If you live in a deregulated electricity market, you may have noticed an increase in the number of renewable energy plans offered by electric suppliers. More states are implementing what is known as renewable portfolio standards (RPS). So how do renewable portfolio standards lead to an increase in the number of renewable energy plans offered by energy suppliers? To answer that question, we first need to find out what are renewable portfolio standards.
Renewable portfolio standards are regulations that require a set percentage of electricity to be generated from renewable energy sources. Renewable energy sources are naturally replenishing and considered by many to be a cleaner source of energy generation compared to conventional sources such as oil and coal. Examples of renewable energy sources include wind, solar, hydropower, and biofuels.
Creating a Market for Renewable Energy
The reality is renewable energy is not cheap. As investments into the renewable energy sector increase and technologies improve then we can expect prices to come down in the future. Creating renewable portfolio standards has helped create an artificial market for renewable energy generation. Every state has different policies, but they all encourage or require generation companies to increase the percentage of power generated from renewable energy sources. The percentage requirement in most states is set to increase in the coming years.
These policies have created an incentive for companies to invest in renewable energy facilities to meet the requirements. Solar and wind farms by third-party generation companies have increased in the last few years. Solar and wind farms allow customers to take advantage of renewable energy without the hassle of having heavy equipment installed on the customer’s property. Wind farms tend to produce more power than solar farms with the largest wind farm in the U.S. located in California. This wind farm is known as Alta Wind Energy Centre and has a capacity of around 1,550 Mega-Watts.
To meet the RPS requirements, most electric suppliers don’t directly generate the power themselves. Electric suppliers may purchase renewable energy credits (RECs) on the open market to meet the set percentage requirement. A renewable energy credit is equal to one megawatt-hour or 1,000 kilowatt-hours of power generated from a renewable energy source. Energy suppliers that generate more renewable electricity than required, may sell the excess to other electric suppliers to meet the RPS requirements.
States to Implement the Renewable Portfolio Standards
Most states have implemented their form of renewable portfolio standards. The policies are different by state but the end goal to increase the accessibility to renewable energy is the same. According to the U.S. Energy Information Administration, the District of Columbia, Maine, New York, New Mexico, Washington, Nevada, Hawaii, and California all have goals for 100% clean electricity by 2050.
How Will Renewable Portfolio Standards Impact You?
If you’re living in a state that has implemented a renewable portfolio standards program then expect a greater percentage of energy consumed by residents to be generated from renewable energy sources. If you also live in a deregulated electricity market then you may notice electric suppliers are offering more options to customers that include 100% renewable energy plans. If you’re looking to get away from oil and coal, then consider your state’s RPS policies as good news. Based on current policies, we can expect renewable energy to play a greater role in our lives in the near future.