“Green Means ‘Go?’ – A Colorful Approach to a U.S. National Renewable Portfolio Standard Authors: Benjamin K. Sovacool and Christopher Cooper Public Policy Analysis Econ 539 Catherine Clark

What is a Renewable Portfolio Standard (PRS)? A law mandating that suppliers must provide a certain percentage of their electricity from renewable sources by a particular date.

Renewables Portfolio Standards State Goal ☼ PA: 18%¹ by 2020 ☼ NJ: 22.5% by 2021 CT: 10% by 2010 MA: 4% by % annual increase WI: requirement varies by utility; 10% by 2015 goal IA: 105 MW MN: 25% by 2025; (Xcel: 30% by 2020) TX: 5,880 MW by 2015 *NM: 20% by 2020 (IOUs) 10% by 2020 (co-ops) ☼ AZ: 15% by 2025 CA: 20% by 2010 ☼ NV: 20% by 2015 ME: 30% by 2000; 10% by 2017 goal - new RE State RPS *MD: 7.5% by 2019 ☼ Minimum solar or customer-sited requirement * Increased credit for solar or customer-sited ¹PA: 8% Tier I / 10% Tier II (includes non-renewables); SWH is a Tier II resource HI: 20% by 2020 RI: 15% by 2020 ☼ CO: 20% by 2020 (IOUs) *10% by 2020 (co-ops & large munis ) ☼ DC: 11% by 2022 Source: Database of State Incentives for Renewables and Efficiency March 2007www.dsireusa.org ☼ NY: 24% by 2013 MT: 15% by 2015 *DE: 10% by 2019 IL: 8% by 2013 VT: RE meets load growth by 2012 Solar water heating (SWH) eligible *WA: 15% by 2020

Two Important Acts for Energy Policy Energy Policy Act (EPAct) 2005 Deregulation in this act energy changed energy production from a state based operation to a geographically unlimited business making some state RPS’s ineffective. Public Utilities Regulatory Policies Act (PURPA) Dictates no set price for energy produced by individual consumers.

Net Metering Policies Standards for measuring and crediting on-site, interconnected, small scale renewable energy production (generally thought of as consumer produced renewable energy). These policies vary state to state and even from utility company to utility company.

The Proposed National RPS Traditional State RPS programs are based on obtaining a certain % of energy produced from renewable sources. The proposed National RPS would call for a certain % of energy demanded from renewable sources. The difference is it provides an opportunity for providers to turn to demand-reducing strategies (such as energy efficiency and expanded load management practices) to meet the regulatory goals of the RPS.

The Proposed National RPS The authors propose the national RPS to be implemented by Federal Energy Regulatory Commission (FERC) and to include a national net metering standard to empower individual consumers and keep utility companies from excluding small generators.

The Proposed National RPS Under the proposed national RPS program, utilities would be required to pay market rates for the renewable energy purchased from small generators but would also buy the rights to the Renewable Energy Credit (REC) associated with that energy.

Aren’t we worried about intermittent power from renewables? Ways Denmark, Spain, and Germany have overcome the problem of intermittence: Diversify source locations. Diversify source technologies. Integrate with existing hydropower and demand response. Predicting wind patterns (just as utilities currently do with demand and rainfall).

Economic Benefits Small generators would have to decide whether to sell their energy and their RECs at the retail rate or sell just the energy This could encourage utilities to invest more heavily in their own renewable energy sources as well.

Economic Benefits RECs would be available to sell between utilities on a national level. This could create a secondary market for renewable energy, pushing the price for renewable energy down. Such a system of a credits market would be similar to the sulfur credit program now.

How would this change current energy markets? In a competing market, it is projected that an increased use in renewable energy will alleviate pressure on the natural gas market causes prices of natural gas to fall. Under mandates to keep using renewable energy, this could cause the price of electricity to fall for consumers.

Why is a National RPS better than State RPS? It could: Establish a level terrain for small scale renewable generation across states. Encourage or allow market forces to dictate the most geographically advantageous distribution of investments in renewables. Enable renewable energy technologies to flourish in the places where they are most useful. Allow for vastly different technologies across space. Provide the regulatory predictability that encourages long term planning.

Questions?? Source: Savacool, Benjamin K. and Christopher Cooper. “Green Means ‘Go?’-A Colorful Approach to U.S. National Renewable Portfolio Standards.” Electricity Journal 19:6 (2006) :