State Clean Electricity Standards

Executive summary 

With recent growth in public support and financial incentives for clean energy, states have new opportunities to expand their leadership in the transition to clean electricity. A growing number of states have adopted a clean electricity standard (CES) as a key component of their decarbonization strategies and to spur clean energy investment. This policy is designed to increase the share of electricity generated from resources with zero or near-zero emissions, ultimately reducing greenhouse gas emissions while ensuring reliability and affordability and fostering economic growth. This brief identifies important policy design choices and considerations for the development of a state CES. 

An effective CES includes three key features. First, the CES sets an enforceable requirement to transition to clean electricity. Second, the policy includes a broad range of clean electricity technologies, not exclusively renewable energy. Third, the CES establishes ambitious targets, either for clean electricity or carbon emission reductions. By enabling a diverse set of clean energy resources, states have the flexibility to achieve their clean energy objectives according to their own distinct resources, market conditions, and political considerations. 

States that adopt a CES can expect an array of benefits. 

1. Certainty for Investments: CESs guide long-term resource planning and investment decisions, encouraging greater investments in clean electricity resources. 

2. Consumer Savings: CESs can reduce consumers’ exposure to fossil fuel price volatility, lower operating costs, and attract federal funding that mitigates ratepayer costs. 

3. Economic Growth: CESs can attract investment in clean energy projects, create associated jobs, and increase the flow of federal funding to the state. 

4. Health and Environmental Improvements: CESs can significantly improve air quality and public health, including for communities disproportionately affected by air pollution. 

5. Access to Federal Funding: CESs align with considerable sources of federal funding, enabling states to maximize funding and reduce the cost of pursuing a CES. 

While differences in market structure, existing generation, and natural suitability for certain clean energy resources will yield variation in individual state CES policies, lawmakers can consider common design elements when crafting a CES. 

1. Form of the Standard: A CES can be based on the amount of clean electricity provided to customers or stated as a percentage reduction in greenhouse gas emissions. 

2. Eligible Clean Electricity Sources: Allowing all clean electricity sources, not just renewables, to contribute to achieving the standard furthers reliability and affordability, and leaves room for new technologies to contribute once they reach commercial availability. 

3. Stringency: Policymakers must determine the stringency and timing of the standard, balancing current opportunities with future technological advancements. 

4. Point of Regulation: The entity with the compliance obligation is determined by the point of regulation. In vertically integrated states, for example, the utility has the obligation to meet CES requirements. 

5. Compliance: Typically, the state public utilities commission (PUC) or the state environmental regulator is responsible for compliance and enforcement. 

6. Tracking: A robust system to track the generation and consumption of clean electricity or the required emission reductions facilitates compliance and ensures program integrity, though not all states currently use one. 

7. Requirements for In-State Generation: Policymakers must weigh local economic benefits, job creation, and regulatory authorities while ensuring the free flow of power across an interconnected grid when determining whether to favor in-state generation. 

8. Flexibility for Different Types of Providers: Tailoring the stringency and/or timing of the standards for different types of power providers may result in greater support while encouraging these entities to take advantage of new federal incentives. 

9. Cost Containment and Compliance Flexibility: A technology-neutral CES provides multiple pathways for compliance. Provisions for cost and reliability off-ramps help guard against unintended consequences while ensuring utilities and others deploy new clean sources.  

10. Aligned Renewable Energy Standards: A CES can integrate a new or existing Renewable Portfolio Standard (RPS) or operate in parallel to an RPS to help advance a state’s clean and renewable electricity objectives.   

11. Carveouts and Other Incentives: Carveouts and incentives may be included in a CES to boost deployment of resources, such as distributed generation, battery storage, offshore wind, hydrogen, or geothermal, but they bring tradeoffs. 

12. Advanced Design Features: Advanced CES design features, such as a clean capacity standard or hourly retail sales requirement, incentivize deployment of clean firm and long-duration storage technologies sooner than a typical CES and accelerate emissions reductions.   

A CES builds on existing state and federal clean energy policies, including renewable portfolio standards, cap-and-invest, and Clean Air Act (CAA) regulations by establishing ambitious requirements for the electric power sector that provide both economic and environmental benefits. In addition, recent federal funding opportunities through the Inflation Reduction Act (IRA) and Infrastructure Investment and Jobs Act (IIJA) enable CES implementation through clean energy financial incentives for a wide array of resources. 

