NEED TO KNOW
RENEWABLE PORTFOLIO STANDARDS/
GREEN ENERGY MANDATES
Renewable portfolio standards (RPS) are state efforts to either mandate or
set a goal for utility companies to acquire some of their energy from
“renewable” energy sources. Although the definition of “renewable energy”
varies from state to state, utility companies are directed to achieve the
energy quota by a certain year to increase demand for green energy. The
result of such efforts produces a wide array of distortions in the market.
Government manipulation of energy production artificially supports an
economically inefficient industry against the efficient, low cost energy
sources that consumers want and the markets need.

QUICK FACTS
Individuals in states with
these Green energy mandates
have on average 39 percent
higher electric bills
29 states, including the
District of Columbia, have
renewable portfolio standards
(1).

HOW RPS MANDATES WORK
RPS mandates use several basic mechanisms to force utility companies to either generate or sell "Green" energy
to consumers. A utility can design a plan on how it will meet the specified goal; however, the state can impose
further regulatory burdens if the utility will fail to reach the renewable energy goal (2).

UNSTABLE JOBS
Despite politicians’ rhetoric claiming RPS programs create jobs, the evidence suggests the contrary. In the public
sector, subsidies for “green jobs” during a period of tremendous budget difficulties forces money away from other
state programs like education and police enforcement. Oregon, for example, granted over $857 million through the
Business Energy Tax Credit from 2007-2014, while cutting K-12 education, eliminating courses and forcing the
layoff of teachers (3). In the private sector, regulations raise costs for businesses and subsidies artificially support
renewable energy sources that are uncompetitive on their own. Picking the winners and losers of industry is not
the purpose of government. The jobs created under the auspices of government are unsustainable and take away
from other competitive industries that give a market struggling with employment the durable jobs essential to
economic recovery.

EXPENSIVE UTILITY BILLS
Energy consumers in RPS states can bet on gradual increases for utility prices and taxes; the expected result of
government intervention. The states with some form of RPS on average have 39% higher energy costs (4).
Moreover, the massive subsidies necessary just to support the economically unsound renewable energy industry
requires increased taxes to pay for such programs. For example, if the taxes and subsidies were level across the
energy industry, wind alone is 162% more expensive than the production of coal (5). Renewable energy such as
wind and solar power is also inherently unstable. Wind, for example, is not a consistent producer of energy and
requires stand-by power to sustain the output of electricity. This alone increases the cost of production by 50%
(6).

 UNOBTAINABLE GOALS
The goals mandated by RPS legislation have since been
given a heavy dose of economic reality. Currently
twenty-nine states have passed RPS legislation and of
those twenty-nine, only five have met the established
goals (7). Many of the RPS states require utility
companies to generate or sell 15% to 25% renewable
energy by 2020 to 2025 (8). The goals have proved
economically implausible in the majority of states due
to the current atmosphere of budget deficits plaguing
the country.

THE EUROPEAN EXPERIENCE

“A focus on green jobs discourages
overall economic growth by
redistributing private sector wealth to
uncompetitive and unsustainable
energy providers. Higher electricity
prices hurt small businesses, resulting
in fewer jobs. Heavily subsidizing
‘green’ energy sources while
simultaneously mandating their use is
a prescription for economic decline
rather than prosperity.”
- Nathan Benefield and Katrina
Currie, Testimony given to the
Pennsylvania General Assembly

The impracticalities inherent in RPS legislation can be
seen among the European countries that have imposed
aggressive goals to achieve renewable energy standards. In Spain, it is estimated that 2.2 jobs were lost
for each green energy employee created. Furthermore, only 1 out of 10 green job contracts involved the
operation of installed plants, as the other 9 were short term construction jobs (9). Spain committed
$753,778 per green job as it was estimated that nearly 110,500 jobs were lost in the rest of the economy
(10).

CONCLUSION
Renewable mandates’ poor record serves as a warning to states that assume the government can
create sufficient incentives for renewable technologies. Green energy goals are rarely met, energy
prices increase dramatically, and massive subsidies are required for jobs and operation of facilities. Only
the markets can dictate such action in an efficient, cost effective manner.

Endnotes
1.
http://www.dsireusa.org/resources/detailed-summary-maps/
2.
Robert J. Michaels, “A Federal Renewable Electricity Requirement: What’s Not to Like?” The Cato Institute (Nov. 13th,
2009). http://www.cato.org/pubs/pas/pa-627.pdf
3.
Brian Leonard, “Green Jobs Don’t Grow on Trees,” State Budget Solutions, (March 7th, 2012) http://www.statebudgetsolutions.org/doclib/20120306_GreenJobsReport.pdf.
4.
Institute for Energy Research, “Energy Regulation in the States: A Wake-up Call,” Institute for Energy Research,
http://www.instituteforenergyresearch.org/pdf/statereport.pdf
5.
Ibid.
6.
Ibid.
7.
Institute for Energy Research, “The Status of Renewable Electricity Mandates in the States,” Institute for Energy
Research, http://www.instituteforenergyresearch.org/wp-content/uploads/2011/01/IER-RPS-Study-Final.pdf
8.
Ibid.
9.
Ibid.
10.
Ibid.

Americans for Prosperity Foundation’s “Need to Know” informational series explores current events
and recent scholarship on public policy isues from a free-market economics perspective. A full list of
“Need to Know” briefings is available at www.AmericansForProsperityFoundation.org/NeetToKnow.
©2012 Americans for Prosperity Foundation. All Rights Reserved.

AMERICANSFORPROSPERITYFOUNDATION.ORG