The Renewables Portfolio Standard in Texas: An Early Assessment

Texas has rapidly emerged as one of the leading wind power markets in the United States. This development can be largely traced to a well-designed and carefully implemented renewables portfolio standard (RPS). The RPS is a new policy mechanism that has received increasing attention as an attractive approach to support renewable power generation. Though replacing existing renewable energy policies with an as-of-yet largely untested approach in the RPS is risky, early experience from Texas suggests that an RPS can effectively spur renewables development and encourage competition among renewable energy producers. Initial RPS targets in Texas will be far exceeded by the end of 2001, with as much as 930 MW of wind slated for installation this year. RPS compliance costs appear negligible, with new wind projects reportedly contracted for under 3(US)¢/kWh, in part as a result of a 1.7(US)¢/kWh production tax credit, an outstanding wind resource, and an RPS that is sizable enough to drive project economies of scale. Obliged retail suppliers have been willing to enter into long-term contracts with renewable generators, reducing important risks for both the developer and the retail supplier. Finally, the country's first comprehensive renewable energy certificate program has been put into place to monitor and track RPS compliance.