A Look behind the Texas Renewable Portfolio Standard: A Case Study

A renewable portfolio standard (RPS - a statutory requirement to achieve a renewable energy goal by a certain date - is the tool of choice for many state policy makers concerned about climate change and the role played by electric generation. Texas enacted its RPS in 1999; since that time, it has added the most renewable capacity of any state and has rapidly outpaced its statutory goals. The numbers do not tell the whole story, however. This article examines the Texas RPS from two public policy perspectives seldom addressed in previous studies: the politics that shaped the statute creating the RPS and threshold judgments made by the agency implementing the statute. One factor crucial to the political fortunes of the RPS in the Texas Legislature was strategic linkage, that is, associating the RPS with related issues that had ascended high on the legislative agenda, such as competitive restructuring of the state's electricity market. Once the RPS was enacted, the Public Utility Commission of Texas (PUCT) aimed to build a practical policy framework in which renewable energy development overall would be a response both to the RPS mandate and to customer-driven demand. The PUCT adopted a "carrot and stick" approach, imposing penalties for falling short of mandated goals, while at the same time creating a portfolio of measures to ensure that the market was fully able to respond to consumer demand. The Texas experience suggests that economically sustainable renewable energy is the true underlying objective of an RPS; building competition into RPS implementation promotes economic efficiency and increases demand for renewable energy; an RPS, a system of renewable energy credits and green-power policies works best as an integrated package; the regime of rules needs to be stable; and an RPS goal need not be ambitious in order to succeed.