### Renewables Portfolio Standa rds in the United States 1

### Renewables Portfolio Standa rds in the United States 2 Executive Summary................................................................................................ 1

Introduction............................................................................................................. 2
Four States Added RPS Policies in 2007, Raising the Total to 25 States and Washington D.C. .................................................................................................... 3
Eleven States Significantly Revised their RPS in 2007........

.............. .............. ....... 5 Forty-Six Percent of Load in the U.S. Will Ultimately Be Covered by Existing RPS Policies............................................................................................................ 5
The Design of State RPS Policies Conti nues to Differ Widely................................ 6
Resource Eligibility Is Expanding Beyond Traditional Renewable Sources to Include Energy Efficienc y and Other Supply-Side Tec hnologies.............. ............ 11
Operational Experience Remains Limited.....

............... .................. ....................... 12
Renewables Portfolio Standards Are Increasingly Motivating Renewable Energy Development............................................................................................. 12
State RPS Policies Are Primarily Supporting Wind Power, Though Some Resource Diversity Is Apparent............................................................................. 13
The Future Impacts of Existing State RPS Policies Are Projected To Be Relatively Sizable.................................................................................................. 14
Solar-Specific RPS Designs Are Becoming More Prevalent................................. 16
Compliance with State RPS Mandates Has Been Strong in General, Though Important Exceptions Exist.................................................................................... 20
The Use of Renewable Energy Certificates and Certificate Tracking Systems Is Expanding............

................... .................. ................ ................ ................ ......... 24
REC Prices Have Been Highly Variable Ac ross States.................

................. ....... 26
The Price Impacts of State RPS Policies Ar e Not Always Observable, But Have Been Modest in Most Cases So Far

.................. ................ ................ .......... 29
States Are Increasingly Recognizing Transmission as a Key Limitation to Achieving RPS Targets......................................................................................... 32

Federal RPS Policies Receiv ed Consideration in the U.S. Congress in 2007...... 34

Conclusions........................................................................................................... 34
Appendix.....................

................... ............... ................ ................ ................ ......... 35 

### LBNL-154E 

## April 25 Revision

### Renewables Portfolio Standa rds in the United States 1 

# Executive Summary

As the popularity of renewables portfolio standards (RPS) has grown, so too has the need to keep up with the design, early experi ence, and projected impacts of these progr ams. This report – the first in a regular series – seeks to fill this need by providing basic, factual information on RPS policies in the United States. Key findings of this inaugural edition are as follows:

• Mandatory RPS policies have been created in 25 st ates and Washington D.C.; four additional states have non-binding goals

• In 2007, four states established new RPS policies, 11 states significantly revised pre-existing RPS programs (mostly to strengthen them), and three states created non-binding renewable energy goals

• Forty-six percent of nationwide retail electricity sales will be covered by the mandatory state RPS policies established through the end of 2007, once these programs are fully implemented

• RPS policy designs vary widely among states, and a “common” design has not yet emerged

• Resource eligibility in state RPS programs has expanded beyond traditional renewables, with three states now allowing demand-side energy efficiency to meet at least a portion of their RPS requirement; additional states have stand-alone mandatory ener gy efficiency portfolio standards

• Eleven states now have four or more years of operatio nal experience with an RPS, though many other state programs are just getting underway

• Though not an ideal metric, over 50% of the non-hydro renewable capacity additions in the U.S. from 1998 through 2007 occurred in states with RPS programs (~8,900 MW); 93% of these additions came from wind power, 4% from biomass, 2% from solar, and 1% from geothermal

• Assuming that full compliance is achieved, current ma ndatory state RPS policies will require the addition of roughly 61 gigawatts (GW) of new renewables capacity by 2025, e quivalent to 4.7% of projected 2025 electricity generation in the U.S., and 15% of projected electricity demand growth

• Solar-specific RPS designs are becoming more comm on, with 11 states and Washington D.C. adopting solar or distributed generation (DG) set-asides so far; these policies have already supported 102 MW of photovoltaics and 65 MW of solar-thermal electric ca pacity, and a total of roughly 6,700 MW of solar capacity would be needed by 2025 to fully meet existing set-aside requirements

• The early-year renewable energy targets in the majority of state RPS policies have been fully or almostfully achieved through the application of renewable el ectricity or renewable energy certificates (REC) towards RPS targets; the overall average level of RPS “compliance” in 2006 was 94%, and nine states achieved renewable energy deliveries, as a pr oportion of RPS targets, of above 95%

• Several states have struggled to meet early-year RPS targets, however, and alternative compliance payments of more than $18 million were paid in 2006 ; financial penalties have been applied in two states

• Renewable energy certificate tracking systems continue to expand and, as of the end of 2007, all but four RPS states allowed unbundled RECs to count towards RPS compliance

• Renewable energy certificate markets remain fragmented, and prices have varied dramatically across states, and over time, reflecting variations in RPS design

• The electricity rate increases associ ated with existing state RPS polici es, for those states in which such impacts are readily calculable, generally equal 1% or l ess so far; in several states, the renewable electricity required by these policies appears to be pr iced competitively with fossil generation

• States are increasingly recognizing lack of transmission investment as a key barrier to achieving RPS targets, and at least five states – Texas, Colorado, California, Minnesota, and Ne w Mexico – took important steps in 2007 to mitigate this barrier

• The U.S. House of Representatives passed a Federal RPS in 2007, but the bill was unable to pass out of the U.S. Senate

### Renewables Portfolio Standa rds in the United States 2 

# Introduction

Renewables portfolio standards (RPS) have prolifer ated at the state level in the United States since the late 1990s. 1 

## In combination with Federal tax incentives , state RPS requirements have emerged as one of the most important drivers of renewable energy capacity additions. The focus of most RPS activity in the U.S. has been within the states. Nonetheless, the U.S. House of Representatives and Senate have, at different times, each passed versions of a Federal RPS; a Federal RPS, however, has not yet been signed into law. 2


## The design of an RPS ca n and does vary, but at its heart an RPS simply requires retail electricity suppliers (also called load-serving entities, or LSEs) to procure a cert ain minimum quantity of eligible renewable energy. An RPS establishes numeric targets for renewable energy supply, applies those targets to re tail electric ity suppliers, and seeks to encourage competition amongrenewable developers to meet the targets in a leastcost fashion. RPS purch ase obligations generally increase over time, and retail suppliers typically must demonstrate compliance on an annual basis. Mandatory RPS policies are backed by various types of compliance enforcement mechanisms, and many – but not all – such policies include the trading of renewable en ergy certificates (RECs 3 

## ). Renewables portfolio st andards are a relatively recent addition to the renewable energy policy landscape, and these policies continue to evolve. Keeping up with the desi gn, early experience, and projected impacts of these programs is a challenge. This report seeks to fill this need by providing basic, factual information on RPS policies in the United States. It focuses on state-level initiatives, though a later section briefly discusses Federal developments as well. The report does not cover municipal-level renewable energy goals, unless required by state law. Similarly, this report focuses on mandatory state RPS requirements, though it also touches on non-binding renewable energy goals, especially when those goals are

1 

### RPS policies are sometimes called “Renewable Energy Sta ndards,” “Quota Systems,” or “Renewable Obligations.”
2 

### Mandatory RPS requirements also exist in Australia, Japan, Belgium, Sweden, Italy, the United Kingdom, and Poland. Certain provinces in India and Canada have also developed RPS instruments, and renewable energy purchase obligations of a somewhat similar form are used in China.
3 

### Sometimes referred to as a “Tradable Green Certificate” or “Green Tag”, a REC is created when a megawatt-hour of renewable energy is generated, is a purely financial product, and can be traded separately from the underlying electricity generation. REC transactions create a supplemental revenue st ream for renewable generators, and allow retail suppliers to demonstrate compliance with an RPS by purchasing RECs in lieu of directly purchasing renewable electricity. 

### ACRONYMS

ACP alternative compliance payment CPCN certificate of public convenience and necessity CREZ competitive renewable energy zone DG distributed generation ERCOT Electric Reliability Council of Texas ERZ energy resource zone ESP competitive electric service provider GATS PJM Generation Attributes Tracking System GIS New England Power P ool Gen. Info. System GW gigawatt GWh gigawatt-hour IOU investor-owned utility LSE load-serving entity MISO Midwest Independent System Operator M-RETS Midwest Renewable Energy Tracking System MSW municipal solid waste MW megawatt MWh megawatt-hour
PJM PJM Interconnection POU publicly owned utility PRC public regulation commission PSC public service commission PUC public utilities commission PV photovoltaics REC renewable energy certificate RPS renewables portfolio standard SEP supplemental energy payment
TWh terrawatt-hour WECC Western Electricity Coordinating Council WREGIS Western Renewable Energy Gen. Info. System

### Renewables Portfolio Standa rds in the United States 3 

## developed by state law or regulation. This report is the first of what is envisioned to be an ongoing series; as such, it concentrates on key recent developments, while also providing basic information on historical RPS experience and design. The report begins with an overview of state RPS policies: where they have been developed, when, and with what design features. Though most RP S programs are still in their infancy, the report summarizes the early impacts of these policies on renewable energy development, and provides a forecast of possible future impacts. It then turn s to the implications of the growing trend towards solar and/or distributed generation set-asides within state RPS progr ams. Next, the report highlights state RPS compliance levels, enforcement actions, and cost impacts, as well as key developments in REC markets. Finally, the report provides a brief overview of Federal RPS proposals.



# Four States Added RPS Policies in 2007, Raising the Total to 25 States and Washington D.C.

The popularity of mandatory state RPS policies has gr own in recent years. F our states – Illinois, New Hampshire, North Carolina, and Oregon – es tablished new RPS programs in 2007 alone (the details of which are described fu rther in Table A-1 in the Appendi x). At the end of 2007, 25 states and Washington D.C. had a mandatory RPS (see Figur e 1). Figure 2 shows the rate of state RPS adoption over time, presenting both the year of initial enactment and the years in which major changes to state RPS policies have been made. Of the 26 programs in existence at the end of 2007, half had been created since the beginning of 2004.

Figure 1. State RPS Policies and Non-Binding Renewable Energy Goals WI: 10% by 2015

NV: 20% by 2015

TX: 5,880 MW by 2015 PA: 8% by 2020
NJ: 22.5% by 2021 CT: 23% by 2020 MA: 9% by 2014 ME: 40% by 2017

NM: 20% by 2020 (IOUs) 10% by 2020 (co-ops) CA: 20% by 2010 MN: 25% by 2025 Xcel: 30% by 2020

IA: 105 MW by 1999

MD: 9.5% by 2022 RI: 16% by 2019

HI: 20% by 2020

AZ: 15% by 2025 NY: 24% by 2013

CO: 20% by 2020 (IOUs) 10% by 2020 (co-ops and munis) MT: 15% by 2015

DE: 20% by 2019
DC: 11% by 2022 WA: 15% by 2020

NH: 23.8% by 2025

OR: 25% by 2025 (large utilities) 5-10% by 2025 (smaller utilities)

NC: 12.5% by 2021 (IOUs) 10% by 2018 (co-ops and munis) IL: 25% by 2025



### Mandatory RPS Non-Binding Goal VT: Load growth by 2012 up to cap of 10% ND: 10% by 2015

VA: 12% by 2022 MO: 11% by 2020 WI: 10% by 2015

NV: 20% by 2015

TX: 5,880 MW by 2015 PA: 8% by 2020
NJ: 22.5% by 2021 CT: 23% by 2020 MA: 9% by 2014 ME: 40% by 2017

NM: 20% by 2020 (IOUs) 10% by 2020 (co-ops) CA: 20% by 2010 MN: 25% by 2025 Xcel: 30% by 2020

IA: 105 MW by 1999

MD: 9.5% by 2022 RI: 16% by 2019

HI: 20% by 2020

AZ: 15% by 2025 NY: 24% by 2013

CO: 20% by 2020 (IOUs) 10% by 2020 (co-ops and munis) MT: 15% by 2015

DE: 20% by 2019
DC: 11% by 2022 WA: 15% by 2020

NH: 23.8% by 2025

OR: 25% by 2025 (large utilities) 5-10% by 2025 (smaller utilities)

NC: 12.5% by 2021 (IOUs) 10% by 2018 (co-ops and munis) IL: 25% by 2025



### Mandatory RPS Non-Binding Goal VT: Load growth by 2012 up to cap of 10% ND: 10% by 2015

VA: 12% by 2022 MO: 11% by 2020

### Renewables Portfolio Standa rds in the United States 4 

### Figure 2. The Adoption and Revision of Mandatory State RPS Policies 4



## Most state RPS policies, including all four ne w programs created in 2007, have been established by legislative action. Alternatively, two states (N ew York and Arizona) developed their programs through regulatory channels, and two other stat es (Washington and Colora do) did so via voterapproved ballot initiatives. 5 

## In the 1990s, state RPS policies were generally incorporated into much broader state electricity restruct uring legislation. More recently, these policies have been adopted through stand-alone legislation. In most cases, RPS programs ar e implemented by state utility regulatory agencies (i.e., public utilities commissions, variously re ferred to as PUCs, PSCs, PRCs, etc).

In addition to mandatory RPS policies, several states have developed non-binding renewable energy goals. As of the end of 2007, four states without a mand atory RPS had instead created nonbinding targets through legislative action. Three of these states – Missouri, North Dakota, and Virginia – created their targets in 2007 (see Tabl e A-3 in the Appendix), wh ile Vermont established its target in 2005. 6 

## Other states, such as Illinois and Ma ine, previously had non-binding renewable energy goals that have subsequently been changed to mandatory RPS programs. Finally, some states with a mandatory RPS also have more-aggressi ve non-binding goals, including California (33% renewable energy by 2020, established by the Governor and the state’s energy agencies), Iowa (1000 MW of wind capacity by 2010, recommended by the G overnor's Energy Policy Task Force in 2001), and Texas (10,000 MW by 2025, established through legislation).

4 

### Some states have adopted annual RPS compliance periods that do not coincide with calendar years. Throughout this report, RPS compliance periods are referred to based on the starting year of the a nnual compliance period.

