Understanding State Renewable Electricity Goals
States are committing to ambitious climate and energy goals.
In the United States today, climate policy is virtually non-existent at the federal level. To fill this gap, many states have implemented their own goals and mandates regarding climate change, renewable energy consumption, energy efficiency, greenhouse gas emissions, and decarbonization. This report focuses on a subset of those laws: state renewable portfolio standards, procurement mandates for renewable energy, and energy planning. Land use restrictions and siting incentives can be built into state climate and energy policies to protect farmland and agricultural uses.
Renewable Portfolio Standards
State renewable portfolio standards (RPS) mandate the increased production of renewable energy by requiring retail suppliers of electricity (your local electric utility) to obtain a specific percent of their supply of electricity from renewable sources by an identified year. RPS policies incrementally increase targets for renewable electricity. For example, an RPS might require utilities to increase total renewable electricity consumption by 3% each year for the next 15 years, resulting in renewable energy constituting 45% of the utility’s “portfolio” of electricity sold to customers. The specific goals, qualifying resources, and compliance requirements vary from state to state, as does treatment of Renewable Energy Certificates.
State RPS Policies Differ in Design
- States may set a total goal, like “100% renewable electricity by 2045,” may establish “classes” or “tiers” within their total goal for preferred energy sources, or may “carve-out” a percentage of the goal for a specific renewable technology, like solar.
- Classes or tiers might create different mandates for different renewable sources or for electricity generated by new sources versus existing sources of electricity.
- Electric utilities comply with RPS requirements by developing renewable generation (where permitted),* purchasing power from other renewable generators, or buying Renewable Energy Certificates.
- Some states may include “REC multipliers” for solar or other preferred energy characteristics.
*Many states have “unbundled” the electricity-supply functions of electric utility service from the distribution services in a process called restructuring. Distribution utilities may be prohibited from owning energy generating facilities, leaving power production to competitive suppliers.
NOTE: RPS policies may also be called Renewable Energy, Alternative Energy, or Clean Energy Standards, and, may include additional mandates for reducing energy consumption from fossil fuel sources or for transitioning other energy uses, like heat, toward carbon-free, low-carbon, or renewable energy sources. This analysis focuses on state laws that require retail suppliers of electricity to source increasing quantities of renewable electricity.
Measuring Compliance with Renewable Portfolio Standards
RPS laws require electric distribution utilities (retail suppliers of electricity) to obtain escalating percentages of energy from renewable sources. Utilities comply with the RPS mandate by owning a number of Renewable Energy Certificates (RECs) equal to the required percentage of renewable electricity procurement each year. The utility may obtain required RECs by generating renewable energy (and the associated RECs) or by purchasing RECs generated by others. Purchasing RECs allows utilities to comply with RPS policies flexibly without needing to build or own the renewable generation infrastructure. The state public service or public utility commission usually administers RPS implementation and may be required to publish an annual report showing how utilities met the RPS mandate, though state reports vary in the level of detail included.
Renewable Energy Certificates (RECs)
RECs are digital certificates that represent the “environmental attributes” of electricity generated from renewable sources. Every time one megawatt-hour of electricity is generated by a certified renewable source, two products are created:
- the electricity, which generally flows to the grid, and
- the benefits, or “environmental attributes,” of that one megawatt-hour of renewable energy.
RECs represent the second product, and may be bought, sold, or traded, serving as a currency for environmental trading and investment incentives like RPS policies.
RECs can be sold separately, or “unbundled,” from the associated electricity, and only the REC owner may legally claim that their energy is renewable.
When a REC is used to comply with a regulatory requirement or make public claims about renewability, it is “retired” and may not be reused or resold. The market value of a REC differs based on how many state RPS obligations it satisfies, the source of renewable energy it represents, and the age, or “vintage,” of the facility generating the REC.
