Executive Summary

Race to the Top: The Expanding Role of U.S. State Renewable Portfolio Standards

The role of American state governments in developing policies to reduce greenhouse gases continues to expand at a steady clip, measured both in the sheer number of policies and their potential impact on emissions. One of the most widely-used policy tools involves creation of a renewable portfolio standard (RPS). Such policies mandate that utilities operating within a state must provide a designated amount or percentage of power from renewable sources as a portion of their overall provision of electricity. This policy is not unique to the United States, as it is employed by a number of national governments as well as subnational entities that range from the state of South Australia to the province of Prince Edward Island. But they have proliferated among the American states at a rapid rate, having been adopted by 22 states and the District of Columbia as of mid 2006, with a strong likelihood of continued expansion in coming years. Well over half of the American public now lives in a state in which an RPS is in operation and at least one state has such a policy in every region of the nation except the Southeast.

This report builds on earlier Pew Center analyses of the evolving state role in climate policy development, placing a particular focus on the RPS experience to date. It presents an overview of this policy tool and examines key factors in both policy formation and implementation. This work considers the experience of all RPS states but devotes particular attention to five case studies that illustrate both common themes and points of divergence among individual state programs. The analysis concludes with an examination of RPS performance to date and some of the leading opportunities and challenges facing future development.

The continued proliferation of state RPSs and the decision in many states to establish second-generation policies illustrate that these policies tend to draw a fairly broad base of political support that often crosses partisan lines. States are compelled to enact or expand RPSs for multiple reasons, and greenhouse gas emissions may or may not be central factors in prompting adoption. Instead, states consistently anticipate significant economic development benefits from promoting renewables, particularly given the promise of developing home-grown energy sources that could lead to instate job creation. In turn, states are also attracted to RPSs by the prospect of greater reliability of electricity supply in coming decades and the prospect of reducing conventional air pollutants through a shift toward expanded use of renewables. Virtually all state RPSs make some use of flexible compliance mechanisms, including tradable renewable energy credits, although there is some inter-state variation in defining what constitutes a renewable energy source.

In recent years, important trends have emerged in RPS development. These include increasingly ambitious levels of renewable energy mandated over future periods, such as 25 percent of New York electricity by 2013 and 20 percent of Nevada electricity by 2015. In turn, many states have begun to differentiate between various sources of renewable electricity, providing special provisions to support certain forms of renewables that have lagged behind others due to high costs, and some are beginning to incorporate energy efficiency as a way to meet RPS goals. In a number of instances, RPSs have clearly played a central role in fostering rapid and significant expansion of the amount of renewable energy provided in a state.

Looking ahead, RPSs face a number of opportunities and challenges. As the number of state policies continues to grow, inevitable questions of cooperation across state boundaries arise. This may be particularly evident in those parts of the country, such as the Northeast and Southwest, in which de facto RPS regions are emerging through the independent actions of neighboring states. In turn, states increasingly face implementation challenges, including issues of siting new renewable energy facilities and, in some instances, expanding transmission capacity. Furthermore, there has been remarkably little engagement between state and federal policy makers on this issue and clearly a strong need for greater intergovernmental collaboration in thinking about sustaining the advances of individual state policies while consideration of a federal version of an RPS continues.