5 

### The Colorado RPS passed based on a voter initiative in 2004 , with 53% support. The Washington state RPS passed in 2006 with 52% of the vote.
6 

### Though not reflected in this report, Vermont passed legislation in March 2008 establishing a new, non-binding goal that 20% of statewide electricity sales be derived from renewable generation by 2017. TX PA NM NJ MN ME WI MD NJ DE HI TX CT CT NV PA NV CO CA CO NM MN NV WI CA AZ CT NJ CT NM MN AZ MN IA 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1994 1991 1983 OR (2011) WA (2012) MT (2008) RI (2007) CA (2003) NM (2002) TX (2002) WI (2000) NV (2001) AZ (1999) MN (2002) IA NC (2010) DE (2007) NY (2006) NJ (2001) PA (2001) ME (2000) NH (2008) DC (2007) MD (2006) CT (2000) MA (2003) IL (2008) HI (2005)

CO (2007)

TX PA NM NJ MN ME WI MD NJ DE HI TX CT CT NV PA NV CO CA CO NM MN NV WI CA AZ CT NJ CT NM MN AZ MN IA 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1994 1991 1983 OR (2011) WA (2012) MT (2008) RI (2007) CA (2003) NM (2002) TX (2002) WI (2000) NV (2001) AZ (1999) MN (2002) IA NC (2010) DE (2007) NY (2006) NJ (2001) PA (2001) ME (2000) NH (2008) DC (2007) MD (2006) CT (2000) MA (2003) IL (2008) HI (2005)

CO (2007)



## Enactment (above timeline)

( ) Year of First Requirement Enactment (above timeline) Major Revisions (below timeline)

Year of First Requirement 

## Enactment (above timeline)

Year of First Requirement Enactment (above timeline) Major Revisions (below timeline)

Year of First Requirement

### Renewables Portfolio Standa rds in the United States 5 

# Eleven States Significantl y Revised their RPS in 2007

Figure 2 illustrates the gr owing tendency for states to revise ex isting RPS policies. Eleven states made substantial modifications to their RPS progra ms in 2007, as described further in Table A-2 in the Appendix. 7 

## These changes have generally been to strengthen pre-existing RPS requirements, often by increasing renewable energy targets, re moving supplier exemptions, or adding resourcespecific set-asides. Examples of legislative weakening of state RPS policies exist, but are generally more-modest in scope (e.g., minor expansions to re source eligibility, exempting public ly owned utilities from solar set-aside requirements, etc.) than are the examples of a strengthening of those policies. No state RPS policy has yet been repealed by later legislative action.



# Forty-Six Percent of Load in the U.S. Will Ultimately Be Covered by Existing RPS Policies

Mandatory state RPS programs created thr ough the end of 2007 will, once fully implemented, apply to load-serving entities that, in aggregate, supply roughly 46% of nationwide retail electricity sales (see Figure 3). If the four states with non-binding renewable energy goals are also included, then the amount of nationwide load ultimately covered by an existing RPS (once fully implemented) increases to almost 51%. Not all RPS policies establish renewable energy pu rchase obligations that take effect immediately upon enactment, however. As a result, in 2007, LSEs serving 31% of U.S. electrical load had an active RPS compliance obligation, up from 30% in 2006, 24% in 2005, and just 3% in 2000. By 2012, existing RPS policies will be nearly in full fo rce, and active complianc e obligations will extend to LSEs serving almost 46% of nationwide electrical load. Of the LSEs serving the 31% of U.S. electrical load with RPS obligations in 2007, investor-owned utilities (IOUs) represent the larg est share (19%), followed by competitive electric service provides (ESPs, 10%), and then by publicly owned utilities (POUs, 3%). 8 

## After 2007, the percentage share by each type of electricity supplier cannot be easily projected, due to potential customer switching between IOUs and ESPs in states with retail choice. The fact that 100% of U.S. load is not covered by a state RPS reflects two fa ctors. First, and most obviously, not all states have deve loped RPS programs. Secondly, as described in Table 2, a variety of states offer RPS exemptions to particular type s of LSEs and/or custom ers. Both factors are incorporated into Figure 3.

7 

### Less-significant revisions to RPS policies in 2007 were ma de in the following states: (1) Hawaii (in implementing 2006 statutory revisions to the RPS, the PUC established a framework for – among other things – reporting and non-compliance penalties); (2) Massachusetts (regulatory revisions were made to biomass eligibility); (3) Montana (added competitive ESPs serving small customers to those LSEs that must meet RPS obligations); and (4) Nevada (added geothermal heat as an eligible energy efficiency source).
8 

### The term publicly owned utility, or POU, is broadly used in this report to include public power and cooperatives. IOU, ESP, and POU contributions do not sum to 31% due to rounding.

### Renewables Portfolio Standa rds in the United States 6 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%1998199920002001200220032004200520062007200820092010201120122013201420152016201720182019202020212022202320242025Percent of Total U.S. Retail Sales

POUs

IOUs & ESPs

ESPs

IOUs



### Figure 3. U.S. Electrical Load with Active State RPS Obligations



# The Design of State RPS Policies Continues to Differ Widely

State RPS programs share the common goal of en couraging renewable en ergy supply, but design variations among states are so star k that there is even some debate over what exactly constitutes an RPS, and whether certain states qualify as having one. 9 

## The tailoring of RPS designs to satisfy particular state objectives and poli tical exigencies is a typical asp ect of state policy making, ensuring that U.S. states serve as “laborator ies” for RPS policy experimentation. Table 1 illustrates a small subset of the impor tant design differences among existing mandatory state RPS programs and non-binding state renewable energy goals. Vari ations exist in terms of the renewable energy purchase targets and timeframe s, which renewable energy technologies are eligible 10 

## , and whether existing projects can qualify. Importantly, some states have established “tiered” targets or set-asides, c onsisting of different targets for di fferent resource types or resource vintages, frequently with differe nt schedules and compliance framew orks. Tiers and set-asides are often used to ensure that an RPS supports certai n “preferred” resources, not just the least-cost renewable energy options. Alternat ively, or in addition, some states have sought to support preferred resource types through credit multipliers of various designs. One important structural di fference among state RPS policies relates to how compliance is achieved. Three distinct RPS complian ce models have thus far emerged:

9 

### New York, for example, has established a policy that it calls an RPS, but that involves ratepayer collection of funds and incentive payments from a st ate energy authority. New York is identified in this report as a state with an RPS, though such a classification is debatable.
10 

### Though wind, solar, landfill-gas, and geothermal energy ar e eligible under most of the policies, eligibility criteria for biomass, municipal solid waste (MSW), and hydropower vary co nsiderably across states. Some states also allow resources such as energy efficiency an d gas-fired fuel cells to qualify (see later section).

### Renewables Portfolio Standa rds in the United States 7 

## 1. in states with retail electric competition, electr icity suppliers are typical ly given broad latitude to comply with RPS requirements as they see fit;

2. in states with still-regulated utility monopolies, electricity re gulators oversee – to varying degrees – utility procurement and contracting under the RPS; and

3. in two states, New York and Illinois, a state ag ency/instrumentality has direct responsibility to conduct procurements under the RPS.
As alluded to earlier, state RPS policies also differ in terms of which entities are obligated under the program. Many states have exempted certai n LSEs or end-use customers from meeting RPS requirements (see Table 2). In part icular, states often exempt some or all POUs from formal RPS obligations, or instead allow POUs to develop their own renewable en ergy standards. Various other types of permanent or temporary exemptions have also been adopted, for example, exemptions for small utilities, large customers, or customers in utility service territories with a rate freeze. Force majeure clauses and cost caps, which are common, can also effectively function as exemptions by reducing the amount of load subject to RPS obligations. States have also adop ted different eligibility rules related to geographic location and electricity delivery. States that enact RPS policies typically do so with the expectation that the requirement will stimulate new resource development in their state or region. If renewable el ectricity is used for compliance, and that electricity must be deliver ed to the LSE under the R PS obligation, a practical limitation is placed on the distance of renewable pr ojects from the state in question. Unbundled RECs, on the other hand, could potentially satisfy an RPS without any ge ographic constraint. Because state interests in encouraging in-state or in-region development var y, because interpretations of the requirements of the Intersta te Commerce Clause vary, and becau se wholesale electricity market structures differ, a variety of approaches have been used to limit the ge ographic eligibility of renewable energy projects, and to es tablish electricity delivery requi rements. Table 3 describes the geographic eligibility and electricity delivery requir ements for the main “tier” of each state’s RPS (certain sub-tiers, for example solar or DG se t-asides, often have different standards). Other differences in the design of state RPS policies, some of whic h are described in later sections of this report, pertain to what kind of enforcemen t is applied, whether and what types of cost caps exist, whether unbundled RECs are allowed, what leve l of compliance flexibility is provided, whether discretionary or non-discretionary regulatory waivers are offered, the degree to which contracting requirements are applied, and the role of state funding mechanisms. Tables A-1 through A-3 in the A ppendix provide more-detailed text ual descriptions of the key design elements of the new mandatory state RPS programs, major RPS program revisions, and new non-binding state renewable energy goals adopte d in 2007. Key policy design trends among those states that created or revised RPS programs in 2007 include the following:

• The stringency of renewable energy targets increased both through re visions to existing programs and through implementa tion of new RPS policies.

• The use of resource-specific set-asides dramatica lly expanded, especially for solar, but also for other favored renewable resource options, such as wind power.

• The applicability of RPS policies continued to expand to cover POUs, w ith three of four new state policies broadly applicable to all electricity suppliers, and revisions to existing policies also increasingly requiring POUs to meet renewable energy purchase objectives.

• Though RPS policies increasingly apply to POUs, it has also become co mmon to offer greater leniency and impose lower RPS targets to those supplies.

### Renewables Portfolio Standa rds in the United States 8 

### Table 1. Select Design Elements of State RPS Policies

State First Compliance Year Current Ultimate Target Existing Plants Eligible 1 

### Set-Asides, Tiers, or Minimums Credit Multipliers

Mandatory RPS Obligations

Arizona 2001 15% (2025) No Distributed Generation None 2

California 2003 20% (2010) Yes None None
Colorado 2007 20% (2020): IOUs 10% (2020): POUs Yes Solar In-State, Solar, CommunityOwnership

Connecticut 2000 23% (2020) Yes Class I/II Technologies None
Delaware 2007 20% (2019) Yes Solar, New/Existing Solar, Fuel Cells, Wind

Hawaii 2005 20% (2020) Yes Energy Efficiency None
Illinois 2008 25% (2025) Yes Wind None

Iowa 1999 105 MW (1999) Yes None None
Maine 2000 40% (2017) Yes New/Existing None Maryland 2006 9.5% (2022) Yes Solar, Class I/II Technologies Wind, Methane

Massachusetts 2003 9% (2014) No None None
Minnesota 2002 25% (2025) 30% (2020): Xcel Yes Wind for Xcel; Goal for Community-Based Renewables None

Montana 2008 15% (2015) No Community Wind None
Nevada 2003 20% (2015) Yes Solar, Energy Efficiency PV, DG, Eff., Waste Tire New Hampshire 2008 23.8% (2025) Yes Solar, New, Existing Biomass/ Methane, Existing Hydro None

New Jersey 2001 22.5% (2021) Yes Solar, Class I/II Technologies None
New Mexico 2006 20% (2020): IOUs 10% (2020): Co-ops Yes Solar, Wind, Geothermal or Biomass, Distributed Generation None 2

New York 2006 24% (2013) Yes Distributed Generation None
North Carolina 2010 12.5% (2021): IOUs 10% (2018): POUs Yes Solar, Swine Waste, Poultry Waste, Energy Efficiency None

Oregon 2011 25% (2025): Large 5-10% (2025): Small No 3 Goal for Community-Based and Small-Scale Renewables None

Pennsylvania 2001 8% (2020) Yes Solar None
Rhode Island 2007 16% (2019) Yes New/Existing None

Texas 2002 5,880 MW (2015) Yes Goal for Non-Wind All Non-Wind Washington 2012 15% (2020) No None Distributed Generation Washington, DC 2007 11% (2022) Yes Solar, Class I/II Technologies Wind, Solar, Methane

Wisconsin 2000 10% (2015) 4 Yes None None Non-Binding Renewable Energy Goals 6

Missouri 2012 11% (2020) Yes None PSC Authorized To Do So

North Dakota 2015 10% (2015) Yes None None

Vermont 2006 Up To 10% (2012) 5 No None None Virginia 2010 12% (2022) Yes None Wind, Solar

1 Some RPS policies allow existing facilities, but only if built af ter a certain date, e.g., 1995 or 1999. For the purpose of th is table, these states are identified as not allowing existing resources, because they do not allow older existing facilities. In other states, such as Te xas, existing facilities may qualify towards the RPS, but with restrictions not identified in the table. Note also that even those states that do not broad ly allow existing facilities to qualify under their RPS often allow incremental generation from such facilities to qualify.

2 Credit multipliers were once used extensively, but ar e now being phased out and replaced by set-asides.

3 Only plants placed in service on or afte r January 1, 1995 are broadly eligible, excep t that certain small-hydro facilities owne d by Oregon utilities and placed in service prior to 1995 are also elig ible (such facilities must be certified as “low impact”, however, and there are li mits to the amount of hydro generation that is allowed to qualify). Incremental effici ency and capacity upgrades on pr e-1995 renewable facilities are also eligible.

4 Targets vary by utility, but the statewide goal is 10% by 2015.

5 Target equals load growth between January 2005 and January 2012, capped at 10% of 2005 load. The target becomes mandatory in 20 13 if the nonbinding goal is not achieved. Though not reflected in this re port, Vermont also passed legisl ation in March 2008 establishing a new, non-binding goal that 20% of statewide electricity sales be de rived from renewable generation by 2017.

6 In addition to the four non-binding state renewable energy goals noted here, California, Iowa, and Texas have both mandatory R PS policies and moreaggressive non-binding goals.

