One-size RPS does not fit all

The U.S. Congress continues to debate proposals that would mandate that a set amount of the nation’s electricity come from renewable energy sources such as wind, the sun, or biomass. These discussions about adopting a nationwide renewable portfolio standard (RPS) raise significant concerns for power providers and customers alike.

 

Backers of a one-size-fits-all federal RPS believe it to be an essential component of a broad national energy strategy to address global climate change, improve air quality, and lower electricity price volatility. But in reality, a national RPS could disrupt existing state renewable energy programs and put added pressure on electricity prices and reliability.

Impact on state programs

States are moving forward with their own programs to promote renewable energy sources. As of September 2007, 24 states and the District of Columbia had established an RPS. Four other states had nonbinding goals for adopting renewables, and 48 states now support programs that offer consumers incentives, grants, loans, or rebates to use renewable energy resources.

Each state’s RPS plan includes carefully considered timetables and targets based upon its own unique circumstances and available energy sources. A federal RPS that imposes different targets and timetables could undercut or preempt those efforts. This would create uncertainty and drive up the cost of meeting renewable mandates even further for electricity suppliers and consumers in those states.

Even among states that have an RPS, all have chosen to add energy sources unique to their areas, such as geothermal power, which are not included in the broad-sweeping federal RPS proposals. Many state programs also include technologies such as fuel cells, as well as alternative means of compliance such as energy-efficiency programs, which are not recognized in the federal plans.

Higher power costs

Finally, not all regions of the country have abundant renewable energy sources that they can turn to for generating electricity. The cost for states in these regions to comply with a federal RPS could be high, because many of the retail electric suppliers in these areas will not be able to meet an RPS requirement through their own generation. They will be required to purchase higher-cost renewable energy from other suppliers or purchase renewable energy credits.

Thus a nationwide RPS mandate will mean a massive wealth transfer from electric consumers in states with little or no renewable resources to the federal government or states where renewables happen to be more abundant.

A federal RPS would also mean higher costs due to the need to build high-voltage electric transmission lines. Renewable energy facilities, especially wind farms, are usually located in remote areas. To deliver their electricity to the populated areas where it is needed, transmission lines would need to be built. To do so will cost approximately $1 million to $3 million per mile.

Most renewable energy sources are intermittent, meaning they do not generate power all the time. Consequently, conventional power plants (most likely fueled by natural gas) need to be built to support them, which accounts for costs in addition to the cost of building the renewable energy facilities.