RECs have different shelf lives for RPS compliance, and must be used before they “expire” for compliance purposes, often a few years after creation. In some cases where RECs have shorter life spans, they can be banked from one year to the next to meet a certain percentage of the next year’s annual requirement. The percentage of RECs that may be banked for use in the future and for how long differs by state program.
In addition to providing flexibility for utilities in complying with RPS obligations, RECs help to promote renewable energy generation development by monetizing the environmental benefits of renewable energy. RECs provide an additional revenue stream for renewable energy developers and can help with financing renewable energy projects.
RPS Alternative Compliance
If a utility fails to generate or obtain RECs equal to the percentage of renewable electricity required by an RPS, it usually must pay an Alternative Compliance Payment, or a per-kilowatt-hour financial penalty for amount it fell short. Alternative compliance payments are often contributed to a state fund dedicated to promoting renewable energy development. The ACP rate sets a ceiling price on RPS compliance because utilities are only willing to purchase RECs at amounts lower than the ACP rate.
Tracking and Trading RECs
There is no mandatory federal system for tracking generation or exchange of RECs, but several regional authorities have been developed to track the attributes of all the electricity contributed to the grid from all fuel sources, not just renewable generators.
The regional authority issues a digital certificate recording the emissions profile, fuel source, and other attributes, or generator characteristics, associated with each megawatt-hour of generation and manages the accounting of RECs used for compliance obligations or voluntary commitments. Certificates are called RECs when they are issued to a renewable generator. Electric utilities use the system’s certificates to report their compliance with RPS and other fuel disclosure requirements set by states. Policymakers define required REC attributes, like project capacity size, vintage, and energy source, for each class or tier of energy established through the RPS.
The regional tracking authorities all define one REC to represent the attributes of one megawatt-hour of energy, and the tracked attributes are very similar. These tracking systems list the state RPS programs and detail the specific tiers or classes for which each registered energy generator’s RECs may be eligible. Tracking systems that serve a single state’s RPS program may be more limited–only tracking data required by that state’s RPS. Data collection requirements may be modified to track different or additional REC characteristics in response to policy changes.
By tracking RECs from issuance to retirement, these systems ensure against double counting the environmental benefits of renewable energy generation.
One limitation of the digital certificate system arises when grid-tied renewable energy is consumed on-site or “behind the meter.” When this occurs, RECs are not issued a digital certificate, but generally still may be sold or assigned to the utility within the state’s net-metering program or other power purchase program, and the utility assumes responsibility for accounting for these RECs. In states without a regional system for coordination of RECs, accounting systems for the renewable attributes of energy vary.
Compare: State and Regional REC-tracking Authorities
States may participate in more than one REC tracking system, and entities in Canada and Mexico, as well as private entities may also participate in these systems. The tabs below show the regional and state-specific tracking system that each state uses for tracking RECs used by utilities for compliance with regulatory obligations.
The following states participate in the WREGIS tracking registry: California, Oregon, Washington, Idaho, Montana, Wyoming, Colorado, Arizona, Nevada, New Mexico, South Dakota
The following states participate in the NEPOOL-GIS tracking registry: Connecticut, Rhode Island, Massachusetts, New Hampshire, Vermont, Maine
The following states participate in the PJM-GATS tracking registry: D.C., Maryland, New Jersey, Pennsylvania, Virginia, West Virginia, Ohio, Illinois, Kentucky
The following states participate in the M-RETS tracking registry: Illinois, Iowa, Minnesota, Montana, North Dakota, South Dakota, Missouri, Kentucky, Arkansas, Mississippi, Louisiana, Texas, Wisconsin
The following states participate in the ERCOT tracking registry: Texas
The following states participate in the MIRECS tracking registry: Michigan
The following states participate in the NC-RETS tracking registry: North Carolina
The following states participate in the NVTREC tracking registry: Nevada
The following states participate in the NYGATS tracking registry: New York
The following states participate in the NAR tracking registry: Kansas, Missouri
NAR allows registration from generators located anywhere in the U.S. and Canada.