### Renewables Portfolio Standa rds in the United States 9 

### Table 2. State RPS Exemptions

Treatment of POUs State % of State Sales Covered Munis Coops Other LSE Exemptions Customer Exemptions

AZ 59% { z Political subdivisions; utilities with >50% of out-of-state customers None

CA 98%   POUs obligated to develop own RPS None
CO 94% z z Munis with < 40,000 customers None
CT 100%  na Munis obligated to develop own RPS None

DE 75% { { POUs have requested/ received exemptions Industrial customers > 1.5 MW load

HI 100% na z None None
IA 75% { { Applies only to MidAmerican and IPL None

IL 56% { { IOUs with < 100,000 customers; all competitive ESPs IOU retail supply customers not with fixed-price service
MA 86% { na None None

MD 98% z z Coops served by existing purchase agreement Industrial process load > 300 GWh/yr; resid. load in area subject to rate freeze

ME 93% { { None Sales to certain bus inesses, until 2010

MN 100% z z None None

MT 63%   Coops and existing munis with > 5,000 customers must develop own RPS; other coops exempt; ESPs and new munis that serve large customers exempt None

NC 100% z z None None
NH 100% z z None None
NJ 97% { { None None
NM 88% { z None None
NV 88% { { None None

NY 73% { { LIPA, NYPA, munis encouraged to establish RPS None

OR 100% z z Multiple clauses offer possible exemptions to certain suppliers (esp. POUs) in certain years None

PA 97% { { None Load in area subject to rate freeze

RI 99% { na None None

TX 75% { { Utilities under a rate freeze Certain large customers upon petition
WA 83% z z All utilities with < 25,000 customers None
D.C. 100% na na None None
WI 100% z z None None Notes: The percent of state sales figures represent the fracti on of statewide load ultimately obligated by existing RPS polici es. The percentage totals include POUs required to meet an RPS of thei r own design (e.g., CA and CT) an d LSEs temporarily exempted from the RPS. In addition to the specific exemptions listed here, Fe deral power marketing agencies and state-owned electric utilitie s are assumed to be exempt in all cases.

z Must generally meet RPS (in some cases, percentage targets are lower or limited exemptions apply)  Must meet an RPS of their own design { Fully exempt from obligatory RPS na No entities of that type exist in the state

### Renewables Portfolio Standa rds in the United States 10 

### Table 3. Geographic Eligibility and Electricity Deliv ery Requirements (Main Tier of Each State’s RPS)

Geographic Eligibility and Delivery Requirements States Notes

In-state generation requirement HI, IA IA: also allows location in broader utility service area

In-region generation requirement MN, OR, PA MN: RECs originating within M-RETS; OR: WECC for unbundled RECs, U.S. portion of WECC and de livered to LSE for renewable electricity; PA: PJM projects for al l LSEs, MISO projects for some LSEs

Electricity delivery required to state or to LSE

Direct transmission inter-tie between generators and state NV, TX NV: allows limited sharing of transmission inter-tie with other generators; TX disallows such sharing

Broader delivery requirements to state or to LSE AZ, CA, MT, NM, NY, WI CA: relaxed scheduling allows shaped/firmed products; NY: strict hourly scheduling to state and strong preference for in-state resources in solicitation process; WI : projects must be owned by or under contract to LSE

Electricity delivery required to broader region

Generators anywhere outside region must deliver electricity to region DE, ME, NJ, WA DE: also provides credit multipliers for in-state wind installed before 2013; NJ: resources outside PJM must be “new”; WA: if outside Pacific Northwest, requires delivery to state

Generators in limited areas outside region must deliver electricity to region CT, DC, MA, MD,

NH, RI All: renewable facilities must be located in control areas adjacent to state’s ISO; DC & MD: LSEs may also purchase unbundled RECs (without electricity delivery) from states that are adjacent to PJM

In-state generation encouragement

In-state multipliers CO No restriction on location of RECs creation, but credit multiplier for in-state projects (DE also provide s in-state encouragement through multipliers)

Cost-effectiveness test IL In-state unless insufficient cost-effective resources, then from adjoining states, then from other regions; after 2011, equal preference to in-state and adjoining states

Limit on RECs from out-of-state generators NC Up to 25% compliance can be met with unbundled RECs from outside state (no limit for one LSE, Dominion); remainder must be in-state or delivered to LSE

### Renewables Portfolio Standa rds in the United States 11 

# Resource Eligibility Is Expanding Beyond Traditional Renewable Sources to Include Energy Efficiency and Other Supply-Side Technologies

Among those states with mandato ry RPS policies, three – Hawaii, Nevada, and North Carolina – allow demand-side energy efficiency to qualify for a portion of the stated renewables portfolio standard requirement, enabling LSEs to substitute energy efficiency for renewable energy for some portion of RPS compliance (see Table 4). Other states, including Colorado, Connecticut, Illinois, Minnesota, New Jersey, New Mexico, Pennsylvania, and Texas, have es tablished (or have authorized the development of) mandatory energy efficiency por tfolio standards that are separate from, and additional to, any targets for renewable resources. 11



## Some states also allow cert ain supply-side efficiency tec hnologies or non-renewable energy technologies to meet a portion of their RPS standa rd, including the electricity and/or heat from combined heat and power and/or waste heat reco very facilities (e.g., Colorado, Connecticut, Hawaii, Illinois, Maine, Nevada, North Carolina), and fuel cells using fuels derived from non-renewable energy sources (e.g., Connecticut, Maine, Minnesota , New York, Pennsylvania). Still other states, such as Pennsylvania, include portfolio standard requirements for non-renewa ble energy sources that

are additional to the standards applied for renewable electricity.

Table 4: States with Demand-Side Energy Effi ciency Included in Mandatory RPS Requirements

State Proportion of RPS that Can Be Met with Energy Efficiency Notes

HI Up to 50% Heat pump water heating, ice stor age, ratepayer-funded efficiency programs, and use of rejected he at from cogeneration and combined heat and power systems

NV Up to 25% Utility-subsidized efficiency measures installed after 1/1/05, and district heating powered by geothermal hot wa ter; at least 50% of savings must come from the residential sector; u tilities can purchase energy savings credits from third parties; energy efficiency receives standard multiplier of 1.05, and 2.0 for peak savings

NC IOUs: Up to 25%; up to 40% after 2021
POUs: Unlimited for main RPS target Efficiency measures after 1/1/07, including waste heat from combined heat and power systems powered by non-renewable fuels; POUs may also rely on demand-management/load-shifting

11 

### For additional information on energy efficiency portfolio sta ndards in the United States, see: (1) Nadel, S. 2006. Energy Efficiency Resource Standards: Experi ence and Recommendations. Washington, D. C.: American Council for an EnergyEfficient Economy. (2) Hamrin, J., E. Vine, and A. Sharick. 2007. The Potential for Energy Savings Certificates as a Major Tool in Greenhouse Gas Reduction Program s . San Francisco, Calif.: Center for Resource Solutions.

### Renewables Portfolio Standa rds in the United States 12 

# Operational Experience Remains Limited

State RPS programs are a relatively new addition to the renewable energy policy landscape, with most programs enacted since the late 1990s. Cons equently, many RPS states have few years of operational experience during which ac tive compliance obligations have b een in force. As shown in Figure 4, six states with RPS policies had no operati onal experience with those policies, as of yearend 2007 (i.e., the first compliance period is 2008 or la ter), and six additional states had just one year of such experience. Eleven states have four or more years of operational experience, though in some instances these policies began with modest renewable energy purch ase obligations, so early-year targets were not particular ly challenging to achieve.

Washington

Oregon North Carolina New Hampshire Montana

Illinois

Washington D.C. Rhode Island

Delaware Colorado

New York Maryland Hawaii

Texas New Mexico Minnesota Massachusetts

California

Wisconsin Pennsylvania New Jersey Nevada Maine Connecticut

Arizona

Iowa



### < 1 year 1 year 2 – 3 years 4 – 6 years 7 – 8 years > 8 years Washington

Oregon North Carolina New Hampshire Montana

Illinois

Washington D.C. Rhode Island

Delaware Colorado

New York Maryland Hawaii

Texas New Mexico Minnesota Massachusetts

California

Wisconsin Pennsylvania New Jersey Nevada Maine Connecticut

Arizona

Iowa



### < 1 year 1 year 2 – 3 years 4 – 6 years 7 – 8 years > 8 years



### Figure 4. Experience with State RPS Polici es (Years Since First Major Compliance Period)



# Renewables Portfolio Standards Are Increasingly Motivating Renewable Energy Development

Though experience remains somewhat limited, state RPS policies are already beginning to have a sizable impact on the amount and lo cation of renewable project devel opment. These policies are one of a number of drivers for renewa ble energy. Other signif icant factors include Fe deral tax incentives, state renewable energy funds, voluntary green power markets, the specter of future greenhouse gas regulations, and the economic fundamentals of cer tain forms of renewa ble energy relative to conventional generation. Disentangling these various drivers is – to put it mildly – challenging. As one indicator of the role of state RPS progr ams in renewable resource development, over 50% of non-hydro renewable capacity additions in the U.S. from 1998 through 2007 occu rred in states with active, mandatory RPS policies, totaling r oughly 8,900 MW (see Figure 5). Since 2002, this percentage rises to over 60%. In 2007 alone, approximately 76% of all non-hydro renewable capacity additions came from states with ac tive RPS programs. By this metric at least, it appears that state RPS policies are already playing a majo r role in renewable resource development in the United States.

These numbers should be viewed with some cau tion, however, because they do not assess whether any given facility was constructed because of a state RPS or was, in fact, even eligible for a given state’s RPS. On the one hand, in some RPS states , such as Texas and Iowa, a substantial amount of renewable energy capacity has been added in recent years that has not been directly motivated by

### Renewables Portfolio Standa rds in the United States 13 

## those states’ RPS policies. Moreover, because RPS po licies have often been established in states with reasonably strong renewable resource potential, it is perhaps not surpri sing that a good fraction of the renewable energy development in the U.S. has occurr ed in those states. Gi ven these considerations, the data presented in Figure 5 would tend to oversta te the importance of RPS programs. On the other hand, most states allow out-of-state generation to count toward their RPS, so renewables capacity built in a non-RPS state may be used to meet anothe r state’s mandate; the data presented in Figure 5 do not account for this effect, which would tend to unde rstate the importance of state RPS policies. As a result, it is somewhat unclear whether and to wh at degree the data presen ted here under- or overestimate the importance of state RPS policies.

Figure 5. Cumulative and Annual Non-Hydro Re newables Capacity in RPS and Non-RPS States 12



## Regardless of these details, it is nevertheless evident that existi ng state RPS policies have already had a sizeable impact on new renewable resource development. 13 

## Moreover, because many of these policies have only recently been enacted, and renewable energy cont racting has just begun, renewable capacity additions to date do not full y capture the impact of existing st ate RPS policies. In California alone, for example, the state’s inve stor- and publicly owned utilities have contracted for more than 7,000 MW of new renewables capacity since the RPS was enacted in 2002, but just 1,100 MW of this capacity was online at the end of 2007.



# State RPS Policies Are Primarily Supporting Wind Power, Though Some Resource Di versity Is Apparent

Of the more than 8,900 MW of new non-hydro rene wable energy capacity that has come on line in RPS states from 1998 through 2007, roughly 93% has co me from wind power, with biomass (4%), solar (2%), and geothermal (1%) pl aying lesser roles (see Figure 6).

12 

### Non-solar data for 1998-2006 were s ourced from EIA Form-860; wind data for 2007 were from AWEA; biomass and geothermal data for 2007 were from Ventyx; and solar data for all years were from Larry Sherwood (Interstate Renewable Energy Council) and known installations of solar thermal el ectric facilities. Renewable capacity additions are designated as having occurred in an RPS state if the facility came onlin e in the year before the first compliance date or later.
13 

### Research at Berkeley Lab confirms this to some degree. In particular, Berkeley Lab estimates – based on projectspecific considerations – that, from 2001 through 2007, roughly 65% of the total wind additions in the U.S. were motivated, at least in part, by state RPS policies. Cumulative Capacity

13,000 16,000 19,000 22,000 25,000 28,000 31,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007Nameplate Capacity (MW) RPS

non-RPS Annual Capacity Additions

0 1,000 2,000 3,000 4,000 5,000 6,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007Nameplate Capacity (MW) RPS

non-RPS

### Renewables Portfolio Standa rds in the United States 14 Total Capacity Additions (1998-2007)

Solar
2% Geothermal
1%

Wind
93% Biomass
4% Annual Capacity Additions

0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007Nameplate Capacity (MW) Solar

Geothermal

Biomass

Wind



### Figure 6. Non-Hydro Renewable Energy Capacity Additions in RPS States, By Technology Type 14



## Though renewable resource diversity has so far been limited, there is some evidence that diversity may increase over time as RPS policies expand, at least in some states. In California, for example, of the more than 7,000 MW of contracts for new or repowered renewable ener gy projects signed from 2002 through 2007 by the state’s IOUs and POUs, 58% of the total capacity is wind, 23% solar, 12% geothermal, 7% biomass/MSW, and less than 1% is small hydro and ocean energy, demonstrating a greater level of diversity th an historical trends, both nationally and in California. 15 

## Additionally, largely because of technology tiers that exist in a number of states , a growing amount of solar energy is being motivated by RPS obligations, as discusse d further in a later section of this report.



# The Future Impacts of Existing State RPS Policies Are Projected To Be Relatively Sizable

The impacts of state RPS programs on renewable resource development are expected to expand in the long term as renewable purchas e obligation increase, though the magnitude of that growth will depend on how RPS policies are implemented, whether cost caps are limiting, whether entities elect to make alternative compliance payments, and whether new renewable energy proj ects would have come on line absent the support of state RPS policies. Ignoring these complexities, and simply assuming that full compliance is achieved, Berkeley Lab estimates that over 61 GW of cumulative, new re newable energy capacity may be needed by 2025 to fully meet existing state RPS policies (see Figu re 7), including 4 GW already required by 2007, a cumulative 15 GW by 2010, and a cumulative 32 GW by 2015. The 61 GW figure increases to over 63 GW if one also includes the non-binding renewable energy target s legislatively established in Missouri, North Dakota, Vermont, and Virginia, and to over 77 GW if one in cludes the longer-term, non-binding renewable energy goals in California, Iowa, and Texas.

