Order Code RL34116
Renewable Energy Portfolio Standard (RPS):
Background and Debate Over a National
Requirement
Updated August 6, 2007
Fred Sissine
Specialist in Energy Policy
Resources, Science, and Industry Division
Renewable Energy Portfolio Standard (RPS):
Background and Debate Over a National Requirement
Summary
Under a renewable energy portfolio standard (RPS), retail electricity suppliers
(electric utilities) must provide a minimum amount of electricity from renewable
energy resources or purchase tradable credits that represent an equivalent amount of
renewable energy production. The minimum requirement is often set as a percentage
share of retail electricity sales. More than 20 states have established an RPS, with
most targets ranging from 10% to 20% and most target deadlines ranging from 2010
to 2025. Most states have established tradable credits as a way to lower costs and
facilitate compliance. State RPS action has provided an experience base for the
design of a possible national requirement.
RPS proponents contend that a national system of tradable credits would enable
retail suppliers in states with fewer resources to comply at the least cost by
purchasing credits from organizations in states with a surplus of low-cost production.
Opponents counter that regional differences in availability, amount, and types of
renewable energy resources would make a federal RPS unfair and costly.
In Senate floor action on H.R. 6 in the 110th Congress, S.Amdt. 1537 proposed
a 15% RPS target. The proposal triggered a lively debate, but was ultimately ruled
non-germane. In that debate, opponents argued that a national RPS would
disadvantage certain regions of the country, particularly the Southeastern states.
They contended that the South lacks a sufficient amount of renewable energy
resources to meet a 15% renewables requirement. They further concluded that an
RPS would cause retail electricity prices to rise for many consumers.
RPS proponents countered by citing a study by the Energy Information
Administration (EIA). The report examined the potential impacts of the 15% RPS
proposed in S.Amdt. 1537. It indicated that the South has sufficient biomass
generation, both from dedicated biomass plants and existing coal plants co-firing
with biomass fuel, to meet a 15% RPS. EIA noted further that the estimated net RPS
requirement for the South would not make it “unusually dependent” on other regions
and was in fact “below the national average requirement....” Regarding electricity
prices, EIA estimated that the 15% RPS would likely raise retail prices by slightly
less than 1% over the 2005 to 2030 period. Further, the RPS would likely cause
retail natural gas prices to fall slightly over that period.
In House floor action on H.R. 3221, an RPS amendment (H.Amdt. 748) was
added by a vote of 220 to 190. The bill subsequently passed the House by a vote of
241 to 172. The RPS amendment would set a 15% target for 2020, and would allow
up to 4% of the requirement to be met with energy efficiency measures. Key points
and counter-points of the Senate debate were repeated. On the House floor, RPS
opponents also contended that biomass power technologies were not yet ready for
commercial use and that certain usable forms of biomass were excluded. Proponents
acknowledged that there is a need to expand the definition of biomass resources, and
offered to do so in conference committee.
Contents
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The RPS Mechanism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
State RPS Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Electricity Production Targets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Tradable Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Credit Flexibility Mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Federal RPS Action and Debate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Federal RPS Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Renewable Portfolio Standard (S.Amdt. 1537 to H.R. 6) . . . . . . . . . . . 4
Federal Renewable Portfolio Standard (H.Amdt. 748 to H.R. 3221) . . 5
Comparing H.Amdt. 748 with S.Amdt. 1537 . . . . . . . . . . . . . . . . . . . . 6
Senate RPS Debate (S.Amdt. 1537 to H.R. 6) . . . . . . . . . . . . . . . . . . . . . . . . 8
Resource Availability and Electricity Price Impacts . . . . . . . . . . . . . . . 8
Transmission Constraints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
An Alternative Proposal: The “Clean Energy” Portfolio Standard . . . 11
House RPS Debate (H.Amdt. 748 to H.R. 3221) . . . . . . . . . . . . . . . . . . . . . 11
List of Tables
Table 1. H.Amdt. 748 Compared with S.Amdt. 1537 . . . . . . . . . . . . . . . . . . . . . . 7
Renewable Energy Portfolio Standard
(RPS): Background and Debate Over a
National Requirement
Background
The RPS Mechanism
Under a renewable energy portfolio standard (RPS), retail electricity suppliers
(electric utilities) must either provide a minimum amount of electricity from
renewable energy resources or purchase tradable credits that represent an equivalent
amount of renewable energy production. The minimum requirement is often set as
a percentage share of retail electricity sales, which is usually expressed in terms of
kilowatt-hours (kwh).1 Many RPS programs use tradable credits, sometimes referred
to as renewable energy certificates, to increase flexibility and reduce the cost of
compliance with the purchase mandate, and to facilitate compliance tracking.2
State RPS Action
In the late 1990s, many states began to restructure their electric utility industries
to allow for increased competition. Some of the states with this newly “restructured”
system established an RPS as a way to create a continuing role for renewable energy
in power production.3 Some states without a restructured industry also began to
adopt an RPS. The total number of states with an RPS has grown steadily. In June
2007, the Federal Energy Regulatory Commission (FERC) reported that 23 states and
1 Most states use the percentage requirement. The only exceptions are Texas and Iowa,
which have chosen to specify the minimum requirement in terms of installed capacity,
measured in terms of millions of watts (megawatts). Department of Energy (DOE).
