||We currently face a tremendous challenge to transition away from carbon-intensive
fossil fuels as our primary energy source to more sustainable and cleaner options,
including renewable energy. A Renewable Portfolio Standard (RPS), which requires a
minimum share of renewable power generation, is one policy mechanism that has been
adopted by many states in the US to stimulate generation and investment. The recent
passage of the North Carolina Renewable Energy and Energy Efficiency Standard (REPS)
represents the first example of such a program in the South. Attempting to learn from
this experience, this paper evaluates and offers lessons for other southern states
who might adopt a renewable portfolio standard. This work responds to interest by
the North Carolina Sustainable Energy Association (NCSEA) on the potential for other
southern states to adopt a renewable portfolio standard.
Combining historical experience with RPSs, recent experience with the NC REPS, and
interviews with policymakers and energy sector stakeholders in neighboring South Carolina,
I have concluded that while there are barriers to RPS adoption, there are also tremendous
opportunities. There are three elements of a renewable portfolio standard that can
be attractive to South Carolina policymakers:
1. Job growth potential: A renewable industry in North Carolina has been bolstered
by the state’s renewable standard. A similar industry can be built in South Carolina.
2. A state mandate is better than a federal mandate: South Carolina’s ideological
makeup is more inclined to state regulations based on a state’s needs. Other traditionally
conservative states have enacted renewable portfolio standards: Utah, Arizona, South
Dakota, and North Dakota.
3. Benefits to rural electricity cooperatives: Rural electricity cooperative members
in South Carolina have historically been skilled technicians with experience installing
appliances and equipment. These cooperatives could benefit from a new industry that
installed renewable technologies such as solar photovoltaic and solar thermal systems.
While the elements discussed above can drive RPS adoption in South Carolina, the policy
design of North Carolina’s REPS can serve as a template to create the next renewable
standard in the South. It is important to balance the renewable energy goals with
the realities of regulated energy markets in the region. Based upon insights from
North Carolina’s experience and general research of renewable energy policies, I recommend
four policy mechanisms that will make the next renewable standard sustainable and
1. Make the renewable standard mandatory. Twenty-nine states have enacted mandatory
renewable portfolio standards, while four other states have enacted voluntary renewable
targets. A voluntary standard may appear to be more politically palatable, but it
lacks the certainty utilities covet and the mandate utilities need to procure anything
other than “least-cost” generation.
2. Include an alternative compliance payment (ACP) mechanism to clarify noncompliance.
An ACP has been successfully implemented in most RPS states. Such a mechanism helps
to establish an acceptable price for renewable generation in the state. If funds are
generated through an ACP, they can be distributed to potentially viable energy technology
3. Design requirements according to various state resources. The annual renewable
generation requirements have been met by most RPS states. The benefit of these state
standards is that they can be tailored to local resources. Set-asides, such as those
for hog and poultry in North Carolina, can be used to address state-specific resources,
expertise, and industry.
4. Allow energy efficiency programs and out-of-state renewable credits to meet some
portion of renewable standard. The energy efficiency provision gives electricity retailers
greater flexibility to meet the standard and gives greater control of assets. The
out-of-state renewable credits enable the purchase of low-cost renewable generation
that still meets broader emissions reduction goals. However, these advantages need
to be balanced against the local economic interest of keeping resources in state and
focused on renewable energy.
A renewable portfolio standard is a proven policy tool that can help to guide our
transition away from fossil fuels. The lessons learned from other RPS programs, from
North Carolina’s recent and pioneering effort, and from on-the-ground, local stakeholders,
can and should be used to help other southern states to adopt an RPS. This will in
turn help them to meet their energy needs, to diversify their energy sources, and
to mitigate climate change.