by one resource: solar energy.

Generally speaking, solar carve-outs allowed policymakers to demonstrate support for their in-state solar markets when the solar economics may not have been very favorable. But as the cost of solar has continued to decline over time, solar carve-outs have become less common as a part of renewable portfolio standards.

As of July 2021, 30 states, the District of Columbia, and three territories have renewable portfolio standards. Additionally, seven states and one territory have non-binding or voluntary renewable energy standards. The two most comprehensive resources for comparing and contrasting the differences among renewable portfolio standards nationwide are the National Conference of State Legislatures (NCSL) and the Database of State Incentives for Renewables & Efficiency (DSIRE).

While more than half of the states in the country have an RPS, not all renewable portfolio standards are created equal. Many states have recently announced ambitious targets, aiming for a higher percentage of renewables by an earlier date than other states with RPS policies:

Most ambitious renewable portfolio standards in the US

Solar energy is a major piece of the puzzle for complying with renewable portfolio standards. If you live in a state with a renewable portfolio standard, the odds are high that your state also provides incentives to improve the economics of going solar. To get a sense of which incentives you may be eligible for and how much you can save from going solar, check out EnergySage’s free Solar Calculator. If the economics are right and you’re ready to take the next step, register for the EnergySage Marketplace to receive free solar quotes from local, pre-screened solar companies.