State Renewable Portfolio Standards

Renewable portfolio standards (RPS) are regulatory mandates enacted by individual states to increase the development and generation of eligible renewable resources. An RPS legally obligates a qualifying retail electricity supplier to meet a specified amount of its electricity sales from the generation of renewable energy resources. An RPS usually takes the form of a target that includes a percentage of retail sales that must be met by a certain date. Currently, 30 states plus Washington D.C. have adopted a RPS, while an additional eight states have similar, but voluntary, renewable portfolio goals.[1] A state will pursue a RPS or goal to encourage and increase the development of renewable resources, diversify the resource portfolio mix, boost economic development, and reduce greenhouse gas emissions. There is no overarching federal RPS policy in place.

Each state has defined what an eligible renewable resource is for compliance with its RPS. These resources can come from different vintages (for example, some states allow for certain resources that were built prior to the enactment of the RPS to count towards compliance), can have minimum or maximum requirements, and can allow for a resource to count as more than one credit toward compliance (multiplier) to encourage development of that particular resource.

A megawatt hour that is generated from an eligible renewable resource is called a renewable energy credit (REC) - one megawatt hour is equal to one REC. In general, power from an eligible renewable resource can be sold with and without the accompanying REC, although states have different rules regarding whether (or what percentage of) RECs must be accompanied by the generation. If a REC is sold with the generation, it is “bundled.” If a REC is sold without the generation, it is “unbundled” and the power that has been stripped of its REC is known as “null” or “brown” power. RECs can be sold and traded through the REC market, which in the West is governed by the Western Renewable Energy Generation Information System (WREGIS). States also have varying rules about banking RECs, meaning once a REC is created, an entity can hold onto it for compliance in a future year.

In the Pacific Northwest, Montana, Washington, and Oregon adopted state renewable portfolio standards in the mid 2000’s. While Idaho does not have an RPS, its Idaho Energy Plan encourages the development of cost-effective local renewable resources. Each RPS is detailed, nuanced, and unique in its requirements, eligibilities, and allowances. The state summaries below are meant to provide a highlight and are not intended to be comprehensive.

Renewable Portfolio Standards: High Level Summary – as of April 2020

RPS initially enactedMontana Renewable Power Production and Rural Economic Development Act of 2005Initiative 937 Washington Energy Independence Act of 2006SB 838, Oregon Renewable Energy Act of 2007
Latest updaten/an/aSB 1547 Clean Electricity & Coal Transition Plan of 2016
Standard15% by 201515% by 2020
(100% clean by 2045)
50% by 2040 (IOUs)
25% by 2025 (large COUs)
10% by 2025 (small COUs)
5% by 2025 (smallest COUs)
Obligated EntitiesIOUs and competitive electricity suppliersUtilities serving more than 25,000 customersIOUs and all COUs; targets vary by size of utility
BankingAllowed; 2 yearsAllowed; one year prior and one year subsequentAllowed; 5 years
(original law allowed unlimited banking)
Resource Carve-outs (additional target requirements)n/an/a8% from small scale community-based renewables or biomass cogen
Additional Provision(s)Community Renewable Energy Project (CREP): 75 MW by 2015No coal in the electricity supply by 2025No coal in the electricity supply by 2030

* The Montana RPS has since been repealed. See Montana RPS for more info.

Montana RPS

Note: On May 14, 2021, Montana Governor Greg Gianforte signed House Bill 576, repealing the Montana Renewable Power and Rural Economic Development Act of 2005 and effectively annulling the Montana RPS in its entirety. Data for the 2021 Power Plan was frozen in April 2020, and therefore the Montana RPS is actively included in the clean policy analysis and described in the documentation as it was reflected at the time. However, an "Updated Clean Energy Policy Analysis" is provided in the "Clean Policy Analysis" section. 

Montana was the first state in the region to adopt a renewable portfolio standard as part of its Renewable Power Production and Rural Economic Development Act of 2005. Montana’s RPS includes a renewable resource target of 15 percent in 2015 (and each year thereafter) for its investor owned utilities (IOUs) and competitive electricity suppliers serving 50 or more customers. Although cooperative and municipalities are exempt from the mandate, if they serve more than 5,000 customers, they must implement a renewable resource goal and strategy akin to the spirit of the law. Eligible resources must either be located in Montana or directly deliverable via existing transmission routes into Montana. A REC can be used for compliance in the year it was generated or it can be banked for compliance for two subsequent years before it is retired. Failure to comply with the RPS in Montana results in a $10 per megawatt hour administrative penalty for RECs to make up the deficit. Montana has a cost cap built into its policy that precludes the utility from having to meet the annual target if the cost of purchasing or procuring a REC is greater than 15 percent of the cost of any alternative resource.