Lawrence Berkeley National Laboratory (Berkeley Lab). Renewables Portfolio Standards:
A Factual Introduction to Experience from the United States. (LBNL-62569) April 2007.
p. 3.
2 DOE. Lawrence Berkeley National Laboratory (LBNL). Weighing the Costs and Benefits
of State Renewables Portfolio Standards: A Comparative Analysis of State-Level Policy
Impact Projections, March 2007. p. 1.
3 Section 210 of the Public Utility Regulatory Policies Act (PURPA) of 1978 had guaranteed
a market for the purchase of electric power produced from small renewable energy facilities.
PURPA let states determine the avoided cost pricing of the electricity production from
renewable energy facilities. The effectiveness of this mechanism lessened with the advent
of electric industry restructuring. Provided that certain conditions are met in any given state,
Section 1253 of the Energy Policy Act of 2005 terminates the PURPA requirements.
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the District of Columbia had an RPS in place,4 collectively covering about 40% of
the national electric load.5 Mandatory state RPS targets range from a low of 2% to
a high of 25%. However, most targets range from 10% to 20% and are scheduled to
be reached between 2010 and 2025. Although this emerging “tapestry of state
programs” continues to spread to more states, the majority of recent actions have
been to increase and accelerate previously established standards.6 Most states have
a similar definition of eligible renewable resources that covers wind, solar,
geothermal, biomass, and several forms of water-based power, including
hydropower, current, wave, tidal, and ocean power.7 At least 19 of the 23 states
allow some form of credit trading. Non-compliance penalties range from about one
cent per kwh to 5.5 cents per kwh. There are significant regional differences in
resource availability. As shown in the previously cited FERC map, most states in the
Southeast and Midwest regions do not have an RPS requirement. Several states have
broadened their RPS provisions to allow certain energy efficiency measures and
technologies to help satisfy the requirement.8
Electricity Production Targets. Most state RPS programs employ an
annual renewable energy target that is set as a percentage of total projected electricity
production.9 With a percentage requirement, the amount of mandated renewable
energy will increase or decrease in proportion to changes in end-use electricity sales.
In general, the targets increase gradually, in a step-wise fashion, over a period of
several years. The scheduled rise of the annual target, and its peak value, are
intended to create predictable long-term purchase obligations that drive new
development and economies of scale. The graduated schedule is intended to allow
time for competition to emerge among eligible resources. Also, to create stability
that allows for long-term contracts and financing that can help keep renewable energy
costs down, the peak target often is designed to remain in place for several years after
4 DOE. FERC. Renewable Energy Portfolio Standards (RPS). This is a map showing the
s t a t u s o f s t a t e a c t i o n o n R P S . U p d a t e d J u n e 7 , 2 0 0 7 .
[http://www.ferc.gov/market-oversight/mkt-electric/overview/2007/elec-ovr-rps.pdf] Also,
DOE’s Office of Energy Efficiency and Renewable Energy (EERE) has posted a map
showing the status of state RPS action. EERE notes that four additional states (Illinois,
Missouri, Vermont, and Virginia) have enacted non-binding “goals” for renewable
electricity production. [http://www.eere.energy.gov/states/maps/renewable_portfolio_
states.cfm]
5 Berkeley Lab, Renewable Portfolio Standards.
6 The Pew Center on Global Climate Change reviewed the status of state RPS policies in
2006. See Race to the Top: The Expanding Role of U.S. State Renewable Portfolio
Standards. 2006. 36 p. [http://www.pewclimate.org/global-warming-in-depth/all_reports/
race_to_the_top/index.cfm]
7 Details about eligible resources and other provisions of state RPS programs are available
from the online Database of State Incentives for Renewable Energy and Energy Efficiency.