14 

### Non-solar data for 1998-2006 were s ourced from EIA Form-860; wind data for 2007 were from AWEA; biomass and geothermal data for 2007 were from Ventyx; and solar data for all years come from Larry Sherwood (Interstate Renewable Energy Council) and known installations of solar thermal elect ric facilities. We designate re newable capacity additions as having occurred in an RPS state if the facility came online in the year before the first compliance date or later.
15 

### Of the more than 1,100 MW of renewable capacity added in California from 1998-2007, approximately 75% was wind, 12% biomass, 8% geothermal, and 4% small hydro.

### Renewables Portfolio Standa rds in the United States 15 

## The largest markets, in terms of capacity growth requirements, are projec ted to be California, Illinois, Minnesota, Texas, New Jersey, and Ariz ona, each of which would require over 3,000 MW of new renewable energy capacity by 2025 to achieve full compliance. As a proportion of expected statewide retail sales in 2025, however, leading states are somewh at different, and include Minnesota, Oregon, Connecticut, New Jersey, New Hampshire, New Mexico, and Delaware, each of which would require that more than 15% of statewide load in 2025 come from new renewable generation. Some of the leading states in terms of required capacity ad ditions, such as Texas, require rather modest additions on a percentage-of-load basis.

0 2,000 4,000 6,000 8,000 10,000 D.C. Iowa Hawaii Rhode Island Maine Montana New Hampshire Delaware Massachusetts Nevada New Mexico

Wisconsin Connecticut

Maryland North Carolina New York Colorado

Oregon Washington Pennsylvania Arizona New Jersey Texas Minnesota Illinois California New Renewable Capacity Needed by 2025 (Nameplate MW)

0% 5% 10% 15% 20% 25% 30% D.C. Iowa Maryland

Texas Hawaii New York Wisconsin Maine Montana Arizona Colorado Washington

California

Nevada

Illinois Rhode Island Delaware New Mexico New Jersey Connecticut Oregon Minnesota New Renewable Generation Needed by 2025 as a Percent of Projected Statewide Retail Sales

New Hampshire

Pennsylvania Massachusetts

North Carolina



### Figure 7. New Renewable Energy Required to Meet Existing State RPS Policies 16



## Though the eventual market impacts of existing state RPS policies are un certain, and will depend critically on design and implementati on details, there is little doubt that the aggregate amount of new renewable energy generation required under these policies is significan t. The estimated 61 GW of new renewables capacity equates to an additional 4.7% of total projected nationwide electricity generation in 2025, compared to a non-hydro shar e of 2.1% in 1999 and 2.4% in 2006. Roughly 15% of the projected growth in retail electricity sales from 2000 though 2025 would come from new renewable generation required under existing state R PS policies. Even with this growth, however, non-hydro renewables would continue to provide a relatively modest contribution to U.S. electricity supply: adding the estimate of new renewable ge neration required by existing state RPS programs from 2000 to 2025 to the 1999 base amount of non-hydr o renewables sums to just 6% of total projected electricity gene ration in the U.S. by 2025.

16 

### Data used to generate this figure were derived by applying RPS percentage oblig ations in each state to our projection of obligated retail sales, and deducting expected contributions from existing renewable generation. The figure may overstate new renewables needed to fully meet state RPS policies to th e extent that more-aggressive energy efficiency programs reduce load growth, or if LSEs use out-of-state existing renewable generation to a greater extent than assumed here. Note that the new renewable generation required under the Maryland and Washington, D.C. RPS policies is assumed to come exclusively from those states’ solar set-asides, with all remain ing RPS requirements in those tw o states projected to be met by existing resources.

### Renewables Portfolio Standa rds in the United States 16 

# Solar-Specific RPS Designs Ar e Becoming More Prevalent

Because of concerns that traditional RPS program s – in which all eligible renewable technologies compete – are likely to benefit only the least-cost pr ojects, an increasing number of states have begun to design their RPS policies to provide differentia l support to promising but (currently) higher-cost renewable technologies or applicat ions. Typically, this support has been provided either through credit multipliers , in which favored renewable technologies are given more credit towards meeting RPS requirements than are ot her technologies, or through set-asides , in which some fraction of the RPS must be met with favored technologies. As suggested by Table 1, set-asides and credit multipliers have been used to support an array of favored technologies, applications, project locations, and vintages. The most popular use of these mechanisms, however, has been to support central and distributed solar energy specifically, and customer-sited distributed ge neration (DG) more generally. 17



## Set-asides for solar or DG exist within 12 of the 26 U.S. RPS programs (see Figure 8). Four of these states combine credit multipliers of some form with these set-asides. Credit multipliers have become somewhat less popular in recent years, and only two states – Texas and Washington – now use credit multipliers without an accompanying mandatoryset-aside. The popularity of set-asides for solar or DG, on the other hand, has increased dramatica lly in recent years. In 2007 alone, new solar or DG set-asides were created in Delaware, Mary land, New Hampshire, New Mexico, and North Carolina, and the previously-established solar set- aside in Colorado was e ffectively expanded though an increase in that state’s overall RPS target.

NV: 1% solar by 2015 2.4x multiplier for central PV 2.45x multiplier for distributed PV PA: 0.5% PV by 2020 NJ: 2.12% solar electric by 2021

AZ: 4.5% customer-sited DG by 2025 (half from residential) NY: 0.1542% customer-sited DG by 2013

CO: 0.8% solar electric by 2020 (half from customer-sited projects) 1.25x multiplier for in-state projects 3x multiplier for co-ops and munis for solar installed before July 2015 DC: 0.386% solar electric by 2021 1.1x multiplier for solar 2007-09 WA: 2x multiplier for DG

NM: 4% solar electric by 2020, 0.6% DG by 2015 DE: 2.005% PV by 2019 3x multiplier for PV installed before 2015 MD: 2% solar electric by 2022



### Set-aside

Multiplier NC: 0.2% solar by 2018 NH: 0.3% solar electric by 2014



### Set-aside with multiplier TX: 2x multiplier for all non-wind NV: 1% solar by 2015 2.4x multiplier for central PV 2.45x multiplier for distributed PV PA: 0.5% PV by 2020 NJ: 2.12% solar electric by 2021

AZ: 4.5% customer-sited DG by 2025 (half from residential) NY: 0.1542% customer-sited DG by 2013

CO: 0.8% solar electric by 2020 (half from customer-sited projects) 1.25x multiplier for in-state projects 3x multiplier for co-ops and munis for solar installed before July 2015 DC: 0.386% solar electric by 2021 1.1x multiplier for solar 2007-09 WA: 2x multiplier for DG

NM: 4% solar electric by 2020, 0.6% DG by 2015 DE: 2.005% PV by 2019 3x multiplier for PV installed before 2015 MD: 2% solar electric by 2022



### Set-aside

Multiplier NC: 0.2% solar by 2018 NH: 0.3% solar electric by 2014



### Set-aside with multiplier TX: 2x multiplier for all non-wind



### Figure 8. Differential Support for Solar Energy in State RPS Policies

17 

### In addition to deciding which of these mechanisms to use, states seeking to support solar within an RPS must also address issues of eligibility (Are all forms of solar elect ricity eligible? Are customer-sited generators eligible?); measurement (Are metering and tracking systems in place?); and REC ownership and trading (Do owners of solar systems own their RECs? Do mechanisms exist to trade small quantities of RECs?).

### Renewables Portfolio Standa rds in the United States 17 

## Among those states with solar or DG set-asid es, two are restricted to photovoltaic (PV) applications, nine also allow solar-thermal electri c technologies to qualify, three allow solar heating and/or cooling to qualify 18 

## , and three states have DG set-asides in which solar PV can compete with other forms of renewable DG (see Table 5). The polic ies also differ in their targets and timeframes, geographic scope of project eligib ility, use of cost caps and altern ative compliance mechanisms, and degree of regulatory oversight over so lar contracting. Many of these set- asides have yet to take effect; only Arizona, Nevada, and New Jersey have thre e or more years of operational experience.

Table 5. Design Elements of State Solar and DG Set-Asides

Resource Eligibility

State First Compliance Year Photovoltaics Solar Thermal Electric Solar Heating and/or Cooling Non-PV Dist. Generation

Arizona 2001 ● ● ● ● Colorado 2007 ● ● Delaware 2008 ● Maryland 2008 ● ● Nevada 2003 ● ● ● New Hampshire 2010 ● ● New Jersey 2004 ● ● New Mexico 2011 ● ● ● New York 2006 ● ● North Carolina 2010 ● ● ● Pennsylvania 2006 ● Washington D.C. 2007 ● ●



## Despite their nascent state, solar and DG set- asides, in combination with state and Federal incentives, have already begun to ha ve a significant impact on the gr id-connected PV market in the United States, as shown in Figure 9. Overall, New Jersey has been th e largest solar set-aside-driven PV market in the United States since 2000, alth ough Nevada and Colorado emerged as equallysignificant solar set-aside markets in 2007. Additiona l contributions to grid-connected PV additions in states with solar set-asides have come from Ar izona and, more recently, New York. In total, from 2000 through 2007, 102 MW of grid-connected PV capacity was added in states with solar set-asides, representing 22% of all grid-connected PV installa tions in the U.S. over this period, and 75% of all grid-connected PV additions outside of Ca lifornia, the country’s largest market. 19


## The impact of solar and DG set-asides is not rest ricted to PV. In fact, the nation’s only two solarthermal electric plants built since 1991 – a 1 MW facility in Arizona commissioned in 2006 and a 64 MW plant in Nevada commissioned in 2007 – have been motivated by solar set-asides. More generally, solar-thermal electric de velopment does not, in some states , appear to requi re a solar setaside. In California, for example, a number of su ch projects are in development, driven by a moretraditionally designed RPS, without a solar set-aside (see Table 6).

18 

### In addition to Arizona, Nevada, and No rth Carolina, which allow solar heating and/or cooling to qualify for their solar/DG set-asides, a number of other states allow solar h eating and/or cooling to qualify for their overall RPS target, including: Delaware, Hawaii, Illinois, New Hampshire, Pennsylvania, and Texas.
19 

### California’s RPS, which lacks a solar se t-aside, has resulted in 15-29 MW of utility-scale PV contracts for projects not yet constructed (range reflects expansion options). Separately from the RPS, California has also enacted aggressive financial incentive programs that intend to support 3,000 MW of customer-sited solar PV by 2017, and that have already spurred more than 300 MW of grid-connected PV capacity from 2000-2007.

### Renewables Portfolio Standa rds in the United States 18 0 10 20 30 40 50 60 70

2000 2001 2002 2003 2004 2005 2006 2007Annual Grid-Connected PV Installations in RPSStates with Solar or DG Set-Asides (MW)

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%Percent of Annual Grid-ConnectedPV Installations in the US (%) Delaware Maryland District of Columbia Pennsylvania
Colorado
Nevada
New York
Arizona New Jersey

Percent of annual US PV installations [right axis] Percent of annual US PV installations (excluding California) [right axis]



### Figure 9. Annual Grid-Connected PV Installations in RPS States with Solar or DG Set-Asides 20



### Table 6. Status of Utility-Scale Solar-Therma l Electric Facilities Proposed in the U.S.

Power Purchaser Developer State Project Size Status Motivation

Nevada Power Acciona Nevada 64 MW Operational Solar set-aside

Arizona Public Service Acciona Arizona 1 MW Operational Solar set-aside

Pacific Gas & Electric Solel California 554 MW Contracted General RPS

Pacific Gas & Electric Ausra California 177 MW Contracted General RPS

Pacific Gas & Electric BrightSource California 500 – 900 MW Contracted General RPS

Southern California Edison Stirling Energy Systems California 500 – 850 MW Contracted General RPS
San Diego Gas & Electric Stirling Energy Systems California 300 – 900 MW Contracted General RPS
San Diego Gas & Electric Bethel California 49 MW Contracted General RPS
San Diego Gas & Electric Bethel California 49 MW Contracted General RPS

Arizona Public Service Abengoa Arizona 280 MW Announced General RPS
Florida Power & Light Ausra Florida 10 – 300 MW Announced Not stated
Notes: Table does not include facilities announced by developers, unless a purchaser of the power has been identified. In addi tion to the specific facilities listed here, a number of utilities in the Southwest have issued a 250 MW RFP for central station solar power, and Colorado’s ma jor IOU (Xcel Energy) has announced preliminary plan s for a 200 MW facility.



## The impacts of RPS solar set-asides on solar de velopment will continue to grow as a greater number of the existing set-asides take effect and as targets increase over ti me. Figure 10 and Table 7 present Berkeley Lab estimates of the solar electric capacity (including PV a nd solar thermal electric) that would be required to fully achieve existing stat e solar and DG RPS set-aside policies. Changes in Federal tax incentives, binding RPS cost caps, force majeure events, and other barriers will – in reality

20 

### PV installation data from 2000-07 were provided by Larry Sherwood (Interstate Renewable Energy Council). For the purpose of assigning state PV installations to set-asides, the da ta above include installations in the year before the first se taside compliance date. Data are presented in di rect-current units, at Standard Test Conditions.

### Renewables Portfolio Standa rds in the United States 19 

## – challenge the full achievement of these policies. 21 

## As such, the estimates presented here should be considered a reasonable, if uncerta in, estimate of the potential imp act of these set-asides under an aggressive assumption of full compliance.