Montana’s RPS includes a provision for community renewable energy projects (CREPs), which are locally owned (at least 50% or more local or utility ownership) renewable projects less than or equal to 25 megawatts installed nameplate capacity. This requirement obligates utilities (competitive electricity suppliers are exempt) to enter into contracts with CREP facilities for the RECs and associated output. For compliance year 2015 and each year thereafter, the CREP requirement is 75 MW for the state of Montana (NorthWestern Energy’s obligation is 65 megawatts and Montana Dakota Utilities is responsible for the rest). The purpose of the CREP requirement is to stimulate economic development within Montana, particularly in rural areas. However, the success of this provision has been relatively limited thus far. Since the CREP provision went into effect in 2012, NorthWestern Energy has been granted waivers for each compliance year from the Montana Public Service Commission (PSC).

Washington RPS

Washington adopted the Energy Independence Act by way of ballot initiative 937 in 2006, which included a renewable energy standard. Washington’s target for renewable resources is 15 percent by 2020 (and each year thereafter) for its utilities serving 25,000 customers or more (this equates to roughly 84% of the state’s sales). Eligible renewable resources can be located anywhere within the Pacific Northwest region or delivered to Washington from outside the region on a real-time basis. For example, PacifiCorp’s wind projects in Wyoming are eligible to meet RPS compliance in Washington. Washington’s banking rules allow for a REC to be used within the year it was generated, or one year prior or subsequent. Washington allows for two multipliers in its standard; for eligible distributed generation projects less than five megawatts, the RECs generated can be multiplied by two and if union-apprenticed labor is used in the development of an eligible renewable project, the RECs generated can be multiplied by 1.2. Failure to comply with the RPS in Washington triggers an administrative penalty ($50 per megawatt hour starting in 2006, adjusted for inflation each year).

In addition to meeting the RPS by generating or procuring RECs, Washington has two alternative means of compliance through cost caps. A utility may comply with the annual target if the incremental cost of acquiring a renewable resource or REC exceeds 4 percent of its retail revenue requirement. Alternatively, if a utility experiences zero or negative load growth, it is not required to spend more than 1 percent of its retail revenue requirement on RECs to comply with the target.

In May 2019, Washington Governor Jay Inslee signed the Clean Energy Transformation Act (CETA), which upholds the renewable portfolio standard and strengthens it with additional clean electricity targets. See clean policies section.

Oregon RPS

In 2016, Oregon strengthened its RPS to 50% by 2040 through the Clean Electricity & Coal Transition Plan (SB 1547). This was an update to its original renewable portfolio standard adopted in 2007, that had a target of 25% by 2025. In addition to increasing the targets, the 2016 update revised Oregon’s rules regarding REC banking as well as adding an 8% minimum carve-out of small scale (less than 20 MW) community-based renewable resources or biomass cogeneration by 2025. Another significant piece of the legislation is a complete phase out of coal in Oregon’s electricity supply by 2030 (with an exception for a small portion of Portland General Electric’s ownership of Colstrip, which must be phased out by 2035).

Oregon has four categories of renewable targets. For investor owned utilities having greater than 3% of state retail sales (PGE and PacifiCorp), the target increases from 20% in 2020 to 50% in 2040. Consumer owned utilities (COU) are defined in three categories: large COUs (defined as a utility having greater than 3% of state retail sales) have a target of 25% by 2025 and each year thereafter, small COUs (defined as a utility having between 1.5% and 3% of state retail sales) have a target of 10% by 2025 and each year thereafter, and even smaller COUs (defined as a utility having less than 1.5% of state retail sales) have a target of 5% by 2025 and each year thereafter. Between these categories, all utilities in Oregon – as well as energy service suppliers - are subject to a renewable portfolio standard by 2025.

Oregon Renewable Portfolio Standard

One of the major changes of the 2016 update to Oregon’s RPS is the banking rules. Previously, Oregon allowed unlimited banking, meaning that once a REC was created, it could be saved indefinitely to meet a future compliance year. Under the new rules, REC banking is more restrictive for IOUs. RECs created before 2016 remain unlimited and RECs created in the first five years of operation by facilities built between 2016 and 2022 are also unlimited. All other RECs will be bankable for 5 years. REC banking rules for COUs remained unchanged and all RECs held by COUs can be banked indefinitely.

Finally, SB 1547 codified the community-based renewable goal from the original 2007 RPS. Now a requirement, at least 8% (in aggregate across all utilities) of Oregon’s electricity supply must come from small scale (20 MW or smaller in capacity) renewable or combined heat and power projects by 2025.

Like other state policies, Oregon has instated a cost cap to protect consumers from rising electricity costs. Utilities are not required to comply with the RPS to the extent that the costs of compliance would exceed four percent of the utility’s annual revenue requirement. The Oregon Public Utility Commission can also institute a suspension of the RPS if compliance would conflict with the stability and reliability of the electricity grid.

[1] Source: Information maintained and produced by the DSIRE.