[http://www.dsireusa.org/]
8 The most frequently occurring energy efficiency measures are fuel cells and combined heat
and power equipment.
9 Some states use a variation of this target. For example, Texas uses a capacity development
target converted annually into a percentage energy target.
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it is reached. Most state targets include only generation from new renewable energy
facilities, placed in service after the RPS standard is enacted.10
Tradable Credits. Many states have created tradable credits as a way to lower
costs and facilitate compliance. Typically, the owner of a qualified renewable energy
facility receives one credit for each kilowatt-hour of electricity produced. The credits
are treated as a product separate from generated power. Credits are a purely financial
product that represents the attributes of electricity generated from renewable energy
sources. The owner may bundle the credits for sale with its electrical energy.
Alternatively, the owner may sell the credits and power separately. The power would
be sold in the electricity market, and the credits would be sold in a secondary credit
trading market.11
Each year, RPS requires all retail suppliers to show that they have acquired a
number of credits equivalent to the percentage target for the previous year. The retail
suppliers have options for meeting this requirement. Suppliers can choose to build
a renewable energy facility, purchase renewable power bundled with credits, or buy
credits separately through the trading market. They are also free to choose the types
of renewable energy to acquire, the price paid, and the contract terms offered.
Further, they can choose whether to enter into long-term credit and/or renewable
power purchase contracts or to purchase these commodities on the spot market. If
a supplier cannot obtain sufficient credits through these means, it can achieve
“alternative compliance” by purchasing additional credits from the state regulatory
agency. For a supplier that otherwise fails to meet the credit target, most states
require that it purchase additional credits at a higher penalty price.
Credit Flexibility Mechanisms. Spreading credit requirements over a
longer time period can make a credit trading market more flexible. Many credit
trading systems provide a “true-up” (reconciliation) period after the RPS compliance
year. During this period, retailers that are short on their obligation can buy additional
credits and those with excess credits can sell them.12 “Credit banking” can reduce
retailer risk and promote economies of scale by allowing credits to be carried forward
to one or more future years. “Deficit banking” allows a retailer to defer making up
a credit shortage to a future year.13
10 Many states exclude existing hydropower and certain other renewables. Several states
place them in a separate “tier.”
11 Evolution Markets. An Overview of the Renewable Energy Credit (REC) Markets.
January 30, 2006. p. 4.
12 Reconciliation often employs a three-month period.
13 Most states limit the “banking” period, to ensure compliance is not unduly deferred and
to prevent credit hoarding from causing artificial shortages.
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Federal RPS Action and Debate
Federal RPS Legislation
Legislative proposals to establish a federal RPS date back to the 105th Congress.
During the 107th, 108th, and 109th Congresses, the Senate passed an RPS, but it did
not survive conference committee action. Several bills introduced in the 110th
Congress would create an RPS.14 In Senate floor action on H.R. 6, S.Amdt. 1537
proposed a 15% RPS. The proposal triggered a lively debate, but was ultimately
ruled non-germane. In House action during the 110th Congress, H.R. 969 was
introduced with a proposal for a 20% RPS target. The House Leadership indicates
that H.R. 969 may be offered as a floor amendment to H.R. 3221, the House energy
independence legislation.15
Renewable Portfolio Standard (S.Amdt. 1537 to H.R. 6). During
Senate floor debate on H.R. 6, S.Amdt. 1537 proposed to add an RPS title to the bill.
The proposal would have modified Title VI of the Public Utility Regulatory Policies
Act of 1978 to establish an RPS for retail electric utilities that would be administered
by the Department of Energy (DOE). For each retail supplier that sells more than
four billion kwh per year,16 the RPS would set a minimum electricity production
requirement from renewable resources.
The standard would start at 3.75% in 2010, rising to 7.5% in 2013, 11.25% in
2017, and then reaching a peak of 15% in 2020. Resources eligible to meet the RPS
would include wind, solar, geothermal, biomass, landfill gas, ocean (including
current, wave, tidal, and ocean thermal), and incremental hydropower. Existing
generation from hydroelectric and municipal solid waste facilities would not be
eligible to meet the percentage standard, but could be excluded from the sales base
used to calculate the RPS.
