Race to the Top: The Expanding Role of U.S. State Renewable Portfolio Standards

Since the release of our 2002 report on state-level climate activity, Greenhouse and Statehouse: The Evolving State Government Role in Climate Change, the pace of innovation and adoption has quickened. States are taking a broad range of actions that reduce greenhouse gas emissions. One of the most widely-used policy tools is the creation of a renewable portfolio standard (RPS). These standards generally mandate that renewable energy provide an increasing share of state’s electricity. As of mid 2006, 22 states and the District of Columbia have implemented an RPS.

In this Pew Center report, author Barry Rabe of the University of Michigan concentrates on this subset of the increasingly broad range of state climate policy initiatives. This work presents an overview of this policy tool, focusing on case studies of five states: Texas, Massachusetts, Nevada, Pennsylvania and Colorado. These cases reveal a number of themes with implications for other states considering adoption of an RPS, as well the implementation of a federal renewable portfolio standard.

RPS enactment and expansion appear to draw strong political support independent of party lines. States are enacting or expanding RPSs for multiple reasons, including economic development opportunities and a more reliable and diversified supply of electricity. Environmental factors, such as reduction of conventional pollutants or greenhouse gas emissions, are often seen as secondary drivers in many states. RPSs are already boosting renewable energy supplies in a cost-effective manner, and appear to hold considerable potential for more dramatic gains. They are driving the expansion of important homegrown industries. However, this report also identified a number of challenges that could potentially deter future development and successful implementation of this policy tool.

Many RPS programs remain in very early stages of implementation, and many states are facing serious implementation challenges. How should renewable energy be defined? How should individual states deal with intra-state and inter-state transmission capacity, an issue that calls for greater inter-state collaboration in policy development? Should special status be accorded specific, disadvantaged renewable sources, which might lead to a collision between competing special interests and end up by raising costs?

This report illustrates a classic case of federalism in energy and environmental policy. States adopting RPSs are providing actual data and real-world models, and the early successes of these states are changing the debate about what states can individually accomplish with their energy systems, how states can cooperate regionally, and whether a federal RPS may be feasible. These states are also, however, pushing up against the limits of what states can do without federal support and coordination. Engagement between state and federal policy makers on this issue has been surprisingly limited, and is overdue. These policy experiments may prove a deciding factor in the energy path that the United States chooses to take, demonstrating that renewables can be a viable part of our energy future.

The Pew Center would like to thank Margaret Kriz, a Nieman Fellow at Harvard University, Kirsten Engel, Professor of Law at the University of Arizona, and Rick Gilliam, Senior Energy Policy Advisor at Western Resource Advocates for their comments on an earlier draft of this report. Barry Rabe would like to thank Katie Kerfoot for her research assistance, and Joshua Bushinsky, the States Solutions Fellow at the Pew Center, who authored the Appendix.