Glossary
Renewable Portfolio Standard (RPS)
"Renewable Portfolio Standard (RPS)" is a regulatory mandate implemented by many states in the U.S. to increase the production of energy from renewable sources such as wind, solar, biomass, and geothermal. It's a policy designed to encourage the increased production of clean energy resources and decrease dependency on non-renewable resources.
An RPS works by setting a minimum requirement, or “obligation level,” for the percentage of electricity supply that must come from renewable sources. This obligation level increases incrementally over a given period, leading to a progressive transition towards renewable energy. The idea behind this standard is to stimulate market and technology development so renewable energy can eventually sustain itself without the need for support schemes.
Utility companies meet the RPS by acquiring renewable energy certificates (RECs) which stand as proof that electricity was generated from an eligible renewable energy resource. Each REC represents a specific amount of electricity produced and delivered to the power grid by these resources. In some cases, utilities can also meet RPS requirements by paying an Alternative Compliance Payment, essentially a fine for falling short of the stated objective.
It’s worthy to note that the specifics and targets of an RPS can vary widely from one jurisdiction to the other, depending on the region’s available resources and existing energy mix. What’s common, however, is the underlying objective to reduce greenhouse gas emissions and combat climate change by promoting the use of renewable resources.
The enactment of RPS policies has not only led to a significant increase in renewable energy generation but they have also fostered job creation, reduced reliance on imported fuels, and contributed to the stabilization of energy prices. As a cornerstone for state-level renewable energy policy, the RPS is fundamental to the growth of the green energy sector.