Renewable Portfolio Standard

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A Renewable Portfolio Standard (RPS), also known as a renewable electricity standard, is a mandate intended to increase the amount of renewable energy production. Generally a utility company will be required by a state to have a certain percentage of its electricity come from certain renewable energy resources. In exchange for meeting these requirements, a tax credit is given to the utility company.[1]

Background

Generally, Renewable Portfolio Standards (RPS) set minimum requirements for the share of electricity received from renewable energy resources by a certain year or date. Usually a certain segment of eligible renewable resources is chosen that best fits the needs of a state or a region's local preferences. While some states set targets for particular kinds of renewable sources of energy to encourage their use, other states allow flexibility if renewable generation carries extra costs. There is no Renewable Portfolio Standard (RPS) at the federal level. As of 2012, 30 states had an enforceable RPS. Additionally, 7 states had voluntary goals for renewable electricity generation as of January 2012. California's electric utilities derive nearly 33 percent of its retail sales from renewable energy resources.[2]

Economic impact

Supporters and opponents of the Renewable Portfolio Standard (RPS) have sought to emphasize the economic impact of the RPS, with advocates arguing that the standard helps create jobs while critics say that the standard has a negative effect on energy prices.

According to the Natural Resources Defense Council, an environmental organization, the RPS has spurred economic activity and job creation in the following states:[3]

  • Kansas: 12,300 jobs were created in 19 wind farms throughout the state.
  • Missouri: The state's RPS provides an incentive for residents to install their own solar energy panels.
  • Ohio: The state has approximately 160 separate companies that employ workers in the solar industry.
  • North Carolina: The RPS "contributed $1.4 billion in investment in clean energy projects" from 2007 to 2012.

According to a study by the Manhattan Institute, a market-oriented policy organization, there were costs associated with the RPS as well:[4]

  • In 2010, the average price of electricity in states with the RPS was 31.9 percent higher than the average price in non-RPS states (commercial electricity rates were 27.4 percent higher in RPS states, while industrial rates were about 30.7 percent higher in RPS states).
  • Between 2001 and 2010, commercial and residential electricity prices in RPS states increased at a faster rate than the prices in states without the RPS.
  • Out of the 10 states with the highest electricity prices, eight of those states had the RPS.
  • Out of the 10 states with the lowest electricity prices, two states had the RPS.

See also

References