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000200820092010201120122013201420152016201720182019202020212022202320242025Cumulative Solar Capacity (MW)

0 100 200 300 400 500 600 700 800Annual Solar Additions (MW) AZ

NJ

MD

PA

NM

NC

DE

NV

CO

DC

NH

NY Annual Capacity (right axis) Cumulative Capacity (left axis)



### Figure 10. Solar Capacity Required to Meet Existing State RPS Solar and DG Set-Asides 22



## Even with these caveats, the estimates presented here demonstrate the potential importance of these set-asides for the solar market in the coming decades. As shown, a cumulative 550 MW of solar capacity may be required by these policies by 2010, growing to approx imately 2,200 MW by 2015, 5,300 MW by 2020, and 6,700 MW by 2025. Annual solar additions on the order of 100 MW may be required from 2008 through 2010, rapidly ramping up to nearly 300 MW a year from 2011 through 2014, and then to over 500 MW a year from 2015 to 2021, if full compliance is to be achieved. The largest set-aside driven solar markets in th e long-term, based on required capacity to fully meet state targets, are projected by Berkeley Lab to include Arizona, New Jersey, Maryland, and Pennsylvania. In the next several years, however, significant growth in sola r capacity will also be required in New Mexico, Nevada, a nd Colorado. Finally, as a proporti on of expected statewide load in 2025, these set-aside policies are projected to require solar genera tion shares as high as 3.1% in New Mexico, and 2% or more in Arizona, Mary land, and New Jersey again assuming that full compliance is achieved.

21 

### Actual impacts will be affected not only by whether full compliance is achieved, but also by future load growth, the competitiveness of solar energy in broader DG set-asides, the relative contribution of different types of eligible solar technologies, and other factors.
22 

### Berkeley Lab developed these estimates using a number of input assumptions regarding expected load growth, capacity factors, compliance exemptions, the share of solar used to meet broader DG obligations, the share of PV and solar-thermal electric used to meet solar requirements, and other factors. Data are presented in direct-current units, at Standard Test Conditions.

### Renewables Portfolio Standa rds in the United States 20 

## Achieving these targets is not assured, however, and a number of policy design issues may constrain the market’s growth. States have developed various types of cost caps, for example, many of which may ultimately become binding, thereby limiting future solar market expansion to levels below those estimated here. Additionally, some states – especially those in which retail electric competition exists – continue to struggle with how to encourage appropriate contracting for solar generation, given the political risk of future policy changes. In 2007, New Jersey sought to address this concern by developing plans totransition away from a rebatebased solar market and towards a market primarily supported by solar renewable energy credits. To provide some encouragement for longer-term REC contracting, Ne w Jersey established, in advance, an eight-year schedule for solar alternative compliance payment (ACP) levels, there by removing at least some market uncertainty. Other states, such as Maryland, North Carolina, Colorado, and Nevada, simply require long-term contracting for solar energy or RECs. Alternativel y, or in addition, some st ates have mandated or encouraged the use of up-front financial incentiv es, at least for smaller-scale PV systems (and sometimes for larger commercial installations as we ll); this is true in Co lorado, Nevada, Arizona, New Jersey, New York, and Maryland.



# Compliance with State RPS Ma ndates Has Been Strong in General, Though Important Exceptions Exist

So far at least, early-year renewable energy target s in the majority of state RPS policies have been fully or almost-fully achieved. “Compliance” is defined here as the application of renewable electricity or RECs towards RPS targets, including the use of available credit multipliers, but excluding any use of ACPs. 23 

## Using this definition, of the 14 st ates with RPS compliance obligations

23 

### Note that the definition of “compliance” us ed here is not the same as that used by individual states. This report focuses on the delivery and retirement of renewable electricity or RECs for use in a given compliance year (including RECs that are delivered in previous or subsequent years, as long as th ey are used to meet current-year compliance, as well as credit 

### Table 7. Cumulative Solar Required to Meet State RPS Solar and DG Set-Asides

State 2010 Capacity 2025 Capacity 2025 Solar Generatio n as a % of State Load

Arizona 110 MW 1,600 MW 2.0%

Colorado 29 MW 160 MW 0.4%

Delaware 0.5 MW 190 MW 1.4%

Maryland 14 MW 1,500 MW 2.0%

Nevada 76 MW 180 MW 0.6%

New Hampshire 4 MW 35 MW 0.3%

New Jersey 210 MW 1,600 MW 2.1%

New Mexico 64 MW 420 MW 3.1%

New York 10 MW 15 MW 0.0%

North Carolina 5 MW 280 MW 0.2%

Pennsylvania 25 MW 690 MW 0.5%

Washington D.C. 0.5 MW 54 MW 0.4%

Total 550 MW 6,700 MW n/a

Note: Data are presented in direct-current units, at Standard Test Conditions

### Renewables Portfolio Standa rds in the United States 21 

## in 2006 for which data were availa ble, nine states achieved complia nce levels of greater than 95%, (see Table 8). These states include California, Iowa, Maryland, Maine, New Jersey, New Mexico, Pennsylvania, Texas, and Wisconsin . Moreover, the weighted-average compliance level (weighted by the level of compliance obligation) across all 14 st ates for which data were available was 94% in 2006, compared to 96% in 2005 (12 st ates), 94% in 2004 (11 states), and 86% in 2003 (9 states).
Nonetheless, it is also evident th at a number of states have struggl ed to meet even their early-year RPS targets. In Arizona, for example, complian ce has been well below 50% since 2003, even after accounting for credit multipliers. This is because RPS ta rgets in that state have historically had to be met only to the extent that pre-specified funding amounts were sufficient to achieve compliance; in point of fact, funding levels have been insufficien t. In Massachusetts, on the other hand, eligible RECs have been in short supply, in part because of a difficult project development climate in the New England region. For similar reasons, Connecticut also experienced a slight REC shortage in 2006, though much less severe than in Massachusetts due to different resource eligibil ity rules. Minnesota’s statewide RPS, which began in 2005, achieved 94% “compliance” in that year, but because Xcel’s mandate for additional biomass and wind capacity (b eyond that required for the statewide RPS) was not strictly achieved on schedule, overall complia nce levels (including both the statewide RPS and Xcel’s incremental renewable capacity mandates) averaged 61-81% from 2002 through 2005. Nevada has struggled with RPS compliance for a variety of reasons, including contract failures and project delays, as well as changing regulatory treatmen t of REC transfers among the state’s two major utilities. Finally, New York’s first-year RPS ta rget was missed by a wide margin, in large part because of a modest delay in the on-line date of one of the state’s largest new renewable energy facilities, and in part due to RE C prices that were higher than in itially anticipated and budgeted. The few states with obligatory solar set-asides in 2006 or earlier have had mixed success in meeting those requirements (see Figure 11). In Ariz ona, for example, just 23% of the solar set-aside in 2006 was met by solar energy deliveries (even af ter accounting for credit multipliers), due in large measure to insufficient funding levels. In Nevada, solar REC retirements in 2006 were only 9% of the solar target (again, accounting for multipliers), an increase from just 2% in 2004 and 2005. The addition of a 64 MW solar-thermal electric pr oject and nearly 15 MW of PV in 2007 should dramatically improve the compliance of Nevada’s utilities in the years ahead. New Jersey, meanwhile, achieved 96% compliance with its solar set-aside in 2006 through so lar deliveries, down from 98% in 2005, but up from just 54% in 2004. Pennsylvania achieved 100% compliance with its first-year solar set-aside in 2006, but that requirement was so small as to be effectively meaningless (the solar REC retirement obligation in the 2006 compliance year was equivalent to just 5-10 residential PV installations, due to the limited amount of load with RPS obligations in that period).

multipliers). In so doing, these data ignore the possible use of ACPs as well as certain other compliance flexibility mechanisms.

### Renewables Portfolio Standa rds in the United States 22 

### Table 8. Application of Renewable Electrici ty and/or RECs Towards RPS Targets,

State 1999 2000 2001 2002 2003 2004 2005 2006

AZ - - 89% 64% 31% 31% 26% 25%

CA - - - - - 100% 100% 98%

CT - no data no data no data no data 100% 100% 93%

HI - - - - - - 100% -
IA 100% 100% 100% 100% 100% 100% 100% 100%

MA - - - - 100% 65% 64% 74%

MD - - - - - - - 100%

ME - 100% 100% 100% 100% 100% 100% 100%

MN - - - 61% 72% 72% 81% no data

NJ - - 100% 100% 100% 100% 100% 100%

NM - - - - - - - 100%

NV - - - - 31% 30% 95% 39%

NY - - - - - - - 52%

PA - - no data no data - - - 100%

TX - - - 99% 96% 99% 99% 100%

WI - 40% 100% 100% 100% 100% 100% 100%
Weighted Average 100% 98% 100% 90% 86% 94% 96% 94%

blank cells = no compliance obli gation existed in that year no data = unable to obtain compliance data for that year

Notes:

• Arizona – data for 2001-2004 come from an ACC staff report and, after 2004, directly from compliance reports provided by the

state’s electric utilities; 2006 data were unavailable from one of the state’s IOUs.

• California – data come from the CEC and fro m self-reported information, and include th e state’s major IOUs, and, starting in 20 06,

ESPs; data from small IOUs are excluded (because compliance rules have not been established) as are data from the state’s POUs (because yearly RPS targets are often unstated).

• Connecticut – data were unavailable for 2000-2003, during whic h time RPS obligations applied only to non-standard-offer load,

which represented less than 2% of statewide retail sales in those years.

• Hawaii – RPS obligations under previous legi slation existed in 2005, but subsequent legislation re moved the 2005 obligation and established a new RPS schedul e that begins in 2010.

• Maine, Maryland, New Jersey – compliance fi gures are based on emails from state RPS ad ministrators, not based on a review of compliance filings.

• New Jersey – compliance data for 2001-2003 are on a calendar year basis; beginning in 2004, compliance data are for annual peri ods

beginning June 1st, which for the purpose of the table, are assigned to the starting year of the annual compliance period.

• Minnesota – prior to 2005, data presented here only include Xc el’s wind and biomass mandates; in 2005, data include the overall

statewide renewable energy obligation and Xcel’s wind and biom ass mandates, and 2005 compliance data are for the year beginning July 1, 2005; 2006 data are not yet available.

• Nevada – the large increase in compliance in 2005 resulted from the sale of excess non-solar RECs by Sierra Pacific to Nevada

Power; Sierra Pacific has genera ted a substantially greater number of non-solar RECs in each year than required for its RPS tar get; the Nevada PUC allowed Sierra P acific to sell excess non-solar RECs generated in 2004 and 2005 to Nevada Power, which the latte r retired for compliance in 2005; in 2006, the utilities again request ed that Sierra Paci fic be allowed to se ll non-solar RECs to Nevada Power, but the PUC did not grant this request, and t hus Nevada Power fell far short of its RPS target.

• Pennsylvania – data were unavailable for 2001-2002, during which time RPS obligations a pplied only to Competitive Default Servi ce load (default service provided by a competitive supplier), which re presented less than 1% of statewide retail sales in those ye ars; 2006 compliance data are for the complia nce period beginning June 1, 2006.

• Wisconsin – before 2001, the RPS was a 50 MW renewables capacity requirement on a s ubset of elect ric utilities.

### Renewables Portfolio Standa rds in the United States 23 0% 20% 40% 60% 80% 100%

2001 2002 2003 2004 2005 2006Solar Retirements as % ofSolar Set-Aside Target Weighted Average
Arizona New Jersey
Nevada Pennsylvania



### Figure 11. Application of Solar Electricity and/ or Solar RECs Towards Solar Set-Aside Targets



## Because states have developed differing complia nce enforcement and flexibility mechanisms (see Text Box 1), one should not assume that lack of co mpliance, as defined here, automatically leads to enforcement actions. In some of the states li sted as not achieving full compliance, alternative compliance payments (ACPs) are allowed and have been made to avoid enforcement action (funding collected from these payments is typically recy cled to support renewabl e energy – and/or energy efficiency – through other means). Th is is true in Massachusetts and New Jersey (where the shortfalls in REC retirements have been fully met with ACPs) and, to a much lesser extent, in Maryland. 24 

## As a result, in 2006, $18.2 million was paid in the form of ACPs: 97.6% from Massachusetts, 2.2% from New Jersey, and 0.2% from Maryland. In still other cases, such as California, opportu nities to “make-up” purchase shortfalls exist, ensuring that any enforcement actions will not occur for several years after a given compliance year. In Arizona and New York, funding limitations can cu rtail compliance. Finall y, a number of states offer compliance waivers on a discreti onary basis; this is why, for ex ample, Nevada’s utilities have not been penalized, despite a long history of unde r-compliance, and Minnesota’s utilities have likewise faced no penalties. In part as a result of these fact ors, explicit enforcement actions have been taken in only two states so far: Connecticut and Texas. In Connecticut, l ack of compliance in 2006 resulted in $5.6 million in penalties (though Connecticut uses the term ACP, these payments are defined as penalties here, because they are not automatically recoverable in rates). In Texas, two competitive ESPs were penalized a total of $4,000 in 2003 for lack of RPS compliance, while in 2005 two other ESPs were penalized $28,000. 25 

## In sum, enforcement actions have – up to now – been infrequent.

24 

### Though Table 8 suggests no REC shortfalls in Maryland an d New Jersey in 2006, in fact renewable deliveries in these two states were 99.87% and 99.95%, respectively.
25 

### Although not a non-compliance penalty per se , the two Nevada IOUs agreed to make a $30,000 donation to the Desert Research Institute, not recoverable in rates, as part of the stipulation to its 2005 RPS compliance filing.

### Renewables Portfolio Standa rds in the United States 24 

# The Use of Renewable Energy Certificates and Certificate Tracking Systems Is Expanding

Reliance on unbundled RECs for state RPS comp liance has often gone ha nd-in-hand with the development of regional certificate tracking systems. Although several states have allowed RECs and relied on (manual) attestations a nd contract audits, states are incr easingly using elect ronic certificate tracking systems to issue, reco rd, track, and retire RECs. The year 2007 saw the completion of two new regional tracking systems—the Western Renewable Energy Generation Information System (WREGIS) and the Midwest Renewable Energy Tracking System (M-RETS). WREGIS serves the Wester n Electricity Coordina ting Council (WECC), including 11 U.S. states, two Cana dian provinces, and part of the Me xican state of Baja California. MText Box 1. State RPS Compliance Enforcement

States use a variety of enforcement options to ensure that RPS targets are met. The most popular option in states that allow retail competition is an alternative co mpliance payment. If recoverable in rates, an ACP is a means of complying with an RPS – rather th an procuring renewable generation or RECs – that effectively makes the need for explicit penalties moot(unless an LSE fails to comply through the ACP as well). In states that maintain vertically integrated electric utilities, on the other hand, enforcement most typically occurs through explicit or discretionary fina ncial penalties. Other forms of RPS enforcement are also listed below. Though not show n here, it deserves note that a number of states allow LSEs to petition for an exemption from penalties under certain circumstances.

