State-level Policies and The Growth of Solar Power

Rising fossil-fuel prices and environmental concerns have led to a growing demand for renewable energy sources such as solar power.  Compared to conventional energy and other renewable energy sources, solar power has the advantage of being generated locally, which both increases efficiency and greatly reduces the costs and environmental impacts of transmission .  As a result, both federal and state governments have rolled out a number of past incentives to promote solar energy.  Although a number of important federal renewable energy tax incentives have expired or will expire soon, three key policies at the state-level will continue to support the growth of solar energy in the U.S. These are: mandatory renewable energy requirements, interconnection, and net metering.

Mandatory Renewable Energy Requirements

According to an IBISWorld Report, currently over 30 US states have renewable electricity standards that require utility companies to increase their production of renewable energy, a policy generally referred to as “Renewable Portfolio Standards (RPS)”.^[1]  Although the design and final compliance targets of these policies vary widely among states, many of the RPS programs require that eligible forms of renewable energy contribute 15-25% of retail sales by utility companies by 2030 or sooner.  Please refer to Figure below for detailed information regarding existing RPS policies.

Most states that have mandatory renewable energy requirements also have an associated renewable energy certificate trading system.  This system provides a mechanism to track the amount of renewable energy being sold and to reward eligible power producers.  In some states the certification trading systems are used as incentives to promote solar energy, as utilities companies are buying the certificates from solar energy producers in order to meet RPS requirements.^[2]  In other states where no mandatory RPS exists, companies may still purchase solar certificate in order to advertise their energy supply is produced by renewable power.^[3]  For example, FritoLay bought enough solar certificates to claim their SunChips snack product is “powered by the sun.”^[4]   The solar power producers who sold their certificates to FritoLay still use the actual electricity generated form their solar systems.  However, they are not allowed to claim or treat electricity coming from a solar energy source anymore.^[5]

Although more and more states have started implementing RPS and certificate trading systems, the federal government has not enacted similar requirements.