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What’s an “RPS” and why should I care?
Posted by Walt Vernon on December 31, 2009 at 11:25am
RPS stands for Renewable Portfolio Standard. It is a tactic being used more and more by regulators to try to increase the degree to which our energy supply comes from renewable energy.
A regulatory body looks upon the energy supply for a particular region as if it were a "portfolio", or set of sources. These sources might be hydro-electric power plants, natural gas power plants, coal-burning power plants, nuclear power plants - or, wind, solar, bio-gas, or geothermal power plants. Utility companies generally like to invest in the cheapest possible plants, and plants which can operate at the cheapest possible rate. Today, that generally means these plants run on coal.
When a regulatory body wants to change the fuel supply mix for a region, it might adopt regulations called Renewable Portfolio Standards. These rules basically say that, by some date in the future, a certain percentage of each utility company’s energy (usually electrical energy) must come from renewable sources. Now, there are a lot of details in how these rules get written - must the renewable energy come from within the region or can it come from outside the region? What about solar panels that somebody puts on their roof? What counts as renewable? Can a utility sell Renewable Energy Credits when it builds capacity to generate renewable energy - etc. You can see that it is not a simple kind of regulation to craft.
And, the problem is, most renewable energy sources are still more expensive, at today’s energy prices, than most fossil-fuel energy sources, and so, the utility must either pass these additional costs on to rate payers (which they don’t like to do) or they must eat these costs. As a result, the utility companies don’t generally like these kinds of laws.
If you are the owner of a building, though, you should, I think, be in support of aggressive RPS rules for your location. Here is why I think they are a good idea:
- When you look at the cost per unit to generate energy from renewable sources, it is much less when done in a concentrated, utility-scale way than when done in a distributed, on-site way. So, if we as a country are going to start to move away from our dependence on fossil fuels, and if we want to do it in the cheapest possible way, we will have to do it using as much utility-scale plants as we can get.
- Building owners are not, generally, in the power plant business. I think that the Henry Ford, Adam Smith ideas of letting people do things are best and most efficient at doing things is a good idea. If utility companies, who are experts at generating and moving energy take charge of creating renewable energy, then people who own buildings don’t have to. Yes you might have to pay a little more for your electricity. However, so will everyone you compete against, and therefore you will not be hurt in comparison. Also, if the utility does it, it is less likely that you will be forced to do something, and you can therefore focus on providing quality healthcare, or research, or education.
- We have seen that this makes a tremendous difference for the Greenhouse Gas Inventories for our clients. We have done a number of GHG inventories for many healthcare buildings and owners. In comparing the results from these, it is very clear that the biggest difference between them is where they are located, and how the local utility generates its energy. We have one client that is located in a region that gets half of its energy from renewable sources. These guys have - yes, half the GHG emissions as the guys who are located in other regions, and yet, their buildings consume MORE energy than the ones in the other regions. The ones in the other regions are forced to undertake very expensive measures to reduce their consumption if they want to do better in terms of their emissions, while the lucky hospital in the renewable region, can basically focus its resources on providing quality healthcare and still be better in its GHG profile.
- Investments in renewable energy, though costly now, are a hedge against future energy price increases. If there is one thing we can say for sure about the prices of fossil-fuel based energy, it is that the prices will fluctuate, but will generally go up. Renewable energy, on the other hand, has a one-time fixed investment, and then almost no cost thereafter, allowing you to know with almost absolute certainty, what the energy cost of that plant will be for a very long time. Economically, this is a very good thing.
So, an RPS is probably one of the single most effective, and relatively painless things we as a country can do to start to move away from our dependence on fossil-fuels and towards stable, long-run energy prices, and in a way that minimizes disruption to people who own buildings. I strongly recommend, therefore, that building owners support strong RPS regulations in regions where you operate.
By the way, the following website is the best place to educate yourself on your regions’ RPS requirements: http://www.dsireusa.org/summarytables/rrpre.cfm. If you visit this site, you will see listed lots of other kinds of regulations about renewable energy, and I will try to cover some of these in future posts.
Have a great New Years!
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