Penalties for Non-Compliance States Notes

ACP, Automatic Cost Recovery MA, ME, NH, NJ, RI Payments generally go to a renewable energy fund; if failure to pay ACP, remedies can include license suspension or revocation and/or financial penalties; ME ACP applie s only to new renewables target

ACP, Possible Co st Recovery DE, MD, OR, DC Cost recovery sometimes only allowed if ACPs are deemed to be the least-cost compliance option; payments generally go to a renewable energy fund; if failure to pay AC P, remedies can include license suspension or revocation an d/or financia l penalties

Explicit Financial Penalties, No Automatic Cost Recovery CA, CT, MT, PA, TX, WA, WI CA, CT, MT, PA, TX, WA: penalty in $/MWh applies to shortfall; WA: penalty may, in some circumstances, be recoverable in rates; WI: penalty ranges from $5,000 to $500,000; suppliers often given opportunity to petition for a waiver

Discretionary Financial Penalties, No Cost Recovery AZ, CO, HI, MN, NV Financial penalties assessed at the discretion of the PUC; penalties can be waived with sufficient cause; in MN, PUC can order renewable investment and can impos e financial penalties

Enforcement at PUC Discretion NC, NM PUC has legislative authority to en force compliance, but no rules have been established to document how this will occur

Not Applicable IA, IL, NY IL and NY rely on administrative agencies to procure renewables on behalf of LSEs; IA RPS has already been fully met

### Renewables Portfolio Standa rds in the United States 25 

## RETS serves Wisconsin, Minnesota, Iowa, South Da kota, North Dakota, the province of Manitoba, and parts of Montana and Illinois. 26 

## New and existing tracking systems are shown in Figure 12.

Figure 12. Electronic Certificate Tracking Systems and Year of Initiation



## WREGIS and M-RETS are similar to the first electronic certificate track ing system developed by the Electric Reliability Council of Texas (ERCOT), in that they issue and track certificates only for renewable generation. In addition, WR EGIS and M-RETS certificates ma y – in theory – be used at any time because they do not have an expiration date . This is in contrast to the New England Power Pool’s Generation Information System (GIS) and the PJM Generation Attributes Tracking System (GATS), which both issue certificates to all generation and then set tle those certificates on a regular schedule to support a variety of different policies. Prior to th e operation of GATS, New Jersey developed, and continues to operate , a separate tracking system for Solar RECs and “Class I” RECs from onsite customer generation. New York, which manually tracks bundled energy a nd attributes, is currently working to develop an electronic system that will i ssue and track unbundled certificates. For the remaining states without a tracking system, APX, Inc., a pr ivate service provider, has announced that it will make available a certificate tracking system (not shown in Figure 12). With the increased availability of formal certif icate tracking systems, most RPS states have opted to allow – with restrictions – the us e of unbundled RECs for compliance purposes. 27 

## As shown in Figure 13, the exceptions are: Iowa, which adopted its RPS long before RECs existed and which has satisfied its requirement; Arizona and Hawaii, which do not currently allow the use of unbundled RECs; and California, which will rely on WREGIS but has not yet approved the use of unbundled RECs.

26 

### Because it is bisected by different co ntrol areas, Montana is served in part by WREGIS and in part by M-RETS. Similarly, Illinois is served in part by M-RETS and in part by GATS. Wisconsin previously operated its own tracking system for Renewable Resource Credits, but its program is now supported by M-RETS.
27 

### See Holt, E. and R. Wiser. 2007. Th e Treatment of Renewable Energy Certif icates, Emission Allowances, and Green Power Programs in State Renewables Po rtfolio Standards. Berkeley, Calif.: La wrence Berkeley National Laboratory. 

### Operational Under Development WREGIS

2007 M-RETS 2007

GATS 2005 GIS 2002

ERCOT

2001 

### Operational Under Development WREGIS

2007 M-RETS 2007

GATS 2005 GIS 2002

ERCOT

2001

### Renewables Portfolio Standa rds in the United States 26 

### Figure 13. Treatment of Unbundled RECs for State RPS Compliance



## Although RECs are now widely used as the pref erred means of demonstrating RPS compliance, REC definitions are not uniform. St ates have defined RECs differe ntly—based on differing eligible resource definitions, diffe rent generator vintages, limitations on generator location and electricity delivery, and whether or not emissions credits, if any, must be retired with the REC for RPS compliance. As a result, there are multiple state and regional markets for RECs, and fungibility across RPS markets is limited. Typical REC contracting practices also vary considerably across states. Some state RPS markets have primarily encouraged short-te rm trade in unbundled RECs. This is most-often the case in states where retail choice is allowed and therefore the futu re load obligations of i ndividual LSEs are more uncertain, and where electric utilities are no longer directly in the bus iness of electricity supply. Other markets have relied on a mix of short-term a nd longer-term purchases, where long-term purchases might be for unbundled RECs or RECs bundled with the underlying electricity supply. Finally, in states in which retail competition is not allowed a nd regulators retain oversight over utility supply decisions, electric utilities largely rely on long-te rm contracts for RECs that remain bundled with electricity; such contracts are often re quired by state policy (see Text Box 2).



# REC Prices Have Been Highly Variable Across States

Renewable energy certificate markets remain fr agmented in the U.S. Figure 14 and Figure 15 present indicative monthly data on spot-market REC prices in compliance markets, i.e., states in which RECs are sold to meet state RPS obligations. Figure 14 reports data on “main tier” or “Class I” REC prices, while Figure 15 reports data on REC prices under “C lass II” or “existing tier” RPS requirements – typically consisting of existing hydr opower, biomass, and MSW projects. These data were obtained from Evolution Markets, and exclude markets for which transparent spot-market REC pricing is not available. 28

28 

### Some care should be taken in using these data, however, because bilateral trade in RECs and longer-term REC contracts are not fully captured in the Evolution Markets data , and because liquidity is limited in many states. 

### Unbundled RECs allowed

Unbundled RECs not currently allowed

### Renewables Portfolio Standa rds in the United States 27 $0 $10 $20 $30 $40 $50 $60Jan-03Apr-03Jul-03Oct-03Jan-04Apr-04Jul-04Oct-04Jan-05Apr-05Jul-05Oct-05Jan-06Apr-06Jul-06Oct-06Jan-07Apr-07Jul-07Oct-07Jan-08Average Monthly REC Prices (Nominal $/MWh)

$0 $50 $100 $150 $200 $250 $300NJ Solar - Average Monthly REC Prices (Nominal $/MWh) CT Class I (left axis) DC Class I (left axis) MA (left axis) MD Class I (left axis) NJ Class I (left axis) PA (left axis) RI New (left axis) TX (left axis) NJ Solar (right axis)



### Figure 14. REC Prices in RPS Compliance Markets (Main Tier and Class I)

$0.00 $1.00 $2.00 $3.00 $4.00 $5.00Jan-03Apr-03Jul-03Oct-03Jan-04Apr-04Jul-04Oct-04Jan-05Apr-05Jul-05Oct-05Jan-06Apr-06Jul-06Oct-06Jan-07Apr-07Jul-07Oct-07Jan-08Average Monthly REC Prices (Nominal $/MWh) CT Class II DC Class II DE Existing MD Class II ME Existing NJ Class II



### Figure 15. REC Prices in RPS Compliance Markets (Existing Tier and Class II)



## Though not a comprehensive picture of all states, th e figures clearly indicate that spot REC prices have varied substantially across re gions and resource types, and that significant price fluctuations are even possible within a particular state over time. Key trends in 2007 include continued high prices to

### Renewables Portfolio Standa rds in the United States 28 

## serve the Massachusetts RPS, dram atically increasing prices under the Connecticut Class I RPS and, more recently, a large spike in the price for Class I certificates under the New Jersey RPS. Class I REC prices in Connecticut have shown particularly striking swings, largely reflecting policy changes in resource eligibility rules over time. New Jersey ’s Class I REC prices rose partly because that state’s renewable energy targets ar e increasing and partly because th e growth in RPS requirements inthe PJM region is placing greater competition on available supply. The sudden spike and then (moremodest) drop in prices may also ha ve reflected, to some degree, an (incorrect) belief that supply was severely limited and/or hoarding of RECs by some parties. Pri ces trended downwards in Texas, Maryland (Class I), and Washington D.C. (Class I) due to a surplus of eligible renewable energy supply relative to RPS-driven demand in those mark ets. New Jersey’s solar RECs, on the other hand, continue to fetch more than $200/MWh due to the underlying cost of solar electricity. As shown in Figure 15, prices for “Class II” or “existing tier” RECs remained low, and trended downwards in most markets. Prices in these cases appear to largely reflect transaction (rather than supply) costs, since REC supply appears to fa r exceed REC demand in a ll of these markets. Concerns have been expressed that REC price variability and uncertainty may limit the ability of RPS policies to support renewables i nvestment decisions. As a result, a number of states have adopted RPS provisions to help projects secure financing. These efforts are summarized in Text Box 2.

Text Box 2. Encouraging Project Financing

Renewable projects are capital intensive, and investor s therefore closely examine the long-term energy and REC cash flows of a project; projects that have locked-i n or hedged their energy or REC prices for at least 10 years are often viewed more favorably. LSEs, on the other hand, have in some cases decided not to sign long-term contracts because they are discouraged or prevented from doing so by regulators (typical for default service providers in restructured markets); because their future load requirements are uncertain (competitive ESPs); or because their credit may not be strong enough to support such contracts (typically competitive ESPs). Uncertain energy and/or REC pr ices have – in some of these cases – impeded renewable project development. In other instances, development has occurred on a quasi-merchant basis, but arguably at higher ratepayer cost because investor s in such projects require inflated returns to compensate for the added risk. To address these barrier s, several states have adopted RPS provisions to help projects secure financing, as summarized below.

Contract Duration Requirement CA
CO
CT
IA
MD
MT
NV
NC
PA
RI 10+ yrs 20+ yrs 100 MW, 10+ yrs ownership or long-term contract solar, 15+ yrs 10+ yrs 10+ yrs solar, sufficient length to stimulate development good faith effort includes seeking long-term contracts PUC requires that default utility investigate long-term contracting

Central Procurement NY
IL central procurement where NYSERDA purchases attributes under long-term contract central procurement in which long-term contracts are likely to be offered

Credit Protection NV
CA created program to protect payments to generators fro m utility credit concerns initially exempted utilities from meeting RPS until they became creditworthy

Renewables Fund Support MA renewable energy fund created “green power partne rship” that offers guaranteed REC purchase or option contracts of up to 10 years

### Renewables Portfolio Standa rds in the United States 29 

# The Price Impacts of State RPS Policies Are Not Always Observable, But Have Been Mode st in Most Cases So Far

State RPS policies could have substantial impact s on electricity markets, ratepayers, and local economies. Unfortunately, the actual costs (and benefits) of state RPS policies have not been compiled in a comprehensive fashion, in part because of the early status of policy implementation and in part because of methodological complexities and data availability constrai nts. Despite these limitations, it is reasonably clear that the cost impact s of state RPS policies have varied by state but, at the same time, there is little evid ence of a sizable impact on average re tail electricity rates so far. Translating unbundled REC prices, as well as the renewable electric ity contracts that predominate in traditionally-regulated states, into retail rate impacts is challenging. None theless, if one assumes (a) that REC prices represent th e incremental above-market cost of renewable energy, (b) that the short-term REC prices presented in Figures 14 an d 15 are representative of all RECs used for RPS compliance, and (c) that certain state-specific funding caps are binding, then 2007 RPS-induced retail rate increases, averaged over all obligated load in each state, can be estimated, as shown in Figure 16. 29


## Though the results vary across states, in most cases , rate increases are estimated at 1% or less in 2007. Moreover, the rate impacts shown here may, in some states, be biased upwards due to at least two factors: (1) longe r-term REC contracts are likely to be priced below the short-term REC prices used for these calculations; and (2) the rate estima tes presented here ignore the potential impact of renewable energy in reducing natural gas and wholesale electricity prices. At the same time, however, rate impacts will presumably grow over time as RPS obligations increase, unless REC prices or RPS funding levels simulta neously decline.

0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2%MarylandMaineWashington D.C.DelawarePennsylvaniaNew YorkRhode IslandNew JerseyColoradoArizonaMassachusettsConnecticutCaliforniaIowaMinnesotaNevadaNew MexicoTexasWisconsinHawaiiIllinoisMontanaNew HampshireNorth CarolinaOregonWashingtonEstimated Electricity Rate Impact in 2007 (%)

unknown
data not available not applicable RPS did not apply in '07



### Figure 16. Estimated Rate Impacts of State RPS Policies in 2007

29 

### Rate impacts are estimated on a calendar year basis, using the average compliance obligation during 2007.

### Renewables Portfolio Standa rds in the United States 30 

## In states where long-term re newable electricity contracts (ra ther than purchases of unbundled RECs) predominate as the mode of state RPS complia nce, retail rate impacts are more difficult to estimate, due primarily to the confidentiality of cont ract terms. As such, these states are shown in Figure 16 as having “unknown” rate impacts in 2007 (t hose states listed as “ not applicable” had no RPS obligation in 2007). 30 

## In a number of these states, however, there is at least some evidence that the renewable energy contracted in recent years has been priced competitively with conventional sources of generation. In California, for example, the majority of the renewable electricity brought under contract by the state’s IOUs since 2002 has been signed at pri ces that are below the “market price referent” – the estimated cost of new gas-fired generatio n. Anecdotal evidence suggests historically low renewable energy prices in many of the other states listed as having “unknown” rate impacts in Figure 16 as well. In these instances, it is not clear whether state RPS policies are leading to higher, or lower, retail electricity prices. 31


## Notwithstanding these conclusions, it is also evident that rene wable electricity prices have increased in recent years. Wind power contract pr ices for projects built in 2006, for example, were substantially higher than for projects built from 2000 through 2005. 32 

## At the same time, the cost of new gas and coal facilities has al so been on the rise, making any long- term “incremental” cost of RPS programs difficult to estimate. Given uncertainty about the futu re costs of RPS policies, state policymakers have developed a variety of approaches to limit the maximum impact of these policies on electric ity rates, as shown in Table 9. Common approaches include alternative comp liance payments that can be made in lieu of purchasing RECs, direct retail ra te caps, renewable energy funding caps, renewable energy contract price caps, per-customer electric bill impact limits, a nd financial penalties that can serve as cost caps in certain circumstances. In addi tion, though not presented here, a numbe r of states have established force majeure mechanisms that allow electricity suppliers to limit their renewable energy purchases if they are able to persuade regulat ors that those purchases would unduly raise electricity rates. Where calculable, Table 9 also translates the effective co st caps into the maximum possible incremental retail rate increase caused by RPS policie s, for the year in which the state RPS achieves its highest percentage target. Though a sizable range exists, the majority of st ates have capped incremental rate impacts at well below 10%, and in seven states rate impacts are capped at or below 2%.