To supplement direct generation, retail suppliers would be allowed to purchase
power from other organizations, purchase tradable credits from suppliers with a
surplus, and purchase credits from the government at an inflation-adjusted rate that
14 These bills include H.R. 969, H.R. 1133, H.R. 1945, H.R. 1590, H.R. 2950, and S. 309,
S. 1554, S. 1567, and S. 1602. Descriptions of the RPS provisions in these bills are
provided in CRS Report RL33831, Energy Efficiency and Renewable Energy Legislation
in the 110th Congress, by Fred Sissine, Anne Gillis, Mark Gurevitz.
15 During the House Energy and Commerce Committee’s markup of draft energy
independence legislation, a proposed amendment would have added H.R. 969 to the
legislation, but it was later withdrawn. On July 31, 2007, the EnergyWashington.com online
newsletter reported in RPS Debate Is A Go in the House that the Speaker of the House was
supporting the effort for an RPS floor amendment that would be based on H.R. 969.
[http://energywashington.com/blog/index.php]
A summary of the Senate-passed version of H.R. 6 and the House energy independence
legislation are presented in CRS Report RL33831, Energy Efficiency and Renewable Energy
Legislation in the 110th Congress, by Fred Sissine, Anne Gillis, and Mark Gurevitz.
16 This minimum production threshold was designed to exempt most non-profit utilities,
such as rural electric cooperatives and municipal utilities.
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would currently stand at 1.9 cents/kwh credit. Power generated on Native American
lands would receive a double credit, and onsite distributed generation capacity
smaller than one megawatt (mw) used to offset the requirement would receive a triple
credit. An excess of tradable credits could be carried forward (banked) for up to two
additional years into the future. A credit deficit would lead to a penalty that would
be set as the greater of 2.0 cents/kwh or 200% of the average market value of the
credits. A credit cost cap (adjusted for inflation) would be set at 2.0 cents/kwh.
States would be allowed to have stronger RPS requirements. Funds gathered
from alternative compliance and penalty payments would be used for state grants to
support renewable energy production, particularly in states that have a low current
capacity for renewable energy production.
Federal Renewable Portfolio Standard (H.Amdt. 748 to H.R. 3221).
During the House Energy and Commerce Committee’s markup of draft energy
independence legislation, a proposed amendment would have added H.Amdt. 748
to the legislation, but it was later withdrawn. Similar to S.Amdt. 1537, H.Amdt. 748
would modify Title VI of the Public Utility Regulatory Policies Act of 1978 to
establish an RPS for retail electric utilities that would be administered by DOE. For
each retail supplier that sells more than one billion kwh per year,17 the RPS would set
a minimum electricity production requirement from renewable resources.18 The
standard would start at 2.75% in 2010 and then rise annually until reaching a peak
of 15% in 2020. Electricity savings from energy efficiency measures would be
allowed to compose a maximum of 25% of the standard in any given year, rising to
a peak of 4% of the 15% total in 2020.
Renewable energy resources eligible to meet the RPS would include wind, solar,
geothermal, biomass, landfill gas, ocean, tidal, and incremental hydropower.
Existing generation from hydroelectric facilities would not be eligible to meet the
percentage standard, but could be excluded from the sales base used to calculate the
RPS.
To supplement direct generation, retail suppliers would be allowed to purchase
power from other organizations, purchase tradable credits from suppliers with a
surplus, and purchase credits from the government at an initial rate of 1.9 cents/kwh
credit that would be inflation-adjusted. Power generated on Native American lands
would receive a double credit, and onsite generation used to offset the requirement
would receive a triple credit. An excess of tradable credits could be carried forward
(banked) for up to four years, and a deficit of credits could be “borrowed” from
anticipated generation up to three years into the future. A credit deficit would lead
to a penalty that would be set as the lesser of 4.5 cents/kwh or 300% of the average
market value of the credits. A credit cost cap (adjusted for inflation) would be set as
the lesser of 3.0 cents/kwh or 200% of the average market value of the credits.
17 However, the amendment specifically exempts all retail suppliers in Hawaii.
18 As with S.Amdt. 1537, this minimum production threshold, although substantially lower,
was designed to exempt most non-profit utilities, such as rural electric cooperatives and
municipal utilities.
