Make no mistake, state renewable portfolio standards (RPS) have been a key driver of the solar and windpower industries, along with federal tax incentives, and RPS policy will continue to push utility-scale development for years to come. Still, companies are preparing for the changes and challenges that lie ahead.
Overall, 2013 was a year of RPS policy advancement, according to analysts at Keyes, Fox & Wiedman, even while attempts to diminish or destroy RPS policy gained national attention. Law changes in Colorado, Minnesota and Maryland, for example, will require 1,000 MW of additional renewable energy, including 500 MW of solar.
According to projections from Lawrence Berkeley National Laboratory, 94 GW of renewable energy must be built for utilities to achieve full RPS compliance by 2035. That equates to roughly 3 to 5 GW a year through 2020 and 2 to 3 GW through 2035. By comparison, RPS-driven renewable energy additions have ranged from 6 to 13 GW a year in all but one year since 2008.
“Despite some initial concern that utilities would have difficulty meeting their targets, utilities have in fact been able to hit their targets and many states have gone back and revised their targets and raised them,” says Galen Barbose, a principle scientific engineering associate at the national lab.
Historically, wind has been the dominant RPS resource. Solar was a minor player due to its higher cost and because it was seen as a distributed resource. Some of those differences have eroded in recent years, Barbose says, as solar has become less expensive. In some areas, such as the desert southwest, there is little difference between solar and wind power and the impact RPS makes on those industries.
Influencing Business
Companies in the wind power and solar industries say RPS has unmistakably influenced business. Some companies report developing business plans focused on RPS. First Wind, a Boston-based wind project developer, for instance, has built farms in Maine, Vermont, New York, Utah, Washington and Hawaii. The Utah project provides power to Southern California.
“We haven’t developed in the middle of the country, where RPS standards either don’t exist or are not as strong,” says John Lamontagne, director of corporate communications at First Wind. “The RPS policy is an important part of how we determine where we’re going to put a project and to whom we sell power.”
The Lawrence Berkeley National Laboratory compiled this chart and the one below to show the growth of RPS-driven renewable energy capacity since 1998. Wind power has been the dominant player in that time, but solar is gaining ground.
Likewise, the country’s third-largest utility-scale solar developers, Recurrent Energy, has a 600-MW portfolio in the U.S. that is largely driven by RPS – especially in California, where the step-up from 20% to 33% RPS has been a boon to solar business. In fact, 80% of the energy added to the grid since that expansion has been solar.
“RPS is huge for us,” says Arno Harris, CEO of Recurrent Energy. Still, the company has solar arrays scattered from coast to coast and in Ontario. “As a developer, you learn not to put all of your eggs in one basket. For us, it’s about diversifying across states and regions, so you’re not betting everything on one policy.”
RPS, he says, doesn’t mean a state will have a large utility-scale solar market. Conditions on the ground must be right. A sufficient solar resource is the first consideration. Two more are an interconnection policy that doesn’t disadvantage solar, and utility procurement conditions that don’t favor one technology over another. Increasingly, politics is on the side of renewable energy.
“There is a growing sense that renewables are affordable, and people ultimately do have a sense of responsibility and a desire to be supportive of things that will do something about climate change and air quality,” says Harris.
Challenging Progress
Perhaps the greatest challenge renewable energy companies will face in regard to RPS is their fulfillment. California, for instance, will likely make a shift from its RPS to carbon emissions-based policy in the future. How that will play out it is unknown, and will likely be the subject of much political back-and-forth.
“RPS has led this amazing revolution in California, but the underlining driver is starting to slow down,” Harris says. “The state is going through a big transition right now.” This transition is the object of his concerns more than attacks from lobbyists opposed to renewable energy. But RPS hasn’t clear outside forces yet.
While none of the major attempts to scale back RPS were successful in last couple years, groups have begun to change their methods.
“Now the strategy is shifting toward weakening RPS policies by expanding the set of resources that are eligible and expanding the use of unbundled RECS that can be sourced from anywhere in the country,” says Barbose. “It’s a more subtle way to dismantle RPS programs.”
One problem, though: Renewable energy has an ever-expanding bully pulpit. In Georgia, for instance, environmentalists and Tea Party activists together are pressing state leaders for updated solar policies. The group is called the “Green Tea Coalition.”
“The increasing number of supporters is a big reason why many of these political attacks haven’t been successful,” Barbose says. “They’ve underestimated the strength of the constituencies that benefit from these policies.”
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