CESs provide an effective framework for the transition to clean electricity that can be designed to align with individual state priorities, facilitate economic growth, and leverage federal resources. As states navigate the complex challenges associated with meeting their clean electricity goals, a CES stands out as a dynamic and effective tool for securing a cleaner and more reliable energy future. 

Introduction 

Public polling shows that the majority of Americans prefer to meet their electricity needs with clean energy, and states across the country have enacted policies to increase the amount of clean and renewable electricity provided to homes and businesses.¹ Clean electricity provides new economic opportunities and health benefits for communities, and reducing emissions in the electric power sector has the added benefit of reducing emissions in other sectors as they electrify, including buildings, industry, and transportation. 

Since 2017, more than a dozen states have enacted CESs designed to reduce emissions and ensure that electricity remains reliable and affordable.² A CES differs from an RPS because, while an RPS typically credits only renewables like wind, solar, hydro, and geothermal, a CES incorporates a broader suite of clean energy technologies, such as nuclear, clean hydrogen, and fossil generation with carbon capture.³ A state CES provides the framework for long-term investments and resource planning decisions while reducing air pollution and creating jobs.  

This brief provides policymakers and other interested parties with a summary of CES benefits, describes key policy elements, and highlights considerations for designing a CES to meet state priorities. It also discusses how a CES interacts with other energy policies and how IRA and IIJA provide significant funding resources that make adoption of a state CES even more appealing as each state considers policies to meet its own unique needs. 

What is a CES? 

The first state clean electricity policies, including RPSs, focused almost exclusively on renewable energy, specifically requiring utilities to deploy more wind and solar.⁴ Cumulatively, state RPS policies enabled almost half of renewable energy capacity additions between 2000 and 2023.⁵ Now, more states are adopting technology-inclusive standards that unlock a broad suite of clean electricity resources needed to decarbonize the grid while ensuring adequate clean firm⁶ resources. There are a variety of ways to design a state CES, with the common underlying principle that an increasing share of electricity must come from sources with zero or near-zero carbon emissions.⁷ Importantly, a CES allows each state to achieve clean energy objectives consistent with its own unique needs and resources. 

In addition to setting an ambitious target for more clean electricity, a CES includes two features critical to its success: (1) the transition to clean electricity is a mandatory requirement, not merely an aspirational goal, and (2) the policy is technology inclusive and not limited to renewable energy sources.⁸ A technology-inclusive approach fosters market competition among a diverse set of resources that can reduce emissions while improving reliability and lowering costs. Importantly, a CES provides utilities and other regulated entities with the flexibility to decide which clean electricity resources they will deploy over time to meet the standards. 

The form of the standard and the method of compliance may be dictated by a state’s regulatory environment, but a CES works in states with either a regulated or a deregulated power market by requiring power providers⁹ to deliver an increasing percentage of clean energy. In regulated states, the CES typically applies to vertically integrated utilities that build and own resources and can control the flow of electricity from generation source to the consumer. In deregulated states, the CES can apply to the distribution utility or retail provider of electricity, requiring them to deliver an increasing percentage of clean electricity. The distribution utility or retail provider sources its electricity from clean energy providers, including independent power producers, or purchases renewable/clean energy credits to meet the targets. 

Benefits of a CES  

A CES can provide significant benefits to states and communities. These benefits are the foundation of the policy and political support for a CES. 

Provides certainty for investment and resource planning decisions 

State CESs guide short- and long-term resource planning decisions and provide the framework for regulated entities to decarbonize the power they sell within a state. The technology-inclusive feature enables all types of clean resources to compete and encourages innovation for new technologies to become economically and technically viable. As the mandate for clean electricity reaches higher levels over time, a CES also incentivizes the clean firm generation needed to maintain grid reliability while meeting the standard. Clean firm generation helps ensure that electricity supply matches demand throughout the year while protecting against potential cost increases from overbuilding intermittent sources and associated transmission lines.¹⁰ Multiple analyses indicate that clean firm and long-duration storage technologies are necessary components of least-cost clean electricity systems.¹¹  

A CES also can include advanced design features like a clean capacity standard, which requires the procurement of a specific amount of capacity from clean resources; 24/7 hourly matching, which requires that the CES be met with clean electricity on an hourly rather than annual basis; and clean energy targets for the highest polluting hours of the year. These features are discussed below under “advanced design features.”  