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The governor of a state may petition DOE to allow up to 25% of a retail
supplier’s requirement to be met by submitting federal energy efficiency credits
associated with eligible (“qualifying”) electricity savings. Eligible electricity savings
from end-use energy efficiency actions would include customer facility savings,
reductions in distribution system losses, output from new combined heat and power
systems, and recycled energy savings obtained from commercial and industrial
systems. In each case, the electricity savings would have to meet the measurement
and verification requirements that would be set out in DOE regulations.
States would be allowed to have stronger RPS requirements. DOE would be
required to engage the National Academy of Sciences to evaluate the RPS program.
Comparing H.Amdt. 748 with S.Amdt. 1537. As Table 1 shows, S.Amdt.
1537 and H.Amdt. 748 have some similarities but differ in several important aspects.
The two proposals have nearly identical conditions for overall target percentage,
eligible resources, base amount, multiple credits, and state policy coordination.
However, the proposals have notable differences in the exemption criterion, inclusion
of 4% energy efficiency in target percentage, sunset date, tradable credit cost cap, and
flexibility mechanisms. H.Amdt. 748 includes a program evaluation provision and
S.Amdt. 1537 did not. Both proposals have a state grant provision. The grant
provision in S.Amdt. 1537 had an additional focus on states with a low renewable
energy resource capacity. The grant provision in H.Amdt 748 allows funding to be
used for grants, production incentives, and other state-approved mechanisms for
renewable energy and energy efficiency.
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Table 1. H.Amdt. 748 Compared with S.Amdt. 1537
Policy Design Element
H.Amdt. 748
S.Amdt. 1537
Electric Utility/
1 billion kwh (1 million
4 billion kwh (4 million
Retail Supplier
mwh) or more;
mwh) or more
all suppliers in Hawaii
excluded
Energy Target
- Initial Date
2010
2010
- Initial Value
2.75%
3.75%
- Peak Start Date
2020
2020
- Peak Value
15%
15%
- Sunset Date
2039
2030
Eligible Resources
solar, wind, ocean, tidal,
solar, wind, ocean
(includes new facilities and
geothermal, biomass,
(current, wave, tidal,
incremental production
landfill gas, incremental
and thermal), biomass,
from pre-existing facilities)
hydro
geothermal, landfill gas,
incremental hydro
Base Amount
Excludes pre-existing
Excludes pre-existing
hydropower and MSW-
hydropower and MSW-
generated power
generated power
Tradable Credits:
- Native American Land
- double credit
- double credit
- On-Site Offset
- triple credit
- triple credit
(less than 1 mw)
- Cost Cap/
- lesser of 3 cents/kwh or
- 2 cents/kwh
Alternative Compliance
200% of AMV
- Flexibility
++carry forward
- 3 years
- 2 years
++borrow from future
- 3 years
- none specified
Coordination with State
states can have higher
states can have higher
Policies
standards
standards
NAS Program Evaluation
yes, within 8 years
none specified
Non-Compliance Penalty
the lesser of
the greater of
4.5 cents/kwh
2.0 cents/kwh (inflation
(inflation adjusted)
adjusted)
or 300% AMV
or 200% AMV
Use of funds from
grants to states for
state grants for
Alternative Compliance
renewable energy
renewable energy
and Penalties
production, low income
production; priority for
energy assistance, and
states with low
weatherization services;
renewable energy
in each state, at least 75%
capacity
must go to grants and
production incenties for
renewables and efficiency
Note on acronyms: The term kwh stands for kilowatt-hours; mwh stands for megawatt-hours; MSW
stands for municipal solid waste; and AMV stands for average market value.
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Senate RPS Debate (S.Amdt. 1537 to H.R. 6)
The following discussion describes some key aspects of the Senate floor debate
over S.Amdt. 1537 to H.R. 6, which proposed a 15% national RPS requirement.
