In 1999, the Public Utility Commission of Texas (PUCT) adopted a rule, Goal for Renewable Energy (P.U.C. Substantive Rule 25.173), that sets the state's renewable portfolio standard (RPS) based on a bill enacted by the Legislature as part of restructuring in Texas (see S.B. 7). Texas’s RPS mandates 5,000 megawatts (MW) of new renewables be installed in Texas by 2015 (for a cumulative net capacity of 5,880 MW of renewable energy, or 5.4% of the state's summer net capacity in 2012) and sets a target of 10,000 MW of renewable energy capacity by 2025.
According to the annual compliance report prepared by the Electric Reliability Council of Texas (ERCOT), the program administrator for the Texas Renewable Energy Credit Trading Program, Texas surpassed its 2025 target in 2009 and had 26,045 MW of additional renewable energy capacity (24,381MW of which was wind) in 2017 relative to 1999.
Qualifying renewable energy sources include solar, wind, geothermal, hydroelectric, wave or tidal energy, biomass, or biomass-based waste products, including landfill gas. Qualifying systems are those installed after September 1999.
The RPS applies to “retail entities” in Texas: investor-owned utilities that have not unbundled, retail electric providers in deregulated areas, and municipal utilities and electric cooperatives that offer customer choice.
Each retail entity in Texas is allocated a share of the mandate based on that retailer’s pro rata share of statewide retail energy sales. The program administrator allocates RPS requirements among retail entities by dividing each entity’s total retail energy sales in Texas by the total retail sales in Texas of all retail entities, and multiplying that percentage by the total statewide RPS requirement for that compliance period.
The schedule of cumulative renewable energy capacity required and the corresponding compliance dates are as follows:
2,280 MW by 1/1/2007
3,272 MW by 1/1/2009
4,264 MW by 1/1/2011
5,256 MW by 1/1/2013
5,880 MW by 1/1/2015
10,000 MW by 1/1//2025 (voluntary target)
To address concerns about the adequacy of the state’s transmission systems, the law also instructs the PUCT to require utilities to add to their transmission systems as necessary to meet the renewable energy goal, and to allow utilities to recover the cost of such projects in their electric rates. As a result, the PUCT approved a competitive renewable energy plan to build transmission to bring renewable energy to the highly populated, metropolitan areas of the state. The Competitive Renewable Energy Zone transmission projects will eventually transmit 18,500 MW of renewable generation.
Large utility customers served by transmission voltage are permitted to opt out of the RPS requirements. Regulations for the "opt-out" provision were adopted by the PUCT effective in January 2009. In 2013, there were 84 transmission voltage customers (unique meter IDs) that had elected to opt-out. (Data such as the customer name and load associated with these opt-outs remains confidential.)
The RPS includes a voluntary target of 500 MW of renewable energy capacity from resources other than wind by 2015. Even though the PUCT has the authority establish alternative compliance payments, the PUCT has declined to do so, meaning that the 500 MW target remains voluntary without any non-compliance penalties.
The PUCT awards a "compliance premium" for each non-wind Renewable Energy Credit (REC) generated after December 31, 2007 (see Compliance section below for information on RECs). Compliance premiums are functionally equivalent to a REC for the RPS compliance purposes and may only be awarded to non-wind facilities that were installed and certified by the PUCT after September 1, 2005. This method effectively doubles the compliance value of electricity generated by renewable resources other than wind.
The PUCT established a REC trading program that began in July 2001 and will continue through 2019. For each megawatt-hour (MWh) of qualified renewable energy that is metered and verified in Texas, 1 REC is earned. A retail entity must annually retire 1 REC for each 1 MWh requirement it has. An administrative penalty of $50 per MWh has been established for providers that do not meet the RPS requirements.
A capacity conversion factor (CCF) is used to convert MW goals into MWh requirements for each retail entity. The CCF was administratively set at 35% for the first 2 compliance years, but is now based on the actual performance of the resources in the REC trading program for the previous 2 years.
The program administrator maintains a REC account for program participants to track the production, sale, transfer, purchase, and retirement of RECs. RECs retired (e.g., sold through a voluntary green power program) cannot be counted toward RPS requirements. RECs can be banked for 3 years, and all renewable additions have a minimum of 10 years of credits to recover over-market costs.
Cost Mitigation Measures
The PUCT has the authority to cap the price of RECs and may suspend the standard if necessary to protect the reliability and operation of the grid.