The following states have not formally adopted a tracking system for RECs: Nebraska, Oklahoma, Tennessee, South Carolina, Georgia, Alabama, Florida
Renewable Energy Procurement Laws
In addition to Renewable Portfolio Standards, states may require utilities to procure a certain amount of renewable energy capacity by a target date, and offer a special rate for the purchase of energy from desired projects.
Renewable energy procurement laws usually
- identify a desired renewable energy technology (i.e. solar and/or wind);
- mandate the purchase of a specific quantity of renewable energy generating capacity (i.e., “up to 300 megawatts of installed capacity”);
- identify eligible project characteristics (i.e., “community solar” or “projects up to 1 megawatt”);
- establish a term of years for contracts (usually 10-25 years); and,
- establish a rate or rate calculation method for the purchase of energy generated by eligible projects (i.e., “10 cents per kilowatt-hour”).
Some state energy procurement laws may allocate RECs generated by eligible projects to the connecting utility for use in meeting its renewable energy obligations under the state’s RPS or may allow the utility to sell the RECs into other markets. Other state procurement laws do not address REC ownership, and by default, RECs are owned by the owner of the renewable energy generating project. See our Payment for Solar Energy pages for additional detail about state laws offering special rates for the purchase of solar energy.
Other Climate and Energy Goals
States have designed a variety of clean energy and climate action mandates across the country, including requirements to reduce greenhouse gas emissions, reduce fossil fuel consumption, and produce or consume clean or renewable electricity. As solar energy does not emit greenhouse gases and qualifies as a renewable energy source, state climate and energy policies tend to incentivize and accelerate solar development.
States may set “total energy” or fossil fuel reduction targets meant to transition energy usage across all sectors away from fossil fuels. These policies are not limited to the electricity sector, but include all sources of fossil fuel consumption, including transportation, manufacturing, and commercial activity.
For example, Vermont’s 2016 Comprehensive Energy Plan sets a goal to reduce total energy consumption per capita by 15% by 2025, and by more than one third by 2050.
State greenhouse gas reduction policies usually establish a baseline year for comparison and then require total or sector-specific in-state greenhouse gas emissions to decline by a target percentage over time. As of 2020, twenty-three states, plus D.C., have adopted greenhouse gas reduction requirements.
For example, California committed to economy-wide carbon neutrality by 2045, with specific emissions reduction targets of 2000 levels by 2010, 1990 levels by 2020, and 80% below 1990 levels by 2050, and an interim emissions reduction goal of 40% below 1990 levels by 2030.
A state may also be a party to a regional cooperative agreement to reduce greenhouse gases. For example, nine states in the Regional Greenhouse Gas Initiative (RGGI) established an emissions cap and trade program specifically for the electric power sector. The RGGI states include Connecticut, Delaware, Maine, New Hampshire, New York, Vermont, Massachusetts, Rhode Island, and New Jersey.
Clean Peak, Energy Efficiency, and Energy Storage
Even within the electric power sector, states have begun adopting new and creative energy policies beyond the RPS. States have established requirements for increased energy efficiency and energy storage.
- As of July 2017, thirty states and the District of Columbia had adopted energy efficiency policies, including mandated requirements, voluntary goals, or pilot programs, designed to reduce electricity consumption by using electricity more efficiently.
- For example, Oregon requires utilities to obtain energy storage capacity of 10 MWh or up to 1% peak load by 2020. Nevada established an energy storage target of 1,000 MW by 2030.
States are also developing clean energy generation goals associated with peak times of electric consumption.
- For example, the Massachusetts Clean Peak Energy Standard will provide incentives to clean energy technologies that can supply electricity or reduce demand during seasonal peak demand periods.
While these mandates may not directly affect solar siting, policymakers should be aware of the full framework of climate and energy policy that exist (or could exist!) in their state when considering changes to solar development laws.
Climate and Energy Planning
State RPS policies are usually one part of a larger energy plan in each state. States use comprehensive energy planning to create a roadmap for meeting future energy needs, and these plans may provide additional information about implementation of the state’s RPS policy and other renewable energy initiatives.
