Many U.S. states have standards that require electricity providers to get some of their electricity from renewable, alternative, or other clean energy sources. Common names for these types of standards include: Renewable Portfolio Standard (RPS), Clean Energy Standard (CES), Renewable Energy Standard (RES), or Alternative Energy Standard (AES). Whether or not designed explicitly as a climate policy, these standards have been effective at encouraging cleaner home-grown electricity production.
Increasing a state’s use of cleaner electricity brings other benefits as well, including cleaner air, economic development, and energy security. To capture these benefits, many states have designed their programs to encourage in-state development even though most also allow the environmental benefits to be quantified and traded in a market-based approach. A renewable energy credit (REC) is a common type of credit used in these programs. Credit trading sends a price signal that the environmental benefits from these clean energy sources have value.
Some states also include specific incentives or “carve-outs” (requirements that a certain percentage of the portfolio be generated from a specific energy source, such as solar power) to encourage the development of particular types of clean energy resources.