The rapid growth of renewable portfolio standards poses sobering challenges, including cost and feasibility issues that present obstacles to green advocates’ goals, according to a ratings firm’s report.

The standards on the books in 29 states and the District of Columbia direct load-serving entities to acquire a certain percentage of their power from renewable resources. This forces utilities to shift from least-cost sources toward above-market renewables in unprecedented quantities, Standard and Poor’s said in “The Race for the Green: How Renewable Portfolio Standards Could Affect U.S. Utility Credit Quality.”

In many states, the portfolio targets are significant, with more than half calling for renewables to account for 15 percent or more of a utility’s total energy supply at some future date. While some of these dates are a decade or more away, most states also have interim targets.

RPS is often discussed in “unimpeachable terms” that suggest a sizeable shift toward renewable generation can occur quickly, with little rate impact and minimal disruption to the utility sector, S&P noted. 

But “while it is possible that RPS will prove to be feasible, economic and successful in every state, there is no compelling evidence that suggests this will be the case,” it said.

Jay Morrison, senior regulatory counsel, welcomed the report as a reality check. “We’re pleased that S&P has recognized what NRECA has long argued, that while renewable energy has an important role in our power supply portfolio, mandates requiring rapid integration of large amounts of renewables are unrealistic and certain to raise costs to consumers,” Morrison said..

Utilities unable to achieve RPS requirements on the mandated schedule could be saddled with penalties and an image of being unreceptive to green policy goals.

Looking at current renewables levels underscores the challenges that RPS poses for utilities, S&P pointed out. According to the Energy Information Administration, renewables accounted for about 9 percent of U.S. generation in 2006. But this figure includes conventional hydropower, which not all states consider to be “green.”  If it is excluded, only about 2.4 percent of U.S. generation came from renewables.

Cooperatives receive 11 percent of their power from renewable energy. Of that percentage, 95 percent comes from hydro-power facilities.

According to S&P, to meet 2015 RPS targets, 6,000 megawatts of new renewables would have to come on-line each year. “We question whether this is attainable,” it said.

“We suspect the green marathon will be a difficult race for utilities to run,” the firm concluded.