State Comprehensive Energy Plans usually set out state priorities for energy management and identify sector-specific and technology-specific strategies for meeting the state’s energy goals. Some states identify goals for protection of agricultural land or uses within their comprehensive energy plan.
In addition to statewide planning, laws may require local and/or regional energy planning, including the identification of specific land parcels that are preferred for solar development and ineligible for solar development. Local and regional energy planning decisions are likely to receive deference within state and local permitting processes for solar development.
Some states are working to map land use considerations using GIS technology that allows layering of detailed information about every land parcel. Mapped characteristics might include the location of energy transmission and distribution infrastructure, electric substations, prime agricultural soils, farmland, wetlands, endangered species habitat, and other protected lands and natural resources. Detailed mapping helps to identify beneficial locations for solar development, as well as potential siting conflicts.
- Many states have “unbundled” the electricity-supply functions of electric utility service from the distribution services in a process called restructuring. Distribution utilities may have divested any ownership of generating facilities, leaving the production of power to competitive suppliers. State utilities retain the “regulated natural monopoly of distribution.” Lazar, J. (2016). Electricity Regulation in the US: A Guide, p.9. Second Edition. Montpelier, VT: The Regulatory Assistance Project (http://www.raponline.org/knowledge-center/electricityregulation-in-the-us-a-guide-2).
- Most RPS Annual Compliance Reports can be accessed through the Clean Energy States Alliance website: https://www.cesa.org/projects/renewable-portfolio-standards/state-rps-annual-reports-and-compliance-reports/
- Todd Jones, et al., Center for Resource Solutions, The legal basis for Renewable Energy Certificates, June 15, 2017 (http://resource-solutions.org/wp-content/uploads/2015/07/The-Legal-Basis-for-RECs.pdf)
- Lisa Koperski, Why the Renewable Energy Credit Market Needs Standardization, 13 Wash. J.L. Tech. & Arts 69, 97 (2017).
- Resource portfolio requirements, 2 L. of Indep. Power § 10:115 (2020).
- Joel Mack, et at., All RECs Are Local: How In-State Generation Requirements Adversely Affect Development of a Robust REC Market, The Electricity Journal, Vol. 24, Issue 4, May 2011.
- Clean Energy States Alliance, REC Definitions and Tracking Mechanisms Used by State RPS Programs, Prepared by Jan Hamrin, June 2014 (https://www.cesa.org/wp-content/uploads/RECs-Attribute-Definitions-Hamrin-June-2014.pdf).
- National Renewable Energy Laboratory, Renewable electricity: How do you know you are using it?, 2015 (https://www.nrel.gov/docs/fy15osti/64558.pdf).
- Regional Greenhouse Gas Initiative, Program Overview and Design, https://www.rggi.org/program-overview-and-design/design-archive (Accessed March 1, 2020).
- Vermont Dept. of Public Service, Comprehensive Energy Plan, 2016 (https://legislature.vermont.gov/assets/Legislative-Reports/Executive-summary-for-web.pdf).
- As of July 2017, thirty states and the District of Columbia had adopted energy efficiency policies, including mandated requirements, voluntary goals, or pilot programs, designed to reduce electricity consumption by using electricity more efficiently. Energy Information Administration, Today in Energy, Many States have Adopted Policies to Encourage Energy Efficiency, Aug. 3, 2017 (https://www.eia.gov/todayinenergy/detail.php?id=32332).
- Oregon requires utilities to obtain energy storage capacity of 10 MWh or up to 1% peak load by 2020. OR PUC Order No. 17-291 (July 27, 2017). Nevada established an energy storage target of 1,000 MW by 2030. S.B. 204 (Nevada 2017); See also, NV PUC Docket No. 07014.
- The Massachusetts Clean Peak Energy Standard will provide incentives to clean energy technologies that can supply electricity or reduce demand during seasonal peak demand periods. M.G.L.A. 25A § 17 (2018).