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February 18, 2008 / or4green

Renewable Portfolio Standards


Renewable portfolio standards (RPS) set minimum levels of electricity to be produced from renewable energy sources such as wind, biomass, solar, some hydropower and others. The orange states in the US map above are ones with an RPS in place as of June 2007. The image comes from the US DOE’s Office of Energy Efficiency and Renewable Energy (EERE). (Click on it to visit a page about RPS on EERE’s web site.)

As an example, Connecticut started with a requirement of 5% renewables in 2006, which has increased to 10% for 2008, and will continue to increase to a level of 27% by 2020. Failure of an electric distribution company to meet these levels requires a kind of penalty payment ($0.055 per kWh) to the Connecticut Fund for the Environment, which puts the money toward the development of renewable energy sources. Other states have similar arrangements. This link is to a 2005 Massachusetts report on the program there. Among the points made in it are that the program appears to have stimulated the development of new renewable power plants and that 65% of the standard was met by compliance while the remaining 35% was met through the penalty payments.

A federal RPS was in the House version of the 2007 US Energy Bill but it did not survive. Here is a useful earth2tech post on the aftermath of the federal failure to enact a RPS.

In modeling terms, consider an electric power portfolio optimization problem in which a utility must determine the mix of energy generation choices to utilize that will minimize cost while meeting customer demand and numerous other constraints. The sum of the renewable generation megawatt-hours (MWh) sold plus dummy compliance MWh (each having their associated cost per MWh) must be greater than or equal to the current RPS threshold times the total MWh sold by the utility. (Think: transportation problem with penalty for unmet demand at a sink node.) Below is a fragment of the formulation; click on it for a readable version.

See also this previous greenOR post about RPS and the lead therein.

Lastly, the following article sounds like it might be interesting and useful –
Weighing the costs and benefits of state renewables portfolio standards in the United States: A comparative analysis of state-level policy impact projections
C. Chen, R. Wiser, A. Mills and M. Bolinger
in Renewable and Sustainable Energy Reviews, in Press, available online as of 4 February 2008
It is a survey and synthesis of a number of different studies on the impact of state RPS plans, focusing mainly on the impact of the RPS on cost of electricity. The authors are from Lawrence Berkeley National Lab. The abstract from Science Direct is available here.

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