The Hazards of Implementing Renewables Portfolio Standards

Abstract

At the turn of the millennium, common themes on government policy agendas include electricity industry liberalisation and climate change mitigation. The “Renewables Portfolio Standard” (RPS), a policy concept also known as a “tradable green certificate obligation,” is likewise frequently discussed because it aims to use markets to promote carbonless renewable energy in the electric sector. In this article, experience in RPS implementation in several U.S. states is reviewed. As of April 2000, seven U.S. states – Connecticut, Maine, Massachusetts, Nevada, New Jersey, Texas, and Wisconsin – had adopted RPS laws within the past three years. A closer look reveals, however, that six of these state RPSs are missing one or more of the elements of the original concept that are thought necessary to create competitive renewables markets that will support new projects. Indeed, without Texas, it would be easy to write off the RPS as an ineffective policy. That Texas is now by far the largest U.S. market for renewable energy is evidence that the RPS concept can live up to its potential to advance renewable resources at least cost. Though most of these state laws are formally or informally referred to as “Renewables Portfolio Standards,” they differ in important respects from the policy that was originally put forth by the American Wind Energy Association (AWEA) in 1995. (See Table 1: RPS Essentials). Likewise, in Europe, the RPS and its various synonyms are being bantered about without any commonly accepted definition. But the details are critical, as the uncertain – and in some cases useless – results in six U.S. states make clear: • Maine’s law holds no hope of supporting new renewables development of any kind, and will do little to support currently operating projects.