Student Post: Pros and Cons for a National Renewable Portfolio Standard

Renewable Portfolio Standards ("RPS") typically require a percentage of the electricity sold by power retailers to derive from renewable sources. The goals of RPS mandates are to make electricity generated from renewable sources to become economically competitive with the electricity generated from fossil fuels; and to encourage development in the renewable energy field. Markets have been created as a result of many state RPS plans in which power producers trade renewable credits.

In 2010, a group of senators introduced a bill to create a national RPS. The proposal would require the states to generate at least 15% of their electricity from renewable sources by 2021. Qualified sources would include wind, solar, ocean, geothermal, landfill gas, and new hydropower at existing dams, just to name a few. Retailers that sell fewer than four million MWh would be exempted under the bill. This has worked abroad in such countries as Germany and China's respective national renewables targets. Benefits for the United States would include job creation, consumer savings, and energy independence.

In terms of economic development, the wind energy sector alone could generate nearly $2 million in economic activity per installed wind turbine. In turn, a national RPS would produce three times more jobs than a continuance in the current fossil fuel approach, according to a study by the Union of Concerned Scientists ("UCS"), a nonprofit science advocacy group. New jobs would be created in the clean energy sector with high export potential. Further, the economic development benefits would have a trickling effect on the local banking and construction industries as a result of the growth.

 

A national RPS would have the added beneficial effect of reducing America's dependence on foreign oil. The reduction in foreign oil dependence would ensure that clean energy jobs are created and remain in the U.S. Additionally, American consumers would no longer be particularly vulnerable to costly import tariffs that impact fuel price, and fuel shortages when oil supplies are disrupted. In addition, electricity prices would be nearly 20% lower. A 1998 study by the Energy Information Administration (Annual Energy Outlook 1998) reported that when the effect of added renewables restraining natural gas price increases is counted, along with the induced electricity conservation, there would be a net savings of $1.8 billion from renewable standards. More recently, Lincoln L. Davies' wrote in his 2010 law review article (also found in our casebook), that a 15% national RPS would result in $16.3 billion saved in electricity and natural gas costs for the residential, commercial, and industrial sectors.

Of course, the proposed national RPS legislation is not without its detractors. A 2008 paper entitled "A National Renewable Portfolio Standard? Not Practical" proffered that a national RPS would be a bad idea because renewable sources such as wind, solar, and geothermal are located far from population centers. This would result in costly transmission lines being built to get power to where it can be used. Another interesting reason the paper put forth is that a population center with insufficient transmission would force it to purchase renewable credits from a state like North Dakota. In North Dakota we have abundant renewable resources but a low population, and this means our supply could quite possibly exceed local demand.

An American Wind Energy Association transmission seminar from February 2011 brought to light issues concerning the technical struggles of implementing a national RPS. One key idea was that green energy developers encounter a lot of resistance from Regional Transmission Organizations and Independent System Operators when it comes to linking their projects into the utility grid. Cost allocation and who pays for the transmission upgrades and / or additions was one of the basic concerns.

Robert Michaels, California State University Professor of Economics, in his paper Energy Law Journal article "National renewable Portfolio Standard: Smart Policy or Misguided Gesture?" wrote that a federal RPS would bring little diversity in generation resources and few environmental benefits—thus making it a costly measure with no tangible offering of net employment increases, rural area revitalization, and its effects on emissions are uncertain at best.

The hope for a national renewable portfolio standard persists but, recently, there has been waning federal support for renewables. It remains to be seen whether or not a national RPS will be implemented. There are strong arguments for both sides of the debate, but state mandated Renewable Portfolio Standards have been an economic boon because the 29 states that do have them have created a multi-billion dollar industry and the percentages for green power have been increasing.