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How RPS Works

The Renewables Portfolio Standard (RPS), adopted in six states, is a market-based policy for increasing the amount of renewable energy in the overall electric resource portfolio.

The RPS:

• Requires all generators (or retail suppliers) to demonstrate, through ownership of tradable "renewable energy credits," that they have supported the generation of a certain amount of renewable power;
• Works with retail competition or under traditional regulation;
• Is competitively neutral because it applies equally to all competing market participants; and,
• Complements a system benefits charge to support energy efficiency, low-income, R&D and commercialization.

Advantages of the RPS as Compared to Other Renewables Promotion Policies:

• Relies on the marketplace rather than government agencies to distribute funds.
• Renewable energy sellers face constant competition from new projects and technologies vs. a rigid, one-time competition for funds.
• Ensures that the intended renewable energy development results will be achieved.

The Government's Role is Limited Under an RPS to:

• Certifying the generation output of renewable energy producers and issuing the appropriate number of renewable energy cred its;
• Verifying that power suppliers possess the required number of credits at the end of each year; and,
• Enforcing compliance as has been done with the EPA's tradable emissions permit program for clean air.

Source: American Wind Energy Association