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Incentives/Policies for Renewables & Efficiency

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Renewable Generation Requirement   

Last DSIRE Review: 03/13/2013
Program Overview:
State: Texas
Incentive Type: Renewables Portfolio Standard
Eligible Renewable/Other Technologies: Solar Water Heat, Solar Thermal Electric, Photovoltaics, Landfill Gas, Wind, Biomass, Hydroelectric, Geothermal Electric, Geothermal Heat Pumps, Tidal Energy, Wave Energy, Ocean Thermal
Applicable Sectors: Investor-Owned Utility, Retail Supplier, (Municipal Utilities and Coops May Opt-in)
Standard:5,880 MW by 2015; goal of 10,000 MW by 2025
Technology Minimum:Non-Wind: Goal of 500 MW
Credit Trading:Yes (ERCOT)
Credit Transfers Accepted To:ERCOT into NC-RETS
(Refers to tracking system compatibility only, not RPS eligibility. Please see statutes and regulations for information on facility eligibility)
Web Site:
Authority 1:
Date Enacted:
Date Effective:
Texas Utilities Code ยง 39.904
06/18/1999 (subsequently amended)
Authority 2:
Date Enacted:
Date Effective:
PUCT Substantive Rule 25.173
12/16/1999 (subsequently amended)

In 1999 the Public Utility Commission of Texas (PUCT) adopted rules for the state's Renewable Energy Mandate, establishing a renewable portfolio standard (RPS), a renewable-energy credit (REC) trading program, and renewable-energy purchase requirements for competitive retailers in Texas. The 1999 standard called for 2,000 megawatts (MW) of new renewables to be installed in Texas by 2009, in addition to the 880 MW of existing renewables generation at the time. In August 2005, S.B. 20 increased the renewable-energy mandate to 5,880 MW by 2015 (about 5% of the state's electricity demand), including a target of 500 MW of renewable-energy capacity from resources other than wind. Wind accounts for nearly all of the current renewable-energy generation in Texas. The 2005 legislation also set a target of reaching 10,000 MW of renewable energy capacity by 2025.

To address concerns about the adequacy of the state’s transmission systems, the law also instructs the PUCT to require utilities to add to their transmission systems as necessary to meet the renewable energy goal, and to allow utilities to recover the cost of such projects in their electric rates. The schedule of renewable energy capacity required and the corresponding compliance dates are as follows:

  • 2,280 MW by 1/1/2007
  • 3,272 MW by 1/1/2009
  • 4,264 MW by 1/1/2011
  • 5,256 MW by 1/1/2013
  • 5,880 MW by 1/1/2015

Qualifying renewable energy sources include solar, wind, geothermal, hydroelectric, wave or tidal energy, biomass, or biomass-based waste products, including landfill gas. Qualifying systems are those installed after September 1999. The RPS applies to all investor-owned utilities. Municipal and cooperative utilities may voluntarily elect to offer customer choice.

The PUCT established a renewable-energy credit (REC) trading program that began in July 2001 and will continue through 2019. Under PUCT rules, one REC represents one megawatt-hour (MWh) of qualified renewable energy that is generated and metered in Texas. A capacity conversion factor (CCF) is used to convert MW goals into MWh requirements for each retailer in the competitive market. The CCF was originally administratively set at 35% for the first two compliance years, but is now based on the actual performance of the resources in the REC-trading program for the previous two years. For 2010 and 2011 compliance years the CCF was 30.5%. The CCF increases to 32.2% for compliance years 2012 and 2013.  

Pursuant to meeting the 500 MW non-wind goal contained in S.B. 20 of 2005, the PUCT has elected to award a "compliance premium" for each non-wind REC generated after December 31, 2007. Compliance premiums are functionally equivalent to a REC for the RPS compliance purposes and may only be awarded to non-wind facilities that were installed and certified by the PUCT after September 1, 2005. This method effectively doubles the compliance value of electricity generated by renewable resources other than wind.

Each retailer in Texas is allocated a share of the mandate based on that retailer’s pro rata share of statewide retail energy sales. The program administrator maintains a REC account for program participants to track the production, sale, transfer, purchase, and retirement of RECs. Credits can be banked for three years, and all renewable additions have a minimum of 10 years of credits to recover over-market costs. An administrative penalty of $50 per MWh has been established for providers that do not meet the RPS requirements.

In 2004, the PUCT amended the RPS regulations to change the formula for calculating final REC purchase requirements, add a mechanism to account for corrections to retail sales data, and allow the program administrator of the REC-trading program to petition for deadline changes under certain circumstances. The program website listed above contains the full list of PUCT rule proposals and adoptions since the inception of the program.

The PUCT has the authority to cap the price of RECs and may suspend the standard if necessary to protect the reliability and operation of the grid. For more information on RECs, including annual compliance reports, visit the ERCOT Renewable Energy Credit Trading Program website. According to the 2009 compliance report, Texas surpassed its 10,000 MW by 2025 in 2009.

In 2007 H.B. 1090 clarified that RECs retired for other purposes (e.g. sold through a voluntary green power program) could not be counted toward the RPS requirements. The law also permits large utility customers served by transmission voltage to opt out of the RPS requirements. Finally, H.B. 1090 empowers the PUCT to establish alternative compliance payments (ACP) for the RPS and for the non-wind target. To date, the PUCT has declined to set an ACP for either portion, although as noted above, an administrative penalty exists for providers that do not meet the general renewable energy obligation. The non-wind portion remains effectively voluntary without a penalty or an ACP.

Regulations for the "opt-out" provision were adopted by the PUCT effective January 2, 2009. The 2009 RPS report issued by ERCOT indicates that a total of 90 transmission voltage customers (unique meter IDs) elected to opt-out during 2009. In 2010 there were 97 transmission voltage customers (unique meter IDs) elected to opt-out. Data such as the customer name and load (MWh) associated with these opt-outs remains confidential.

  Public Information - PUCT
Public Utility Commission of Texas
1701 N. Congress Avenue
P.O. Box 13326
Austin, TX 78711-3326
Phone: (512) 936-7000
Web Site:
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Disclaimer: The information presented on the DSIRE web site provides an unofficial overview of financial incentives and other policies. It does not constitute professional tax advice or other professional financial guidance, and it should not be used as the only source of information when making purchasing decisions, investment decisions or tax decisions, or when executing other binding agreements. Please refer to the individual contact provided below each summary to verify that a specific financial incentive or other policy applies to your project.

While the DSIRE staff strives to provide the best information possible, the DSIRE staff, the N.C. Solar Center, N.C. State University and the Interstate Renewable Energy Council, Inc. make no representations or warranties, either express or implied, concerning the accuracy, completeness, reliability or suitability of the information. The DSIRE staff, the N.C. Solar Center, N.C. State University and the Interstate Renewable Energy Council, Inc. disclaim all liability of any kind arising out of your use or misuse of the information contained or referenced on DSIRE Web pages.

Copyright 2013 - 2014 North Carolina State University, under NREL Subcontract No. XEU-0-99515-01. Permission granted only for personal or educational use, or for use by or on behalf of the U.S. government. North Carolina State University prohibits the unauthorized display, reproduction, sale, and/or distribution of all or portions of the content of the Database of State Incentives for Renewables and Efficiency (DSIRE) without prior, written consent.