Tailoring renewable portfolio standards to achieve disparate economic and environmental goals

Abstract

Within the United States, Renewable Portfolio Standard (RPS) programs have become a popular public policy initiative for states to enact in order to encourage the use of renewable resources for meeting state energy demand. As more states have adopted RPS programs, the design of these programs have grown more varied and complex as states seek to increase the benefits and decrease the costs of RPS programs by tailoring program design to suit the interests and characteristics of a state. The purpose of this Masters Project is to create a primer for policymakers, interested in designing new, or amending existing, RPS programs, to better understand the policy design options available when developing an RPS program, the potential impacts of structuring an RPS program in a particular manner, and the current best practices and national trends in designing RPS programs. My report uses best practice RPS design principles, created by Wiser et al. in 2003, to evaluate the positive and negative impacts RPS component options have on each principle. The use of an energy-based compliance requirement, unbundled renewable energy certificates (RECs), REC banking, true-up periods, and clearly defined financial penalties for non-compliance are necessary components for the optimal performance of any state RPS program. The goals emphasized by different RPS programs and state-specific characteristics dictate the additional RPS components needed to complete the optimal RPS design for a state. Of the RPS design options analyzed, most have positive impacts on some best practice principles while having negative impacts on others. As a result, it is important for policymakers to clearly define the relative importance of different policy goals that an RPS program aims to achieve in order to select the appropriate RPS component options.