30 

### Texas is included among these states. Though short-term REC pricing is transparent in Texas, many electricity suppliers have complied with their RPS obligations through long-term, re newable electricity contracts. Short-term REC prices are therefore not likely to be a good indicator of rate impacts in that state.
31 

### Another approach to estimating impact s is to review state RPS cost-impact projections . A Berkeley Lab report completed in 2007, for ex ample, provides a summary of 28 state RPS cost -impact projections. See: Chen, C., R. Wiser and M. Bolinger. 2007. “Weighing the Costs and Benefits of Renewables Portfolio Standards: A Comparative Analysis of State-Level Policy Impact Projections.” Berkeley , Calif.: Lawrence Berkeley National Laboratory.
32 

### See Wiser, R. and M. Bolinger. 2007. “Annual Report on U.S. Wind Power Installation, Cost, and Performance Trends: 2006.” Berkeley, Calif.: Lawren ce Berkeley National Laboratory.

### Renewables Portfolio Standa rds in the United States 31 

### Table 9. Approaches Used to Cap the Maximum Cost of State RPS Compliance

ACP

State Auto. Cost Rec. Possible Cost Rec. Retail Rate/ Revenue Req. Cap Renewable Energy Contract Price Cap PerCustomer Cost Cap Renewable Energy Fund Cap Financial Penalty May Serve as Cost Cap Maximum Effective Retail Rate Increase

AZ ● ● to be determined

CA ● cap for portion of cost

CO ● 1.7%

CT ● 6.5%

DE ● 16.3%

HI ● 0.0%

IA no explicit cap

IL ● 1.4%

MA ● 3.3%

MD ● ● 2.1%

ME ● 4.8%

MN no explicit cap

MT ● 0.1%

NC ● 1.9%

NH ● 8.3%

NJ ● 10.6%

NM ● ● ● 1.8%

NV no explicit cap

NY ● 0.9%

OR ● ● 4.0%

PA ● no explicit cap

RI ● 6.4%

TX ● 2.1%

WA ● 4.0%

D.C. ● 2.5%

WI no explicit cap
Notes: Maximum effective retail rate increase represents maximum incremental impact on average retail rates in the worst-case s cenario, given various cost caps, and assumes that costs will be capped at the ACP, or financial penalty amount in states with active retail electric competition. It is averaged across all customers and utilities covered under each state RPS. In New York, the cap represents available funds collected fro m ratepayers to support renewable attribute purchases by NYSERDA, under that state’s curre nt regulations. California’s RPS does have a cap insomuch as certain funding limitations exist, but these funding limitations do not allow a clea r calculation of rate impacts in percentage terms. Marylan d’s retail rate cap only applies to that state’s solar set-aside. Maine’s AC P only applies to that state’s new renewabl es requirement. New Jersey’s maximum rat e impact is estimated at current ACP levels, and does not reflect the BPU’s recent decision to explore a 2% rate cap on solar incentiv es; if this 2% cap were considered, then the overall maximum rate impact in New Jersey w ould drop to 8.5%. Legislation in Texas allo ws the PUC to establish an ACP, but the Commission has chosen not to do so. Pennsylvania has a financial penalty, but because the penalty for solar set-aside non-compliance in 2x th e market value of solar RECs, the penalty does not serve as a cost cap.

### Renewables Portfolio Standa rds in the United States 32 

# States Are Increasingly Recognizing Transmission as a Key Limitation to Achieving RPS Targets

Transmission has quickly become recognized as among the most prominent barriers to the achievement of state RPS targets. The Californi a Energy Commission, for example, has indicated that it does not expect the thr ee California IOUs to meet the state’ s 20% RPS by 2010, in part because of insufficient transmission. Nevada Power has said that , in the long-term, it will not be able to meet the Nevada RPS without a transmission line to connec t Nevada Power to Sierra Pacific Power Company, and a Governor’s Advisory Committee in 2007 recomm ended that such a line be built and began the process of identifying transmission investment s to support renewable energy. New Hampshire enacted legislation in 2007 requi ring its PUC to conduct a study on expanding transmission in the state for renewable energy. And the North American Electric Reliability Co rporation has indicated that state RPS requirements should be associated with investment in additional transmission. In response to the transmission challenge, states and grid operato rs are increasingly taking moreproactive steps to encourage transmission investment , often within the contex t of growing state RPS obligations. Several examples of th ese initiatives are presented below.

• Texas: A revision of the state’s RPS in 2005 directed the Public Utility Commission of Texas to create competitive renewable energy zones (CREZ) , defined as areas of high-quality clean energy resources. The amended Texas RPS also authori zed the PUC to order a u tility to construct or expand transmission to meet the Texas RPS a nd required the PUC to approve RPS-related transmission applications expeditiously. In October 2007, the PUC issued an interim order designating five CREZ areas in we st and north Texas that could stimulate the development of 22,806 MW of wind power. ERCOT has recently co mpleted a transmission optimization study to determine the optimal transmission layout for the proposed CREZs. Once the CREZ designation is final, the utility or utilities servicing those areas ha ve one year to file an application for new transmission with the PUC. 33



## • Colorado : Legislation was enacted in January 2007 modeled, to some degree, after the Texas CREZ approach. That legislation requires utilities to submit bi ennial reports designating energy resource zones (ERZs), identifying transmissi on plans for accessing the ERZs, and discussing potential strategies for using transmission to encourage local ownershi p of renewable energy projects. Along with the biennial reports, utilit ies must submit applicat ions for certificates of public convenience and necessity (CPCN) for the identified ERZ areas. Subject to annual adjustment, utilities may recover planning, deve lopment, and construction costs for permitted transmission facilities vi a a rate adjustment clause. In Oc tober 2007, Xcel Ener gy identified four potential ERZ areas, and submitted a CPCN a pplication for a 345 kV line in northeastern Colorado. 34



## • California: The ISO received FERC approval for a new transmission interconnection category for location-constrained resources such as re newable energy facilities in late 2007. Once a resource area has been identified, transmission would be built in adva nce of generation being developed, and costs would be in itially recovered through the Calif ornia ISO transmission charge.

33 

### Non-incumbent utilities may also be allowed to be involved in transmission to CREZs.
34 

### In February 2008, Xcel Energy reached a settlement with in terveners to submit CPCN applications for new transmission facilities in all four ERZ areas by March 2009.

### Renewables Portfolio Standa rds in the United States 33 

## Once new generation comes on-line to use the transmission path, each generator would pay a pro rata share of the transmission costs. A variety of criteria would have to be met for an area to be treated in this fashion. Separately, California’ s RPS allows the PUC to approve transmission or generation tie-lines that are needed for LSEs to meet the RPS and for which cost recovery is not otherwise available. A variety of other transmi ssion-related initiatives ar e also underway in the state, including: (1) development and constructio n of transmission facilities to access more wind power in the Tehachapi area; (2) evaluation of tr ansmission options to access renewable energy in the Imperial Valley; (3) initiation of a multi-ag ency Renewable Energy Transmission Initiative to help define renewable energy zone s in and around the state, and to prepare transmission plans for those zones; and (4) utility recovery of costs to study the feasibility of different transmission investments to access renewable energy, and to rec over project-level interc onnection study costs.

• Minnesota: The state has a relatively long histor y of planning for and developing new transmission for renewable resources, particularly wind. For example, in approving the merger of Northern States Power and New Century Energi es that created Xcel Energy in 2000, the PUC ordered that four new transmi ssion lines be placed into serv ice by 2006 to access wind energy resources, and that an 825 MW requirement for wind be accelerated to 2006. Minnesota’s RPS, meanwhile, requires utilities to file five-year tran smission plans necessary to meet the state’s RPS targets, and for those plans to be developed in conjunction with the Midwest ISO. In November 2007, the utilities filed a joint re port stating that transmission is adequate to meet the RPS requirements through 2010 and, with some 115 kV additions, through 2012. More transmission will be necessary, though, to meet the 2016 RPS requirement.

In addition to these initiatives, seven states have formed transmi ssion infrastructure authorities to issue revenue bonds for new transmission. New Me xico’s transmission infrastructure authority, created in 2007, is authorized to support only transmission projec ts that transmit at least 30% renewable energy. Colorado’s transm ission infrastructure authority, also created in 2007, is intended to support projects for the production, transporta tion, transmission, equipm ent manufacturing, and storage of clean energy. 35 

## Though Colorado’s authority is allowed to support non-clean energy projects, this allowance is severely limited; for a tr ansmission project, the primary purpose must be to transmit clean energy. In the other five states of Kansas, Wyoming, North Dakota, South Dakota, and Idaho the infrastructure authoritie s have broad authority to help support transmission infrastructure, and are not limited to clean energy investments.

35 

### Clean energy is defined as: biodiesel; biomass; landf ill gas; ethanol; non-fossil-fueled fuel cells; zero-emissions generation technology; renewables including (but not limited to) solar, wind, and geothermal; and certain clean coal demonstration technologies.

### Renewables Portfolio Standa rds in the United States 34 

# Federal RPS Policies Received Consideration in the U.S. Congress in 2007

The U.S. Congress has consid ered a number of Federal R PS proposals in the House of Representatives and the Senate. These proposals typically contain certai n common design features, including: a renewable production ta rget and schedule; a range of qualifying technolo gies; tradable RECs and price caps; exemptions for certain clas ses of retail electricity suppliers; and sunset provisions. Though the various pr oposals have had common design elements, the specifics vary significantly. A Federal RPS has passed the U.S. Senate on three occasions sin ce 2002. In August 2007, the House of Representatives passed a Federal RPS for th e first time, as an amendment to a larger energy bill, by a 220-190 vote. The U.S. Senate, however, wa s unable to break a filibuster to include the RPS in the final energy bill. The House-approved RPS woul d have required certain re tail electric suppliers to include 15% renewable resources in their elec tricity mix by 2020. Up to 4% of the requirement could have been met through ener gy efficiency investments.



# Conclusions

The popularity of state-level RPS policies has gr own. With 26 RPS policies now in existence in the U.S., covering 46% of the nation’ s electrical load, the importance of these programs is expected to build over the coming decade. States without an R PS are continuing to consider its adoption, and if experience is any guide, even more states are like ly to be added to the RPS roster in 2008. In the meantime, it is clear that state RPS policie s can be designed in a variety of ways, and that implementation experience has been mixed. Compara tive experience from states that have and have not achieved substantial renewable generation gr owth highlight the importance of policy design details. As a result, as furthe r experience and lessons learned are gained, states with existing RPS programs are likely to continue to tinker with their design. Some of this may occur through scheduled reviews of existing RPS policies, while other changes may proceed through the normal legislative process. An emerging challenge will be to make these changes without u nduly destabilizing planning and investment decisions made under previous RPS designs.

### Renewables Portfolio Standa rds in the United States 35 

# Appendix: New State RPS Polic ies, Major Revisions to Existing RPS Programs, and New Non-Binding Renewable Electricity Goals Established in 2007

Table A-1. New State RPS Policies Established in 2007

State Key Elements of Renewables Portfolio Standard Design

Illinois In 2001, Illinois established a non-binding renewable ener gy goal by legislation, and in 2005 a non-binding goal was established through regulatory action. In August 2007, the RPS was made mandatory and targets were both increased and extended, starting at 2% in 2008 and increasing to 25% by 2025. The targets only apply to electric utilities serving over 100,000 Illinois cu stomers, and further only to customers taking fixedprice service (i.e., the fixed-pri ce offerings of the IOU default se rvice providers), making POUs and competitive energy service providers exempt from mandatory renewable purchases. Seventy-five percent of each year’s target is to come from wind power, and in -state resources are strongly encouraged through 2011 (with out-of-state resource eligible during that period only if cost-effe ctive in-state resources are not available). Cost caps change over time. In 2011, the cap will equal the greater of an additional 0.5% of the amount paid per kWh during the year ending May 2010, or 2% of the amount paid per kWh during the year ending May 2007. The newly created Il linois Power Agency is responsible for developing the procurement plans and conducting solicitations to ensure compliance by the state’s IOU defaul t service providers, making Illinois the second state (after New York) to use a varian t of a central procurement model to pursue its RPS.

New Hampshire New Hampshire’s RPS, enacted in May 2007, establishes a renewables target for all of the state’s electricity suppliers of 4% in 2008, incr easing to 23.8% by 2025. The target is se gmented into four classes of eligible resources: Class I is for new renewa ble facilities beginning operation in 2006 or later (16% by 2025); Class II is for solar electricity from facilities beginning operation in 2006 or later (0.3% by 2014); Class III is for pre-2006 biomass and methane projects (6.5% by 2011); an d Class IV is for certain pre-2006 hydroelectric facilities with a nameplate capacity of 5 MW or less (1% by 2009). Alternative compliance payments (ACPs) vary according to the four classes, with starting va lues that range from $28/MWh for Class III and IV to $57.12/MWh for Class I and $150/MWh for Class II. The PUC is provided limited au thority to accelerate or slow scheduled changes to the rene wable energy targets, and to al ter Class III and IV requirements.

