A major difference between the US and Europe is that US renewable energy policy has been driven by the states, and not the national government. Although states have developed a broad range of renewable energy incentives, such as tax incentives, rebates, loan programmes, public benefits funds, RPS systems have emerged as the primary state-level renewable energy policy tool. By early 2007, twenty-one states and Washington DC had enacted mandatory renewables portfolio standards, and two states had adopted voluntary renewables portfolio goals; rising to 29 states at the end of 2010.
RPS policies were initially developed in the United States in the mid-1990s when electricity market competition began because renewable energy sources were not price competitive with conventional generation. RPS was viewed as a tool for preserving renewable energy support as other renewable energy policies lapsed during restructuring. It was originally intended that utilities would use a market-based system of tradable renewable energy credits (RECs), with each MWh of renewable energy produced earning one REC. Retail electric suppliers have to secure a quantity of RECs sufficient to meet their annual RPS compliance target, usually expressed as a percentage of electricity supplied. This supply and demand creates a market in which RECs are bought, sold, and traded. The REC-based RPS was inspired by US emissions trading regimes.
No two RPS designs are the same and it is difficult to generalise about US RPS performance, complicated by the fact that the designs continue to evolve and change and RPS performance has been variable. Of the thirty-seven mandatory and voluntary renewable energy targets in the United States, nineteen have been significantly revised, twenty one have been newly created in the years since 2003, and others have been subject to proposed modifications in each legislative cycle.
Some states in the Northeast have not performed as expected. Massachusetts has experienced high REC prices when renewable energy supply lagged behind demand. In Texas, however, long-term contracts have emerged in tandem with the short-term market for RECs and they have also improved investor confidence in the Texas RPS market.
