Mark Spurr, IDEA Legislative Director

Amid the uncertainty regarding energy and climate policy in the United States, one trend is gaining
strength: standards that require electricity
and (less commonly) natural gas utilities
to obtain a certain percentage of their
requirements from renewable energy
and/or energy efficiency. Variously called
“portfolio standards,” “renewable portfolio
standards,” “renewable energy standards,”
“energy efficiency resource standards” or
“clean energy standards,” these policies
will affect district energy systems in
the coming years, in both positive and
negative ways. Portfolio standards have
the potential to benefit district energy
systems by creating an economic value for
combined heat and power. On the other
hand, at least in the near term, they will
increase electricity prices.

How Do Portfolio
Standards Work?

Utilities can meet portfolio standard requirements in a number of ways. Although there are variations, most programs usually include the following options for utilities to meet their renewable energy requirements:

• Construct their own renewable energy facilities.

• Buy renewable energy credits (RECs) in the credit-trading program authorized in the legislation establishing the standard.

• Pay a set “buyout” rate per kilowatt-hour or therm of natural gas to help fund programs promoting renewable energy.

Similarly, to meet energy efficiency standards, utilities have the following options:

• Implement end-use efficiency programs for utility customers.

• Improve distribution system efficiency.

• Pay a “buyout” rate.

• Buy tradeable energy efficiency credits.

• Purchase energy savings through contracts with other utilities, third-party efficiency service providers or other third-party entities.

States Lead the Way

Chances are good that your state has one or more of these standards, as illustrated in figure 1. Thirty states have a mandatory renewable portfolio standard (RPS),

Mandatory RPS Mandatory EERS Mandatory RPS + EERS or combined standard Voluntary Renewable Goals Voluntary Efficiency Goal Mandatory RPS or EERS including CHP Voluntary Efficiency Goal including CHP Mandatory RPS + Voluntary Efficiency Goal including CHP No portfolio standard at this time

Source: FVB Energy Inc., based on data provided by the Database of State Incentives for Renewables and Efficiency, American Council for an Energy-Efficient Economy and the Pew Center.