What is an RPS?
State legislatures pave the way for strong solar energy incentives to flourish. How? By stipulating standards for renewable energy generation within their territories. Those standards are called the state’s renewable portfolio standard (RPS).
If utility companies do not meet these standards, they must pay alternative compliance fees directly to the state. Many utilities then determine the best ways to source their energy from renewable sources that are less expensive than this fee.
What are Solar Set Asides? Why are they Important?
A solar “set aside” is a mandate the state sets in its RPS. This guarantees a specific portion of the overall renewable energy mix generated comes from the sun. For those states with progressive standards, high alternative compliance payments, and clear solar carve outs, the faster those areas become ripe for solar.
Some states have higher alternative compliance fees than others, and as you can see above, some states have more progressive alternative energy standards and deadlines than others do.
For instance, New Jersey has an overall RPS of 22.5% by the year 2020. That requires local utilities to source 22.5% of their energy mix from renewable sources by the year 2020. Pretty good. However, New Jersey also has a specific solar set aside of 2% by 2021. That’s the type of firm commitment which really gets the industry rolling forward. No wonder why New Jersey is the hottest solar market right now!
Why are Electric Rates Part of the Report?
The states without any renewable standards tend to be heavily reliant on cheap coal for electricity, and also have very low electricity prices. When electricity prices are artificially low, that hinders the ability of solar energy to achieve meaningful payback in the state.
About the grades above:
We ranked the states based on the strength of their policies on a 1-5 scale. While 38 out of the 50 states have a renewable portfolio standard, only 17 states have a specific carve out for solar energy. Many states have passed legislation in 2010 to at least have some sort of standard in place.
This portion of the report is worth 30% of the overall state summary grade. The solar set aside is weighed at 15%, the overall state RPS is weighed at 10%, and the electric utility prices are weighed at 5%.