Climate Change Policy: Mandatory Renewable Energy Policies
A common enemy of climate policy advocates is just how pervasive the carbon-intensive energy industry is, whether that’s coal generation, natural gas heating and cooking, or even oil products used as transportation fuels. Among the most direct tools to combat how entrenched these dirty fuels have become across the economy is to implement public policy strategies that quite directly require the use of more renewable energy in their stead. If a policy mandates renewable energy through one of these types of mechanisms, it creates action and a direct target that will be implemented, a blunt tool towards making those actions become reality.
Examples of these mandatory renewable energy policies include the following:
Renewable Portfolio Standards
What is it: Policies for Renewable Portfolio Standards, or RPS, are mandates that utilities use a given amount of government-defined energy sources (e.g., some states may include nuclear energy as a carbon-neutral source or biomass as a renewable source, while others may narrowly define which energy sources count as renewable). Typically, RPS policies will be escalating over time and require utilities to generate an increasing percentage of its power from qualified resources. RPS standards can be considered a hammer in the clean energy policy toolbox, simply requiring the appropriate amount of renewable energy rather than incentivizing it, though it also ensures all energy providers covered by the RPS are uniformly expected to adapt.
Is it enacted anywhere: According to the Solar Energy Industries Association, 38 states and the District of Columbia have some form of RPS in place.
In Favor of Renewable Portfolio Standards:
“One of the tools that’s been most effective at all levels of policy is performance standards, such as appliance efficiency standards, building codes, and clean electricity or renewables portfolio standards. These tools can be particularly powerful when they set technology-neutral performance goals, which allow for flexibility in finding the most cost-effective ways to achieve targets without pre-judging the best technologies.” – Michael Mastrandrea, Director of Near Zero at Carnegie Institute for Science
“Since 2017, Nevadan voters have been repeatedly calling for a stronger RPS, and today the legislature delivered. Senate Bill 358 will bring thousands of jobs, reduce costs for consumers and keep our clean energy momentum going. We look forward to seeing Governor Sisolak sign this bill.”- Andy Maggi, executive director of Nevada Conservation League
“We’ve been championing a renewable portfolio standard for more than a decade. It’s a very popular policy venue that many states have implemented, but in some parts of the Kentucky legislature, there’s a total lockdown on even approaching it. In twelve years, it’s only ever received one hearing. Ten years ago, I could have understood that because of the ‘coal politics,’ but the coal market has since bottomed out in many ways in Kentucky. The logic of pushing back on a RPS doesn’t really fit the current landscape.” – Lane Boldman, Executive Director of Kentucky Conservation Committee
“Renewable portfolio standards have been tremendously effective in the past at deploying renewables. Making the minor modification from an RPS to a clean energy standard will still deploy a lot of wind and solar. Its effectiveness could be very high or very limited depending on how high states or the US Congress set the targets.” – Rob Gramlich, Grid Strategies LLC
Against Renewable Portfolio Standards:
“The estimates indicate that 7 years after passage of an RPS program, the required renewable share of generation is 1.8 percentage points higher and average retail electricity prices are 1.3 cents per kWh, or 11% higher; the comparable figures for 12 years after adoption are a 4.2 percentage point increase in renewables’ share and a price increase of 2.0 cents per kWh or 17%. These cost estimates significantly exceed the marginal operational costs of renewables and likely reflect costs that renewables impose on the generation system, including those associated with their intermittency, higher transmission costs, and any stranded asset costs assigned to ratepayers. The estimated reduction in carbon emissions is imprecise, but, together with the price results, indicates that the cost per metric ton of CO2 abated exceeds $115 in all specifications and ranges up to $530, making it least several times larger than conventional estimates of the social cost of carbon.”- Michael Greenstone, Ishan Nath, Economists at the University of Chicago
Read more:
State Renewable Portfolio Standards and Goals – National Conference of State Legislatures
Renewable Energy Standards – Solar Energy Industries Association
U.S. Renewable Portfolio Standards: 2018 Annual Status Report – Lawrence Berkeley
Feed-in Tariffs
What is it: Feed-in Tariffs represent a policy mechanism that provides economic certainty to providers of renewable energy and thus encourages the investment in such sources by provisioning a set price that these generators receive for their energy (typically based on costs to generate at the moment, meaning less mature technologies receive higher rates) while requiring utilities to purchase a given amount of the generation at this price for a set period. These tariffs thus encourage and support innovation around emerging energy sources and ensure business models for them are given time to flourish.
In Favor of Feed-in-Tariffs:
“A lot of the charm of the feed-in tariff is solid, take-it-to-the-bank security and confidence for the investing community. You get access to what is very difficult to get right now: financing.”- Jay Inslee, Governor of Washington and candidate for 2020 Democrat Presidential nomination
Against Feed-in-Tariffs:
“The honest truth is we earn our returns by building plants and putting them into rate base and making profits on them.” A feed-in tariff “does take away that opportunity of utilities to earn on their investments. … If you really, really want us to love this stuff, figure out a way we can make some money on it.”- Betsy Engelking, resource planning and bidding manager for Xcel Energy
Read more:
Feed-in Tariffs: Good Practices and Design Considerations – National Renewable Energy Laboratory
Feed-in tariffs: a primer on feed-in tariffs for solar – Energy Sage
