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Goverment Policies

To establish an energy portfolio that is sustainable for future growth, state and federal governments of other countries have enacted various energy policies. This will become increasingly important as more countries develop and industrialize. Energy demand is expected to continue growing exponentially and new technologies must be available to help meet the demand. These policies are primarily aimed at reducing dependency on fossil fuel energy, mandating efficient energy use, and encouraging the development of renewable energy resources. The primary ways in which federal, state, and local governments encourage renewable energy, including photovoltaics, is through incentives and quotas.

  • INCENTIVES: Incentives programs include grants, rebates, renewable energy credits, low-interest or no-interest loans, sales and property tax exemptions, income tax credits or deductions for individuals and corporations, and cash payments based on energy production. Federal programs are available throughout the United States, while state programs vary widely. Even some utilities offer incentives programs in their areas. Online databases of various incentive programs help consumers research available programs for their area.

 

  • QUOTAS: The quota mechanism is a state policy and is typically called a Renewable Portfolio Standard (RPS). An RPS places an obligation on either the state utility or the consumers to source a specified fraction of their electricity from renewable energy sources by a certain deadline. Utilities that fail to meet their obligations are required to pay a penalty fee for each unit of electricity short of the goal. This quota mechanism expands the market for renewable energy systems, which drives competition and is expected to lower costs to the consumer.

 

It’s worth noting that several states have expanded their policies to incorporate additional resources in recent years. There is now a distinction between a “Renewable Portfolio Standard” (RPS) and what some states have labeled as a “Clean Energy Standard” (CES). The difference between a RPS and a CES comes down to how a particular state defines what is a “renewable” versus a “clean” source of energy. Clean energy typically refers to sources of energy that have zero carbon emissions.

Some of those “clean” sources may not be considered “renewable.” For instance, under some CES policies, nuclear energy is considered a “clean” energy source because it is carbon-free; it is not widely considered “renewable,” however. Conversely, biomass, which is an eligible resource under many state RPS policies, is considered “renewable” despite producing carbon emissions.

Iowa was the first state to establish an RPS; since then, more than half of states have established renewable energy targets. Thirty states, Washington, D.C., and two territories have active renewable or clean energy requirements, while an additional three states and one territory have set voluntary renewable energy goals. RPS legislation has seen two opposing trends in recent years. On one hand, many states with RPS targets are expanding or renewing those goals. Since 2018, 15 states, two territories, and Washington, D.C., have passed legislation to increase or expand their renewable or clean energy targets. On the other hand, seven states and one territory have allowed their RPS targets to expire; an additional four states have RPS targets that expire in 2021.

Most jurisdictions with a current or recently updated RPS have set targets of at least 40%. However, recent RPS legislation has seen a push toward 100% clean or renewable energy requirements. To date, 10 states, Washington, D.C., Puerto Rico, and Guam have set 100% clean or renewable portfolio requirements with deadlines ranging between 2030 and 2050. An additional three states, plus the U.S. Virgin Islands, have goals of 50% or greater.

State renewable portfolio standard policies vary widely on several elements including RPS targets, the entities they include, the resources eligible to meet requirements and cost caps. In many states, standards are measured by the percentage of retail electric sales. Iowa and Texas, however, require specific amounts of renewable energy capacity rather than percentages and Kansas requires a percentage of peak demand.

RPS requirements can apply only to investor-owned utilities (IOUs), although many states also include municipalities and electric cooperatives (Munis and Co-ops), sometimes with a lower target. Utilities that are subject to these mandates must obtain renewable energy credits or certificates (RECs)—which represent the environmental benefits of one megawatt-hour of renewable energy generation. RECs are created when renewable energy is sent out to the grid and are used to verify that utilities are meeting their targets.

According to Lawrence Berkeley National Laboratory, 20 states and Washington, D.C., have cost caps in their RPS policies to limit increases to a certain percentage of ratepayers’ bills. One state caps RPS gross procurement costs.

To promote a diversified resource mix and encourage deployment of certain technologies, states have established carve-outs and renewable energy credit multipliers within their RPSs for specific energy technologies, such as offshore wind or rooftop solar. Carve-outs require a certain percentage of the overall renewable energy requirement to be met with a specific technology, while credit multipliers award additional renewable energy credits for electricity produced by certain technologies. At least 21 states and Washington, D.C., have credit multipliers, carve-outs, or both for certain energy technologies in their RPS policies.

Florida’s new goals call on utilities to move toward 40 percent clean energy by 2030, 63 percent by 2035, 82 percent by 2040 and 100 percent by 2050. The goals are the same as those proposed by the young Floridians in their petition for rulemaking.

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