North Carolina North Carolina’s RPS, signed into la w in August 2007 and the first mandatory RPS in the Southeast, requires IOUs to meet eligible energy targets of 3% in 2012 (solar targets begin in 2010), increasing to 12.5% in 2021 and thereafter. Electric cooperatives and municipal utilities are obligated to the same early-year targets but are not required to achieve more than 10% in 2018 and thereafter. Utility-implemented energy efficiency (including waste heat from fossil CHP) qualifies as an eligible resource for IOUs, up to a limit of 25% of each yearly target through 2020 and 40% in years thereafter; renewable CHP, both electricity and heat, qualifies for the renewables portion of the RPS. POUs may include load management as a substitute for energy efficiency, have no limits on the use of these sources, may use hydropower to qualify for up to 30% of their standard, and are provided a dditional leniency on the vintage of projects with which they contract. Unbundled RECs may be used for compliance, but unbundled RECs from out-of-sta te facilities may not meet more than 25% of annual requi rements (except that one supplier – Dominion – is allowed unlimited use of such RECs). The RPS includes set-asides for swine waste, poultry waste, and new solar electric or solar thermal facilities (the solar set-aside begins in 2010). Cost caps vary by customer type.

Oregon Oregon’s RPS was signed into law in June 2007, requiring utilities serving greater th an 3% of statewide load (and any utility making a new in vestment in a coal plant) to meet a renewable energy purchase target of 5% in 2011, increasing to 25% by 2025. Smaller utilities ha ve 2025 targets of 10% or 5%, depending on utility size, and no targets in intervening years. Competitive ESPs must meet targets that are dependent on the RPS obligations of the utility that woul d otherwise have served their cust omers. Unbundled RECs may be used for RPS compliance, but IOUs ar e capped at 20% unbundled RECs; large POUs may use up to 50% unbundled RECs until 2020; other supp liers have no restrictions. The PUC and consumer-owned utility governing boards are required to determine ACP rates for each utility. Suppliers are not required to comply if incremental compliance costs exceed 4% of annual revenue requirements. Suppliers are also not required to comply with the RPS in individual years if doing so would require them to acqui re renewable energy in excess of load growth, displace non-fossil energy with eligible renewable power, or displace low-cost power from the Bonneville Power Administration. The legisla tion also contains a non-binding goal that communitybased and small-scale renewable energy projects of 20 MW or less provide at le ast 8% of 2025 retail load.

### Renewables Portfolio Standa rds in the United States 36 

### Table A-2. Major Revisions to Existing State RPS Policies in 2007

State Key Elements of Renewables Po rtfolio Standard Revisions

California California’s RPS first took effect in 2003, and was designe d such that certain above-market renewable energy contract costs would be paid through a separate fund administered by the California Energy Commission (the payments were called supplemental energy payments, or SEPs). This structure created administrative complexity and imposed financing difficulties on renewable energy pr ojects. As a result, legislation was passed in October 2007 that repeals the SEP process and returns the funds to th e state’s LSEs. To continue to ensure that the cost of the RPS is capped, above-market contract costs for th e state’s IOUs and ESPs will be limited to the funds transferred to them by the California Energy Commission. Separate legislation, al so enacted in October 2007, expanded the resource eligibility rules to include certain hydropower facilities.

Colorado Colorado was the first state to enact an RPS via the ballot box. In March 2007, follow-up legislation doubled the ultimate RPS target for IOUs (now 20% in 2020, up from 10% in 2015), thereby also doubling the effective size of the solar set-aside. The 2007 legislation also obligates all of the state’s electric cooperatives (previously limited to coops serving over 40,000 customers) and munici pal utilities serving more than 40,000 customers to meet a target of 10% by 2020, and el iminates any ability to opt-out of these requirements. POUs are now excluded from the solar set-aside; instead, solar projects that come online prior to July 2015 will receive a 3x multiplier. “Recycled” energy was added to the list of eligible technologies, while community-owned renewable projects of under 30 MW and located in Colorado will receive a 1.5x multiplier. The revisions also increase the retail-rate-cap for the RPS to 2% (up from 1%, except that electric cooperatives are still subject to the 1% cap), and provide some encouragement for util ity-owned renewable energy projects.

Connecticut In June 2007, new legislation increas ed Connecticut’s RPS to 23% by 2020 , with at least 20% from Class I resources. The new legislation also requires the Connectic ut Municipal Electric Energy Cooperative to develop renewable energy standards for the state’s municipal el ectric utilities and report progress on those standards annually.

Delaware In July 2007, Delaware increased its RPS, previously at 10% by 2019, to 20% by the same year, and created a solar PV set-aside that reaches 2.005% by 2019. The legisl ation also increases the le vel of ACP payments that may be made in lieu of purchasing RECs, and establis hes an ACP schedule for the solar set-aside.

Maine Maine’s original RPS did little to support new renewable projects. In June 2007, the legislature made mandatory a new and additional target (state d as a non-binding goal in 2006 legislation) of 10% of supply from new renewable capacity by 2017, starting at 1% in 2008. ACP levels for the new requirement are determined by the PUC, and the PUC subsequently established an ACP for the 10% requirement starting at $57.12/MWh in 2007 dollars, matching the ACP levels in MA, NH, and RI. The PUC is also given the discretion to suspend annual increases in the new standa rd under certain conditions.
Maryland Legislation enacted in April 2007 raises Maryland’s exis ting RPS targets by adding a requirement for solar that increases to 2% by 2022, thereby increasing the overall rene wable energy target from 7. 5% to 9.5%. In exchange for the new solar set-aside, the revised legislation deletes the earlier 2x multiplier for solar. The legislation establishes solar contracting requirements, revises solar REC ownership rules, and creates a higher ACP for the solar set-aside. Delays in achieving the solar set-asid e may be allowed if certain cost limits are reached.

Minnesota February 2007 legislation alters the RPS in Minnesota in several respects. Most importa ntly, it raises Xcel’s RPS obligations to 30% by 2020 (of whic h at least 25% must come from wi nd; the remaining 5% may come from other sources), and creates somewhat lower but mandatory ta rgets for the state’s other electric utilities (including POUs) increasing to 25% by 2025 (previous targets we re 10% by 2015). A separate “good faith” objective of 7% by 2010 exists for all electric utilities in the st ate. Unbundled RECs may now be used for compliance.

New Jersey In 2007, New Jersey’s BPU began to significantly change the implementation of that st ate’s solar set-aside. In particular, the importance of up-front rebates for PV is to decline, with the goal of transitioning towards a system that relies more-heavily on the purchase and sale of solar RECs. As part of that process, among other proposed changes, solar ACP levels are to increase and become more predictable, w ith a rolling 8-year price schedule set in advance. The trading life of solar RECs is to be extended to two years, and PV systems will only be allowed to create solar RECs for 15 years. The BPU staff was also directed to develop an overall cost cap for solar incentive payments, at a level of roughly 2% of reta il rates. Additionally, the BPU staff was directed to cap solar capacity requirement s at a level that accounts for the state’s aggressive energy efficiency goals. New Jersey also extended the timeframe for 2007 RPS complianc e, given the run-up in Class I REC prices.

New Mexico In March 2007, New Mexico’s RPS for IOUs was increased to 20% by 2020 (up from 10% by 2011 previously), and for rural cooperatives an RPS of 10% by 2020 was established. Rules adopted by the New Mexico PRC encourage resource diversity for IOUs through set-asides for solar and wind (each required to meet at least 20% of 2011 targets, and thereafter) and bi omass or geothermal (a combined minimum of 10% of 2011 targets, and

### Renewables Portfolio Standa rds in the United States 37

State Key Elements of Renewables Po rtfolio Standard Revisions
thereafter); distributed generation is required to serve 3% of the RPS by 2015. These set-asides replace earlierdeveloped credit multipliers. The PRC has also established caps on energy costs by resource type, and has developed an overall cost cap of 2% for IOUs, and 1% for coops.
Pennsylvania In July 2007, legislation was passed that clarifies the force majeure clause in Pennsylvania’s RPS, creates a more-detailed schedule for the solar set-aside, adds sola r thermal to the list of eligible Tier I technologies, confirms REC property rights for generators and cust omer-generators, and somewhat limits the geographic scope of projects that may be eligible.

Texas Legislation in 2007 clarifies that RECs retired for othe r purposes (e.g., sold through a voluntary green power program) can not be counted toward the RPS. The legisla tion also permits certain large customers to opt out of the RPS requirements, and empowers the PUC to estab lish alternative compliance payments for the RPS.



### Table A-3. New Non-Binding State Renewable Energy Goals Established in 2007

State Key Elements of Renewable Energy Goal

Missouri Missouri legislatively adopt ed a non-binding renewable energy and energy efficiency goal for the state’s IOUs in June 2007. Utilities are re quired to demonstrate a “good faith” effort to meet a goal of 4% by 2012, using either renewable energy or energy efficiency, increasing to 11% by 2020. The Missouri PSC is required to adopt criteria and standards for such a demonstration by July 2008.

North Dakota In March 2007, the North Dakota legislature adopted a “r enewable and recycled ener gy objective” of 10% by 2015. All retail suppliers of electricity are covered by the objective. Recycled energy systems are defined as those producing power from previously unused waste heat from combustion or other processes (but not from systems being used primarily to generate electricity). Retail suppliers are required to make an economic assessment of the cost-effectiveness of new renewable and recycled energy purchases.
Virginia In April 2007, Virginia enacted a non-binding renewable energy goal for the state’s IOUs of 4% in 2010, increasing to 12% in 2022. The percentages are appl ied to 2007 retail sales, less the average amount of power supplied from nuclear generators between 2004 a nd 2006. Utilities that meet the goals are to receive an increased rate of return in additi on to cost recovery for their renewable energy purchases. Double credit is to be given for solar and wind power.

### Renewables Portfolio Standa rds in the United States 38 

## A cknowledgments

For their support of this project, the authors thank John Atcheson and
Dan Birns of the U.S. DOE’s W eatherization and Intergovernmental Program, Larry Mansueti of the U.S. DOE’s Office of Electricity Delivery and Energy Reliability, Drew Ron neberg, Steve Lindenberg, Phil Dougherty, and Alejandro Moreno of the U.S. DOE’s Wind & Hydropower Technologies Program, and Tom Kimbis and Charles Hemmeline of the U.S. DOE’s Solar Energy Technologies Program.

For providing information or reviewing elements of this paper, we thank: Howard Bernstein (Massachusetts Division of Energy Resources), David Bloom (Delaware PSC), James Brack (New Mexico PRC), Joe Bryson (U.S. EPA), Cathie Bussolotta (Connecticut DPUC), Paul Cartwright (Montana Department of Environmental Quality), Roger Clark (The Reinvestment Fund), Craig Cox (Interwest Energy Alliance), Dennis Criswell (Sierra Southwest Cooperative), Jennifer DeCesaro (Clean Energy Group), Bill Drumhelle r (Oregon Department of Energy), David Goldberg (Connecticut Clean Energy Fund), Kevin Hale (NYSERDA), Paul Helgeson (Wisconsin PSC), Scott Hennessey (Solar Energy Industries Association), Dennis Hughes (Navopache Electric Cooperative), Benjamin Hunter (New Jersey BPU), David Hurlbut (National Renewable Energy Laboratory),Robert Grace (Sustainable Energy Advantage), Gregory Kim (Maryland PSC), Tom Kimbis (U.S. DOE), Jesse Jenkins (Renewable Northwest Project), Barbara Lockwood (APS), Brian Loos (New Jersey BPU), Larry Mansueti (U.S. DOE), Tanya McClosky (Pennsylvan ia Office of the Consumer Advocate), Richard Mignogna (Colorado PUC), Alan Nogee (Union of Concerned Scientists), Larry Nord ell (Montana Consumer Council), John Pearce (Iowa Utilities Board), Susan Peirce (Minnesota Dept. of Commerce), Heather Raitt (California Energy Commission), Shane Rooney (Pennsylvania PUC), Elizabeth Salerno (American Wind Energy Association), Lisa Schwartz (Oregon PUC), Larry Sherwood (Interstate Renewable Energy Counc il), Linda Silverman (U.S. DOE), Sean Simon (California PUC), Charlie Smisson (Delaware Energy Office), Mitchell Tannenbaum (Maine PUC), Jess Totten (Texas PUC), Sam Watson (North Carolina Utilities Commission), Ray Williamson (Arizona Corporation Commission), Mike Winka (New Jersey BPU). We also thank Anthony Ma for assistance with layout, formatting, and production. Of course, the authors are solely responsible for any remaining omissions or errors.

Berkeley Lab’s contributions to this report were funded by the Office of Energy Efficiency and Renewable Energy (Weatherization and Intergovernmental Program, Wind & Hydropower Technologies Program, and Solar Energy Technolo gies Program) and by the Office of Electricity Delivery and Energy Reliability (Permitting, Siting and Analysis Division) of the U.S. Depart ment of Energy under Contract No.
DE-AC02-05CH11231. 

## Disclaime r

This document was prepared as an account of work sponsored by the United States Government. While this document is believed to contain correct information,
neither the United States Government nor any agency thereof, nor The Regents of t he University of California, nor any of their employees, makes any warranty, express or implied, or assumes any legal responsibility for the accuracy, completeness, or usefulness of any information, apparatus, product, or process disclosed, or represents that its use w ould not infringe privately owned rights. Reference herein to any specific commercial product, process, or service by its trade name, trademark, manufacturer, or otherwise, does not necessarily constitute or imply its endorsement, recommendation, or favoring by the United States Government or any agency thereof, or The Regents of the University of California. The views and opinions of authors expressed herein do not necessarily state or reflect those of the United States Government or any agency thereof, or The Regents of the University of
California.

Ernest Orlando Lawrence Berkeley National Laboratory is an equal opportunity employer. 

## Key Report Contacts
Ryan Wiser, Berkeley Lab 510-486-5474; RHWiser@lbl.gov

Galen Barbose, Berkeley Lab 510-495-2593; GLBarbose@lbl.gov



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