Resource Availability and Electricity Price Impacts. In the Senate RPS
debate, opponents argued that regional differences in availability, amount, and types
of renewable energy resources could make a federal RPS unfair. To support this
point, a letter was introduced from the Southeastern Association of Regulatory Utility
Commissioners that stated:
The reality is that not all States are fortunate enough to have abundant traditional
renewable energy resources, such as wind, or have them located close enough to
the load to render them cost-effective. This is especially true in the Southeast
and large parts of the Midwest.... Our retail electricity customers will end up
paying higher electricity prices, with nothing to show for it.19
Further, a fact sheet prepared by the Edison Electric Institute (EEI) elaborated
on the point about the potential impact on electricity prices:
A federal RPS requirement could cost electricity consumers billions of dollars
in higher electricity prices, but with no guarantee that additional renewable
generation will actually be developed. Because many retail electric suppliers will
not be able to meet an RPS requirement through their own generation, they will
be required to purchase higher cost renewable energy from other suppliers or
purchase renewable energy credits. Thus a nationwide RPS mandate will mean
a massive wealth transfer from electric consumers in states with little or no
renewable resources to the federal government or states where renewables
happen to be more abundant.20
Proponents counter-argued that a national system of tradable credits would
enable retail suppliers in states with less abundant resources to comply at the least
cost by purchasing credits from organizations in states with a surplus of low-cost
production. Also, supporters pointed out that S. Amdt 1537 provided that funds
collected from payments for alternative compliance and penalties would be used to
provide grants:
... to states in regions which have a disproportionately small share of
economically sustainable renewable energy generation capacity ...21
The proponents also noted that in addition to many environmental and public interest
groups, the RPS proposal was supported by some electric and natural gas utility
19 Congressional Record. Vol. 153, June 13, 2007. p. S7687.
20 EEI. EEI Raises Concerns About a Mandatory Federal Renewable Portfolio Standard.
June 12, 2007. [http://www.eei.org/newsroom/energy_news/rps.htm] See Fact Sheet
entitled: Protect Electricity Consumers and Existing State Renewable Power Programs:
Congress Should Oppose a Mandatory Federal Renewable Portfolio Standard. 3 p.
[http://www.eei.org/industry_issues/electricity_policy/state_and_local_policies/rps.pdf]
21 Congressional Record. Vol. 153, June 13, 2007. p. S7657.
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companies as well as several corporations, including BP America and General
Electric.22
Perhaps most importantly, RPS proponents countered by citing a study prepared
by the Department of Energy’s Energy Information Administration (EIA). The report
examined the potential impacts of the 15% RPS proposed in S.Amdt. 1537.23
Regarding resource availability, the report found that:
Biomass generation, both from dedicated biomass plants and existing coal plants
co-firing with biomass fuel, grows the most by 2030, more than tripling from 102
billion kilowatt-hours (kwh) in the reference case to 318 billion kwh with the
RPS policy.24
In a follow-up fact sheet to that study, EIA noted that “the South has significant
biomass potential.”25 Compared with other regions of the country, EIA found that
the South would not be “unusually reliant on purchases of allowances from other
regions or the federal allowance window....”26 Further, EIA found that the net
requirement for the core region of the South defined by the Southern Electric
Reliability Corporation (SERC) — after subtracting exemptions for small retailers
and adjusting the baseline generation for pre-existing hydropower and municipal
solid waste facilities — was “below the national average requirement across all
regions.”27
Regarding electricity prices, RPS proponents also cited findings from the EIA
study. EIA estimated that, relative to its base case projections for retail electricity
prices, the 15% RPS would likely raise retail prices by slightly less than 1% over the
2005 to 2030 period. Further, the report estimated that relative to its base case
22 The list of supporters is available on the web at [http://energy.senate.gov/public/
index.cfm?FuseAction=PressReleases.Detail&PressRelease_id=235300&Month=
5&Year=2007&Party=0].
23 DOE. EIA. Impacts of a 15-Percent Renewable Portfolio Standard. June 2007. 24 p.
24 EIA, Impacts of a 15% RPS, p. 7.
25 EIA. Supplemental Results to “Impacts of a 15-percent Renewable Portfolio Standard.”
Provided to Senator Bingaman, July 26, 2007. 17 p. Also, a map of biomass resource
potential prepared by DOE’s National Renewable Energy Laboratory (NREL) is available
on the web at [http://www.nrel.gov/gis/images/biomass.jpg].
26 EIA defined “the South” broadly to include four regions of the National American Electric
Reliability Corporation (NERC). They are: Southern Electric Reliability Corporation
(SERC), Florida Reliability Coordinating Council (FRCC), Southwest Power Pool (SPP),
and Electric Reliability Council of Texas (ERCOT). A map of the NERC regions is
available at [http://www.nerc.com/regional/].
