Re-Assessing RPS Critical To Address Energy Affordability Challenges

States in the PJM region should reassess renewable portfolio standards as part of the solution to rising electricity costs. In Pennsylvania and Washington, D.C., restrictive rules limiting which renewable energy credits can qualify have created artificial scarcity and sharply increased compliance costs for utilities and consumers. In Pennsylvania, Tier II credit prices rose roughly fourteenfold between 2020 and 2025, while D.C. solar credits recently traded at nearly 15 times the price of broader PJM renewable credits. States should consider opening renewable credit markets across the PJM region, clearly disclosing RPS costs on customer bills, and reviewing whether renewable mandates are actually encouraging new generation or simply increasing the price of existing resources.

It’s getting harder to ignore the electricity affordability crisis or write it off as a partisan issue.

On June 2, Mayor Muriel Bowser of Washington, D.C., warned the city council that the District’s solar renewable energy credits are the most expensive in the country, adding about $20 to each electric bill. She said that without changes, this fee could double by 2029. When the mayor of Washington, D.C. voices concerns about rising renewable energy costs, lawmakers elsewhere should pay attention.

Most factors that affect electricity bills, such as data center demand, capacity shortages, fuel costs, and transmission limits, take years of investment to fix. But the cost of the renewable portfolio standard is set by state policy. The RPS and the rules that limit which generators can sell compliance credits are decided entirely by state policymakers.

Renewable portfolio standards usually require electricity suppliers to get renewable or alternative energy credits for a certain portion of their sales. Each credit stands for the environmental benefits of one megawatt-hour of qualifying generation and can be traded separately from the electricity.

In a regional system like PJM, which serves 65 million people in 13 Midwestern and Northeastern states, broad eligibility allows suppliers to find the lowest-cost credits to meet RPS requirements. In contrast, closed-border rules block qualified out-of-state supply, forcing suppliers to pay more for credits.

Limiting where utilities can get qualifying renewable energy creates scarcity and does not reflect a true free market.

These artificial limits come at a high cost. PJM’s independent market monitor found that state RPS compliance costs in the region totaled about $14.6 billion from 2014 to 2023, with $2.9 billion spent in 2023 alone.

Pennsylvania’s state policy is a clear example of renewable energy policy that has gone off track. Before 2020, electricity suppliers could use Tier II alternative energy credits from qualifying facilities anywhere in PJM. But Act 114 limited most Tier II eligibility to facilities inside Pennsylvania, with only a few exceptions, while keeping the Tier II requirement at 10 percent of retail sales.

The Pennsylvania Public Utility Commission reports that the average Tier II credit price went from $1.92 in 2020 to $26.92 in 2025, which is about a fourteenfold increase. Spending on Tier II compliance rose from $3.6 million to over $367 million, more than a hundredfold jump. Total reported Alternative Energy Portfolio Standards compliance costs were nearly $702 million in 2025.

These numbers are from the state regulator, not from an industry study. The PUC found that Act 114 created a tariff barrier around the regional electricity market and shifted the costs to consumers.

Supporters of the policy say higher credit prices are needed to encourage new in-state generation. However, the PUC reports that renewable generation’s share of Pennsylvania’s electricity stayed around 4 percent from 2013 to 2024, even though the compliance requirement rose to 18 percent.

In Washington, D.C., the Public Service Commission says RPS compliance costs went from $65 million in 2020 to $272.6 million in 2025. The independent PJM market monitor found that D.C. solar credits averaged $410.72 in the first quarter of 2026, compared to $27.97 for the broader Tier I credit across PJM. That’s a nearly 15-fold premium.

These higher costs are the result of scarcity created by policy, not because the electricity itself is different.

The PJM market monitor found that the D.C. solar credit implied a carbon price of about $840 per metric ton, while the Regional Greenhouse Gas Initiative (RGGI) market price was $27.55 per metric ton. Any climate program that pays more than 30 times a neighboring market’s price for a ton of carbon reduction should have to show exceptional benefits.

Many of these cost increases are hidden in bundled generation charges instead of being listed separately on customer bills.

Federal regulators see the same problem. FERC Chair Laura Swett has called out states that use "ratepayers as piggy banks to subsidize programs that have nothing to do with energy," and in July testimony before the Senate Energy and Natural Resources Committee, she said the Commission’s recent show cause orders impose "the most detailed cost transparency measures" it has ever required, giving state regulators clearer tools to defend household budgets and ultimately for consumers to know more about what they are really paying for in their monthly bills.

But what else can be done to address protectionist state energy policies and lower electricity costs for customers?

First, states should open their markets. The PJM market monitor recommends letting suppliers buy credits across the whole regional grid to increase competition and transparency and lower costs for consumers.

Second, costs from these specific policies should be clearly listed on customers’ bills. RPS and solar carve-out expenses should appear as separate line items, like state taxes and delivery charges, so consumers can better understand their electricity bills.

Finally, states should review how effective their renewable energy mandates are. Programs that only change the price of existing generation should be redesigned or removed.

Affordability is key to ensuring environmental and energy policies are durable. Mandates that depend on artificial scarcity, hidden charges, and captive customers will eventually lose public support.