Renewable Portfolio Standards

What is a Renewable Portfolio Standard (RPS)?

A Renewable Portfolio Standard, popularly abbreviated as RPS, is a government regulation that requires energy suppliers to produce a certain defined minimum of their output from renewable energy sources, such as solar, wind, geothermal, and biomass. It is also called Renewable Electricity Standard (RES). In UK the equivalent regulation is called a Renewables Obligation (RG). RPS and its equivalents in other countries has forced energy supply companies to invest in renewable energy to meet this requirement.

Renewable Energy Certificates

Renewable energy producers earn certificates for the amount of renewable energy they produce. These certificates can be traded. The holders can sell their earned certificates along with the energy to supply companies. These companies can use these certificates to meet all or part of their renewable obligation. US Federal Laws On November, 9, 1978, the 95th United States Congress passed the Public Utility Regulatory Policies Act, nicknamed PURPA which became effective immediately. It was one of the measures of the US government ward off the drastic effects of events like the first oil shock of 1973. And it came just one year prior to the second oil shock. The purpose of the act was to encourage conservation and to promote use of renewable and domestically produced energy. Later, it received various amendments through Energy Policy Act of 1992and Energy Policy Act of 2005 followed by American Recovery and Reinvestment Act of 2009, and Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.

RPS-Action by Individual States

Different states in the US have their own Renewable Portfolio standards enacted at different times. More than half the states have them now in one form or the other. The rest are following up. Every state is specifying the standards according its own economic and industrial conditions. For example, North Carolina is aiming for “Solar: 0.2 percent by 2018. Swine Waste: 0.2 percent by 2018. Poultry Waste: 900,000 MWh by 2015”, whereas most states simply require a certain percentage of energy to be converted to renewables by a certain target date. Read more here: 

Most often the target dates are year 2020, or 2025. California Senate Bill 350 of October 2015 requires retail sellers of power and public utilities to manage 50 percent of their electric energy from eligible resources of renewable energy by 2030, with intermediate targets. Iowa state took an early step and simply required 105 MW of generating capacity for Investor-Owned Utilities (IOUs). Although the Federal US law is only for IOUs, some states may even require municipalities and electric cooperatives to conform (often at lower levels).

Regulations in Other Countries

Other countries of the world have also adopted similar mechanisms. Prominent among these are Australia, China, Chile, Belgium, Italy, Poland, Sweden, United Kingdom, and especially Germany. The European Union issued the “Directive on Electricity Production from Renewable Energy Sources” in 2001 and modified it in 2007 giving member states an overall target of 20% renewable energy and 30% renewable electricity by 2020. Some member states set even more aggressive targets. Germans have shown real earnestness and recently celebrated a day during which totally renewable energy was consumed. China is looking for 500 GW by 2020. Most of the contribution will come from hydro-electric (300 GW), 150 GW from wind, 30 GW from biomass, and 20 GW solar.

Effect of RPS

RPS were meant to promote conservation and a shift towards renewables. Indeed, that effect is visible, especially when aided by government incentives of various types. Prices are coming down, and awareness is increasing. At the same time, the program has had a positive job creation effect.

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