27 As shown by the NERC map cited in the previous footnote, the SERC region includes the
states of Mississippi, Alabama, Georgia, North Carolina, South Carolina, Tennessee, and
parts of Florida, Illinois, Missouri, Arkansas, Louisiana, and Virginia.
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projections for retail natural gas prices, the RPS would likely cause retail natural gas
prices to fall slightly over the 2005 to 2030 period.28
EIA qualified the report’s findings on potential electricity price impacts. It
noted that projected impacts of an RPS on expenditures for electricity and natural gas
in end-use sectors are sensitive to assumptions about the projected baseline
generation fuel mix in its reference case. A higher share of natural gas in the
generation mix would allow an RPS to displace proportionally more natural gas.
Thus, to the extent that natural gas contributes a larger share of the future generation
mix, the 15% RPS would have more economically favorable impacts. To the extent
that natural gas contributes a smaller share, the opposite effect would be more
likely.29
Transmission Constraints. Opponents also contended that the proposed
15% RPS could impose indirect costs for transmission. EEI stressed that costly new
high-voltage transmission lines would be needed, especially for wind turbines, which
are often located far from population centers.30 EEI further notes that delays are
likely and transmission infrastructure issues have posed significant challenges to the
growth of renewable generation.31 Some analysts have suggested that even if plans
and financing were in place now to develop the national transmission capacity needed
to meet a 15% (or higher) RPS, the construction could not take place quickly enough
to meet the 2020 target date.32
The American Wind Energy Association (AWEA) has acknowledged the
transmission issue, pointing to ongoing efforts to address it.33 For example, the
Texas RPS is driving a boom in wind development. To address transmission
constraints there, the state recently established “competitive renewable energy
zones,” and directed the Electric Reliability Council of Texas (ERCOT) to develop
transmission plans for up to 25,000 megawatts of new wind capacity.34
RPS proponents note that transmission may be much less of an issue for
biomass power development in the South. For co-firing in existing coal plants, new
biomass generation may not require any new transmission infrastructure. Even for
new biomass plants, transmission needs may involve shorter distances, smaller
28 EIA, Impacts of a 15% RPS, p. iv and v.
29 EIA, Impacts of a 15% RPS, p. v.
30 EEI, Protect Electricity Consumers, p. 3.
31 EEI, Protect Electricity Consumers, p. 3.
32 For more on this issue, see CRS Report RL33875, Electric Transmission: Approaches for
Energizing a Sagging Industry, by Amy Abel. Also see Tripp, Jennifer B. Transmission
Access and Delivering the Wind Power. Presentation developed for R. W. Beck, Inc.
(Available from CRS. Not available on the web.)
33 AWEA reports both regulatory and legislative efforts underway to address the
transmission issue. [http://www.awea.org/policy/regulatory_policy/transmission.html]
34 AWEA. Windletter. July 2007. p. 7. [http://www.awea.org/windletter/073107_AWEA_
WL.pdf]
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volumes, and lower costs than that which may be required for more remote wind
farm locations in the Midwest regions.
An Alternative Proposal: The “Clean Energy” Portfolio Standard.
Opponents of RPS brought an alternative measure to the Senate floor that they argued
would address their concerns about resource hardship, transmission needs, and
electricity price increases. That measure, S.Amdt. 1538, proposed expanding the
RPS concept to include energy efficiency measures and other energy production
facilities.35 The “Clean Portfolio Standard,” or CPS, would have started the
requirement at 5% in 2010 and increased to 20% by 2020. Eligible resources would
have been expanded beyond renewables to include energy efficiency, fuel cells, new
nuclear power plants, and new coal power plants that include carbon dioxide capture
and storage equipment.
RPS proponents argued against the CPS proposal. They asserted that the main
purpose of the RPS was to stimulate the market development of new pre-commercial
and near-commercial renewable energy equipment. The CPS, they said, would not
require any real change in the energy mix, and would mainly add an incentive to
expand the use of conventional nuclear energy and fossil energy with carbon capture.
