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Incentives/Policies for Renewables & Efficiency

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Renewable Generation Requirement   

Last DSIRE Review: 10/28/2014
Program Overview:
State: Texas
Incentive Type: Renewables Portfolio Standard
Eligible Renewable/Other Technologies: Solar Water Heat, Solar Thermal Electric, Photovoltaics, Landfill Gas, Wind, Biomass, Hydroelectric, Geothermal Electric, Geothermal Heat Pumps, Tidal Energy, Wave Energy, Ocean Thermal
Applicable Sectors: Investor-Owned Utility, Retail Supplier, Municipally-Owned Utilities and Electric Cooperatives that offer customer choice
Standard:5,880 MW by 2015; goal of 10,000 MW by 2025 (already achieved)
Technology Minimum:Non-Wind: Goal of 500 MW by 2015
Credit Trading:Yes (ERCOT)
Credit Transfers Accepted To:ERCOT into NC-RETS
(Refers to tracking system compatibility only, not RPS eligibility. Please see statutes and regulations for information on facility eligibility)
Web Site:
Authority 1:
Date Enacted:
Date Effective:
Public Utility Regulatory Act, TEX. UTIL CODE ANN. ยง 39.904 (PURA)
06/18/1999 (subsequently amended)
Authority 2:
Date Enacted:
Date Effective:
P.U.C. Substantive Rule 25.173
12/16/1999 (subsequently amended)

In 1999, the Public Utility Commission of Texas (PUCT) adopted a rule, Goal for Renewable Energy (P.U.C. Substantive Rule 25.173), that sets the state's renewable portfolio standard (RPS) based on a bill enacted by the Legislature as part of restructuring in Texas (see S.B. 7). Texas’s RPS mandates 5,000 megawatts (MW) of new renewables be installed in Texas by 2015 (for a cumulative net capacity of 5,880 MW of renewable energy, or 5.4% of the state's summer net capacity in 2012) and sets a target of 10,000 MW of renewable energy capacity by 2025. 

According to the annual compliance report prepared by the Electric Reliability Council of Texas (ERCOT), the program administrator for the Texas Renewable Energy Credit Trading Program, Texas surpassed its 2025 target in 2009 and had 13,359 MW of additional renewable energy capacity (12,824 MW of which was wind) in 2013 relative to 1999.

Eligible Technologies

Qualifying renewable energy sources include solar, wind, geothermal, hydroelectric, wave or tidal energy, biomass, or biomass-based waste products, including landfill gas. Qualifying systems are those installed after September 1999.


The RPS applies to “retail entities” in Texas: investor-owned utilities that have not unbundled, retail electric providers in deregulated areas, and municipal utilities and electric cooperatives that offer customer choice. 

Each retail entity in Texas is allocated a share of the mandate based on that retailer’s pro rata share of statewide retail energy sales. The program administrator allocates RPS requirements among retail entities by dividing each entity’s total retail energy sales in Texas by the total retail sales in Texas of all retail entities, and multiplying that percentage by the total statewide RPS requirement for that compliance period.

The schedule of cumulative renewable energy capacity required and the corresponding compliance dates are as follows:

  • 2,280 MW by 1/1/2007
  • 3,272 MW by 1/1/2009
  • 4,264 MW by 1/1/2011
  • 5,256 MW by 1/1/2013
  • 5,880 MW by 1/1/2015
  • 10,000 MW by 1/1//2025 (voluntary target)

To address concerns about the adequacy of the state’s transmission systems, the law also instructs the PUCT to require utilities to add to their transmission systems as necessary to meet the renewable energy goal, and to allow utilities to recover the cost of such projects in their electric rates. As a result, the PUCT approved a competitive renewable energy plan to build transmission to bring renewable energy to the highly populated, metropolitan areas of the state. The Competitive Renewable Energy Zone transmission projects will eventually transmit 18,500 MW of renewable generation.

Large utility customers served by transmission voltage are permitted to opt out of the RPS requirements. Regulations for the "opt-out" provision were adopted by the PUCT effective in January 2009. In 2013, there were 84 transmission voltage customers (unique meter IDs) that had elected to opt-out. (Data such as the customer name and load associated with these opt-outs remains confidential.)


The RPS includes a voluntary target of 500 MW of renewable energy capacity from resources other than wind by 2015. Even though the PUCT has the authority establish alternative compliance payments, the PUCT has declined to do so, meaning that the 500 MW target remains voluntary without any non-compliance penalties.

Credit Multipliers

The PUCT awards a "compliance premium" for each non-wind Renewable Energy Credit (REC) generated after December 31, 2007 (see Compliance section below for information on RECs). Compliance premiums are functionally equivalent to a REC for the RPS compliance purposes and may only be awarded to non-wind facilities that were installed and certified by the PUCT after September 1, 2005. This method effectively doubles the compliance value of electricity generated by renewable resources other than wind. 


The PUCT established a REC trading program that began in July 2001 and will continue through 2019. For each megawatt-hour (MWh) of qualified renewable energy that is metered and verified in Texas, 1 REC is earned. A retail entity must annually retire 1 REC for each 1 MWh requirement it has. An administrative penalty of $50 per MWh has been established for providers that do not meet the RPS requirements.  

A capacity conversion factor (CCF) is used to convert MW goals into MWh requirements for each retail entity. The CCF was administratively set at 35% for the first 2 compliance years, but is now based on the actual performance of the resources in the REC trading program for the previous 2 years. The CCF was 32.2% for compliance years 2012 and 2013.

The program administrator maintains a REC account for program participants to track the production, sale, transfer, purchase, and retirement of RECs. RECs retired (e.g., sold through a voluntary green power program) cannot be counted toward RPS requirements. RECs can be banked for 3 years, and all renewable additions have a minimum of 10 years of credits to recover over-market costs.

Cost Mitigation Measures

The PUCT has the authority to cap the price of RECs and may suspend the standard if necessary to protect the reliability and operation of the grid. 

  Public Information - PUCT
Public Utility Commission of Texas
1701 N. Congress Avenue
P.O. Box 13326
Austin, TX 78711-3326
Phone: (512) 936-7000
Web Site:
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Disclaimer: The information presented on the DSIRE web site provides an unofficial overview of financial incentives and other policies. It does not constitute professional tax advice or other professional financial guidance, and it should not be used as the only source of information when making purchasing decisions, investment decisions or tax decisions, or when executing other binding agreements. Please refer to the individual contact provided below each summary to verify that a specific financial incentive or other policy applies to your project.

While the DSIRE staff strives to provide the best information possible, the DSIRE staff, the N.C. Solar Center, N.C. State University and the Interstate Renewable Energy Council, Inc. make no representations or warranties, either express or implied, concerning the accuracy, completeness, reliability or suitability of the information. The DSIRE staff, the N.C. Solar Center, N.C. State University and the Interstate Renewable Energy Council, Inc. disclaim all liability of any kind arising out of your use or misuse of the information contained or referenced on DSIRE Web pages.

Copyright 2014 - 2015 North Carolina State University, under NREL Subcontract No. XEU-0-99515-01. Permission granted only for personal or educational use, or for use by or on behalf of the U.S. government. North Carolina State University prohibits the unauthorized display, reproduction, sale, and/or distribution of all or portions of the content of the Database of State Incentives for Renewables and Efficiency (DSIRE) without prior, written consent.