Renewable Portfolio Standards (RPS) are under attack. This may sound surprising to some, especially considering the upsurge in public consciousness regarding the development of clean and green technologies. But in statehouses across the United States, debates are ongoing regarding the need for RPSs, largely due to the increasingly lower prices for certain traditional energy sources, such as natural gas. As these prices continue to fall, many states—including those with significant traditional energy production—will continue to question the necessity of such standards. A recent article in Bloomberg helps illustrate this point.
Currently, 29 states and the District of Columbia have RPSs, and another 7 states have non-binding goals. Generally speaking, these standards/goals require utilities in the state to obtain a portion of their power capacity or generation from renewable sources by a date certain. Depending on the state, and the relevant political atmosphere, the standards/goals may be minimal or quite aggressive. For instance, the California RPS, which was created in 2002, and was later expanded in 2011, requires privately-owned utilities, electric service providers, and community choice aggregators to increase their use of renewables to 33 percent by 2020.
For utilities that do not reach the required RPS standard, there are generally penalties which can be instituted against them. Many states have renewable energy credit programs in place which allows parties to “trade” credits in order to maintain compliance, and quite a few states also make a distinction between different types of renewable sources (e.g., Connecticut separates its renewable sources into various classes by statute). RPSs tend to be rather distinct depending on the state where they have been adopted, and can come in all shapes and sizes.
Over the course of the next year, it will be interesting to watch as state legislatures across the United States attempt to augment, or pare back, existing RPSs. In states such as California, where a democratic super-majority exists, it seems unlikely that any change will occur. But in states such as North Carolina and Colorado, where significant sources of traditional natural resources exist, lobbying by large-scale utilities may result in some potentially significant changes. No matter how these battles play out, the potential uncertainty and instability in some of these jurisdictions are are sure to have an impact on cleantech startups, as they will almost certainly be focusing their attention and expansion into more stable and welcoming areas in order to ease financing concerns and ensure access to government support.
Michael Hecker is a senior associate in the Environment & Energy Practice at Hodgson Russ LLP. You can reach him at email@example.com.