In conclusion, RPS proponents contended that the CPS proposal would eliminate any
real requirement to produce additional power from renewables.36 S.Amdt. 1538 was
tabled by a vote of 56 to 39.37
House RPS Debate (H.Amdt. 748 to H.R. 3221)
In House floor action on H.R. 3221, an RPS amendment (H.Amdt. 748) was
added by a vote of 220 to 190. The bill subsequently passed the House by a vote of
241 to 172. The RPS amendment would set a 15% target for 2020, and would allow
up to 4% of the requirement to be met with energy efficiency measures. The issues
in debate, and the constellation of proponents and opponents, were similar to the
elements of the preceding Senate floor debate over S.Amdt. 1537.
The arguments in opposition to H.Amdt. 748 echoed those raised in the Senate
RPS floor debate. The National Association of Manufacturers (NAM) and the
Edison Electric Institute (EEI) expressed their opposition to RPS.38 Both NAM and
EEI stated that the RPS could create hardship for states and regions with low
amounts of renewable resources, impose burdens for electricity transmission and
reliability, and raise electricity prices for consumers. Both also stated support for a
long-term extension of federal tax credits for renewables, which they contended
would be the most effective form of support. On the House floor, RPS opponents
35 Congressional Record. Vol. 153, June 13, 2007. p. S7658-S7659.
36 Congressional Record. Vol. 153, June 14, 2007. p. S7690.
37 Congressional Record. Vol. 153, June 14, 2007. p. S7691.
38 The NAM letter of opposition is available at [http://www.energywashington.com/secure/
data_extra/dir_07/ew2007_2360.pdf]. Also, EEI’s opposition is noted at
[http://www.energywashington.com/secure/energy_docnum.asp?f=ew_2002.ask&
docnum=ew2007_2330].
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decried the absence of support for nuclear power facilities and said the RPS
proposals would undermine coal facilities. They contended that it was unfair to
exempt electric cooperatives, municipal utilities, and the state of Hawaii. Opponents
to RPS argued further that some states with fewer resources would be burdened with
additional electricity costs. Opponents also contended that biomass power
technologies were not yet ready for commercial use and that certain usable forms of
biomass had been left out of the definition of eligible biomass resources.
The American Wind Energy Association stated that a national RPS is needed
“to fully reap the benefits of renewable energy,” and cited broad support for RPS.39
Also, the Union of Concerned Scientists (UCS) said it used EIA’s computer model
to examine the potential effects of an RPS and found somewhat larger savings for
cumulative electricity and natural gas bills than EIA’s study.40 An EIA report
observed that in the early years after its creation in 1992, the federal renewable
energy electricity production tax credit (PTC) “had little discernable effect on the
wind and biomass industries it was designed to support.”41 In a subsequent report,
EIA found that, after the late 1990s, the combined effect of the PTC with state RPS
programs had been a major spur to wind energy growth.42 On the House floor, RPS
proponents argued that all states have sufficient renewable energy resources and that
the RPS had been recalibrated to include energy efficiency measures to make it even
more flexible. Supporters also cited a study by Wood Mackenzie Corporation that
showed RPS would lead to a net reduction in natural gas an electricity prices.43 They
contended that cooperatives and municipal utilities had been excluded in order to
make the target easier to achieve. Proponents acknowledged that there is a need to
expand the definition of biomass resources, and offered to do so in conference
committee.
39 AWEA. Statement of the American Wind Energy Association on a National Renewable
Portfolio Standard (RPS). July 31, 2007. 2 p. AWEA notes support from the National
Venture Capital Association, League of Conservation Voters, National Farmer’s Union, and
United Steelworker’s Union. [http://www.awea.org/newsroom/releases/
AWEA_statement_on_national_RPS_061207.html]
40 UCS. A 20 Percent National Renewable Electricity Standard Will Save Consumers
Money and Reduce Global Warming Emissions. May 2007. 2 p. (Not available on the web.)
UCS also found that a 20% RPS would have greater environmental and job development
benefits than a 15% standard.
41 EIA. Annual Energy Outlook 2005. p. 58.
42 EIA. Annual Energy Outlook 2006. (Section on “State Renewable Energy Requirements
and Goals: Update Through 2005.”) p. 27. Further discussion of the importance of the
interaction between PTC and RPS is presented in the section under Renewable Portfolio
Standard entitled “Federal Support for State RPS Policies.”
43 Wood Mackenzie. The Impact of a Federal Renewable Portfolio Standard. February
2007. 17 p. The Corporation has a history of energy industry consulting, including studies
on oil, natural gas, and electric power generation. (The report is not available on the web.)