Solar Carve-Outs in Renewables Portfolio Standards

Description

Renewables portfolio standard (RPS) policies require that a certain percentage of a retail electricity supplier's sales or new generating capacity be derived from renewable resources. Energy security and diversity, economic development, and environmental protection are the primary drivers of RPS policies. Because these policies tend to favor least-cost projects (especially large wind-energy projects) when all renewables compete, states or municipalities can choose to support higher-cost technologies or applications such as solar and distributed generation using credit multipliers or carve-outs. A credit multiplier for solar offers "extra credit" toward compliance for energy derived from solar resources. Solar carve-outs, which are more common than credit multipliers, require that a certain percentage of the RPS be met specifically with solar energy. Solar technologies eligible for compliance may vary depending on the goals of the policy.

Municipalities that have authority over their electric utility can choose to adopt an RPS policy to promote renewables and local jobs. Municipalities that do not operate their own electric utilities can consider working with state governments to encourage states to adopt an RPS policy.

Status & Trends

Twenty-nine states plus the District of Columbia and two U.S. territories have established an RPS. An additional eight states and two territories have adopted non-mandatory renewable energy goals. Although wind, biomass and hydropower are the predominant resources used to satisfy RPS obligations, a growing number of states are incorporating a solar carve-out

into their RPS policies, stipulating that a portion of the required renewable energy percentage or overall retail sales be derived from solar resources. For example, New Mexico, Arizona, Maryland, Colorado, the District of Columbia, and Delaware have each set aggressive standards of 2% or greater (of the state’s electricity mix) to be generated by solar or distributed generation resources. [1] Sixteen states and the District of Columbia have adopted solar or broader distributed generation carve-outs or multipliers as part of their RPS policies. Of these states, five states and D.C. allow solar water heating to count towards meeting the solar carve-out.

Several states employ credit multipliers for solar or distributed generation. In addition, Nevada, Oregon, and Delaware have both a solar set-aside and a credit multiplier. Credit multipliers have not been as effective in stimulating solar deployment as a specific solar requirement.[2],[3] In fact, New Mexico and Maryland removed their initial solar multiplier provisions in favor of solar carve-outs.

Best practices for promoting solar through RPS policies include:

Establishing an RPS with an explicit solar carve-out that ramps up over time;
Developing a mechanism for tracking, verifying and trading solar renewable energy certificates (SRECs);
Imposing and enforcing a monetary penalty or including an alternative compliance payment provision for electricity suppliers that do not meet solar requirements;
Requiring long-term power-purchases or contracts for SRECs, or establishing other mechanisms that improve price certainty in order to ensure project developers can access financing; and
Encouraging systems of all sizes, including smaller, distributed systems and customer-sited systems.

Municipalities that have authority over their electric utilities may also choose to adopt an RPS policy to promote renewable energy development. Cities leading the way in this regard include Columbia, Missouri, and Austin, Texas. The Austin City Council has adopted several resolutions ultimately directing its municipal utility, Austin Energy, to meet 35% of all energy needs through the use of renewables by 2020, including at least 200 megawatts (MW) of solar power.

Examples

Colorado’s RPS exemplifies some of the key elements described above. For investor-owned utilities, the requirement began at 3% of retail electricity sales in 2007, and it will rise incrementally to 30% by 2020. At least 3% of the renewable energy must be generated by distributed generation facilities, half of which must come from “retail distributed generation” serving on-site load. Electric cooperatives and municipal utilities are subject to a lower renewables standard of 10% by 2020, but there is no solar carve-out for these utilities. However, solar electricity generated by a facility that begins operation before July 1, 2015, receives a 300% credit for RPS-compliance purposes.

New Jersey’s solar carve-out is among the most ambitious in the nation and is now the primary state-level support mechanism for solar PV facilities in New Jersey. The target for solar PV generation in New Jersey has been amended several times in recent years, but currently stands at 4.1% of retail electricity sales by 2028. The state now uses a fifteen-year solar alternative compliance payment (SACP) schedule with an Energy Year (EY) 2013 SACP of $641/MWh. The SACP will decline to $339/MWh for EY 2014 and further decrease thereafter at roughly 2.5% annually until reaching $239/MWh in EY 2028. In an effort to create more price certainty for solar renewable energy certificates (SREC), the state allows electric distribution utilities in New Jersey to enter into long-term SREC contracts with solar system owners. The current authorization permits utilities to collectively enter long-term SREC contracts with the owners of up to 180 MW of solar generating capacity from 2013 through 2016. However, amidst mushrooming solar growth in the state and region, New Jersey has had difficulty keeping its SREC market from becoming over-supplied in recent years.

Resources

DSIRE: Summary of RPS Policies in the U.S. DSIRE, 2012.

Supporting Solar Power in Renewables Portfolio Standards: Experience from the United States. Ryan Wiser, Galen Barbose and Ed Holt. Lawrence Berkeley National Laboratory (LBNL), October 2010.

Feed-in Tariff Policy: Design, Implementation, and RPS Policy Interactions. Karlynn Cory, Toby Couture and Claire Kreycik. National Renewable Energy Laboratory (NREL), March 2009.

Recommended Principles and Best Practices for State Renewable Portfolio Standards. Prepared by the State-Federal RPS Collaborative, January 26, 2009.

CESA State RPS Policy Report: Increasing Coordination and Uniformity Among State Renewable Portfolio Standards. Ed Holt. Prepared for the Clean Energy States Alliance (CESA), December 2008.

State Clean Energy Practices: Renewable Portfolio Standards. David Hurlbut. National Renewable Energy Laboratory (NREL), July 2008.

Renewable Portfolio Standards: An Opportunity for Expanding State Solar Markets. Ryan Wiser. Lawrence Berkeley National Laboratory (LBNL), State PV Peer Network Conference Call Presentation, July 11, 2008.

Renewables Portfolio Standards in the United States — A Status Report with Data Through 2007. Ryan Wiser and Galen Barbose. Lawrence Berkeley National Laboratory (LBNL), April 2008.

Renewable Electricity Standards Toolkit, Union of Concerned Scientists. 2012.

The Treatment of Renewable Energy Certificates, Emissions Allowances, and Green Power Programs in State Renewables Portfolio Standards. Edward Holt and Ryan Wiser. Lawrence Berkeley National Laboratory (LBNL), April 2007.

Renewables Portfolio Standards in the United States: A Status Update. Galen Barbose. Lawrence Berkeley National Laboratory (LBNL), December 2012.

Footnotes

[1] Unpublished data from Galen Barbose, Lawrence Berkeley National Laboratory, December 2011.

[2] Supporting Solar Power in Renewables Portfolio Standards: Experience from the United States, Ryan Wiser, Galen Barbose, and Ed Holt, Lawrence Berkeley National Laboratory, October 2010.

[3] Renewables Portfolio Standards in the United States — A Status Report with Data Through 2007, Ryan Wiser and Galen Barbose, Berkeley National Laboratory, April 2008.

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