Establishing an RPS is probably the most effective way for a state to increase the contribution of renewable energy sources to a state’s overall energy use. The basic framework involves setting a requirement that state utilities obtain a certain percentage or output (measured in kilowatt-hours) of their power supply from renewable energy sources. For example, if a state had an RPS of 5% for a certain year, a utility that produces 1,000,000 kilowatt-hours of power that year would have to obtain 50,000 kilowatt-hours from renewable energy sources.   

Typically, states allow utilities several ways to meet the RPS requirements and have created what are called renewable energy credits, or REC's, which can be bought and traded among utilities.  An REC is simply a certification that a specified amount (i.e. 1 kilowatt-hour) of renewable energy has been produced. 

Hence, utilities have several options when attempting to meet the RPS requirements.  They can produce renewable energy themselves to obtain the amount of credits they need, they can buy renewable energy from another producer, or they can purchase credits by themselves on the market.  The methods used to obtain the credits are left strictly to the utility and may depend on multitude of factors. 

Generally, states require that renewable energy and credits be purchased in-state to ensure that the benefits of renewable power production are enjoyed by state residents.  For example, if a utility operates wind farm in Wisconsin but sells a certain quantity of renewable power or credits to a utility in Michigan, those credits would not be counted under the Wisconsin RPS. 

Because renewable energy production involves significant investments over extended periods of time, RPS requirements will usually start out small and be ratcheted up on a yearly basis towards a future goal.  For example, a state might currently be producing 5% of their energy from renewable sources, but have a goal of 15%. To ease the transition to greater renewable energy production, they might require utilities to increase their renewable energy production steadily over the course of 10 or 15 years.  Additionally, the state could give the utilities a grace period between when the law is passed and when it takes affect.  This allows utilities to explore all of their compliance options and gives them time to come up with the least costly approach, hopefully minimizing utility objections and energy price fluctuations.  

The definition of what constitutes a renewable energy source generally includes solar power, wind power, many different forms of biomass energy production, geothermal power, tidal power in coastal locations, and hydropower.  The inclusion of hydropower is a matter of some contention because while hydropower is renewable in the classic sense, large-scale hydropower projects have the potential to be very environmentally destructive.  This gives rise to a debate over whether hydropower is truly environmentally friendly and hence "green."  Additionally, hydropower can also be seen as an established, conventional source of power in the sense that it already plays a major role in power production in many states.  If one goal of an RPS is to support the adoption of new, green, unconventional technologies, it is difficult to see how promoting hydropower coincides with this goal.  However, most states still include some form of hydropower production in their RPS, but there are often limitations on the size of eligible projects.

A 2003 proposal (House Bill 4970) by Representative Chris Kolb (D) of Washtenaw County suggested a Michigan RPS with a goal of 7% by 2006 and 15% by 2013.  However, this particular proposal seems unrealistic and unlikely to be adopted in the near future.  Most utilities in Michigan have stated their opposition to such a proposal because they fear it would result in price increases, claiming it creates an "artificial" demand for renewable energy. In addition, those who already have green power programs (see Green Power Markets) feel that an RPS simply amounts to a subsidy funded by customers who do not support renewable power generation, else they would already be participating in such programs. On the other hand, supporters of renewable power generation contend that the demand for conventional power production (i.e. coal-fired power plants) is "artificial" because the environmental damage caused by such production is not reflected in the price of power.  That is, if the true cost to society from conventional power production, in the form of both the costs of production and the environmental costs, was charged to consumers the price of conventional power production would be much higher. 

There are currently 22 states which have some form of an RPS, including several like Minnesota and Wisconsin in the Great Lakes region.  Goals vary from state to state, and the different technologies eligible under each state RPS can vary as well (see the Definition of Renewable Energy Resources above). For detailed descriptions of different state RPS programs as well as other state incentive programs, consult the Database for State Incentives for Renewable Energy (DSIRE).