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A checklist as states move to Renewable Portfolio Standards

ASK THIS | January 29, 2008

More than half the states are setting schedules that require utilities to generate specified amounts of electricity from renewable sources. In principle, the idea is a good one – but some questions need to be asked.

By Kate Galbraith

Clean energy and "green-collar jobs" are buzzwords in political circles these days. In candidates' renderings, they offer an all-purpose approach to dealing with climate change, dependence on foreign oil and the high price of energy.

One of the most frequently used tools to promote clean energy has also been one of the most underscrutinized. More than half the states have adopted "renewable portfolio standards" (RPS). The details vary from state to state, but the gist is that state utilities must provide a certain percentage of electricity from renewables by a given date.

Many states are increasing their RPS requirements. These include Minnesota, where an RPS mandate passed last year ambitiously requires that 25 percent of power must come from renewables by 2025. (Click here  for a state-by-state breakdown.). On a federal level, the House last year passed an RPS mandate (called a Renewable Electricity Standard) which required 15 percent of electricity to come from renewables by 2020. But the Senate blocked it, and the provision was dropped from the final version of the energy bill signed by the President in December.

On the face of it, RPS sounds like a sensible way to tackle climate change. Wind, solar, geothermal and other renewable sources can generate electricity with virtually no carbon-dioxide emissions.

But is RPS the smartest—or, in economic terms, the most efficient—approach? Requiring a utility to produce 20 percent of its electricity from renewables obviously means that 20 percent of electricity produced in other ways will be displaced. What sort of electricity will that be? Will the displaced electricity be made from (very dirty) coal; (nearly-as-dirty) oil; or from (significantly cleaner) natural gas? Are there scenarios in which dirty coal plants will still be operating while RPS-mandated wind power displaces cleaner natural gas generation? The answers are important, and will vary from state to state.

This is not to say that RPS does not have much to recommend it. It is an effective way of jump-starting the renewables industry, as Texas's great surge in wind power has shown. And doubtless it is more politically viable than, say, slapping a carbon tax on utilities. But it is always worth asking about the ramifications of RPS, and whether in its particulars it is the wisest and best-designed policy.

Here are questions reporters could ask state legislators and analysts, as they contemplate implementing or expanding renewable portfolio standards. Many will apply at the federal level as well—for the Renewable Electricity Standard will surely reappear in Congress.

Q. What is the state's main objective in formulating an energy policy? Cutting CO2 emissions; reducing dependence on foreign oil; lowering electricity prices; or jumpstarting the economy with "green" industry?

Q. Is RPS the best mechanism to meet that goal? Alternatives include a carbon tax; cap-and-trade systems; direct subsidies to green industry; or "feed-in" tariffs such as those favored by Europe

Q. Will RPS reduce the cost of electricity to consumers? When?

Q. What sources of electricity will the renewables displace?  Will they displace the dirtiest forms of electricity generation?

Q. What are the compliance mechanisms?

Q. Does the RPS have teeth? In other words, what are the penalties if utilities do not meet their goals?

Q. Is there a conservation measure coupled with RPS, to reduce overall consumption of electricity?

Q. Wind power is a key mechanism for meeting RPS. What are the implications of wind power's unreliability (since wind can't be counted on to blow at the right times)?

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