Lowers costs for consumers 

Switching to clean electricity insulates consumers from the price volatility of severe and frequent weather events, natural disasters, global conflicts, and supply chain constraints. Analysis by the Congressional Research Service highlighted the vulnerability that consumers face because of volatile natural gas prices.¹² Additional analyses conclude that transitioning to clean electricity can reduce consumer costs in the long-term, especially considering federal incentives. Resources for the Future (RFF), for example, found that national average retail electricity prices could fall nearly eight percent compared to 2022 modeled prices, or as much as $345 billion nationwide, because of the IRA and other legislative support for clean energy.¹³ 

Promotes economic growth 

The market certainty provided by a CES helps drive investment in clean electricity technologies, boosting the economic and health benefits that come with deployment of these technologies. According to the U.S. Department of Energy’s (DOE) U.S. Energy and Employment Report 2024, clean energy jobs increased in all 50 states and grew nearly five percent nationally in 2023.¹⁴ Nearly 80 percent of new jobs in the power sector came from clean energy technologies.¹⁵ This job growth will increase with expanded deployment of clean energy. Analysis from RMI shows that each state could gain as many as 100,000 new jobs by 2030 if they take full advantage of resources provided by the IRA.¹⁶ An additional study from the BlueGreen Alliance found that the IRA would create nearly five million clean energy jobs over the next decade.¹⁷ 

Improves public health and environmental protection 

Reducing air pollution through policies like a state CES can lead to significant public health and environmental improvements. The U.S. electricity sector produced 1.6 million tons of sulfur dioxide (SO₂) and nitrogen oxide (NO_x) in 2022 and was responsible for a quarter of U.S. greenhouse gas (GHG) emissions in 2022, with nearly 60 percent of U.S. electricity still generated by the burning of fossil fuels.¹⁸ EPA analyses show that transitioning away from unabated fossil electricity generation will provide health benefits by reducing the incidence of premature deaths and asthma attacks.¹⁹ RFF found that emissions reductions attributable to the IRA will avoid up to 1,300 premature deaths and provide as much as $22 billion in benefits.²⁰ By 2030, if states actively pursue the incentives included in the IRA, 300,000 negative health outcomes could be avoided as a co-benefit of reduced GHG emissions.²¹ 

In addition, a CES benefits underserved and disproportionately impacted communities near power plants by reducing conventional air pollutant emissions.²² The ultimate impact of a CES for communities will depend on many factors, including the nature of the state’s electric grid, the community’s location, and the design of the CES. States can adjust the CES policy design elements discussed below to enhance community benefits.  

Attracts federal funding and investment 

Implementing a CES will provide states, localities, the private sector, non-profits, and consumers with greater access to sources of federal funding, such as loans, grants, and tax credits for deploying clean energy technologies. This includes federal funds to offset the capital costs associated with deploying new clean electricity resources, support community benefits, and train workers. These federal resources significantly reduce the cost of decarbonizing the electric power sector in both the short- and long-term. Further discussion of specific federal resources can be found below in the “federal funding opportunities” section of this report. 

Policy design elements and considerations in a CES 

Policymakers consider multiple policy design elements when developing a state CES. While even within the broad framework of a CES, certain elements will remain consistent across states—i.e., a requirement, not a goal; technology inclusive; and ambitious targets—policymakers can consider differences among states, including their energy goals, market structure, existing generation portfolios, grid infrastructure, and natural suitability for particular clean energy resources, when developing a state CES policy design. This section describes considerations for key policy design elements of a CES.  

1. Form of standard 

CESs typically set a standard in one of two ways: (1) requiring a percentage of electricity provided to come from clean sources or (2) requiring percentage reductions in carbon dioxide (CO₂) emissions from a baseline year. Many states have defined their CESs in terms of the percentage of clean electricity provided to customers (e.g., 100% of annual retail electricity sales from clean resources by 2040). In this case, the policy must specify which resources qualify as “clean.” This can limit compliance flexibility if some lower-carbon resources do not qualify as “clean,” which can increase the cost of meeting the standard. In practice, there also may be political pressure to favor some technologies over others, given incumbent interests within a state. 

A CES defined as a reduction in CO₂ emissions may be simpler and provide more compliance flexibility because it does not require the state to specify which resources qualify as “clean,” and it credits lower-emitting technologies (e.g., natural gas with CCS) that may not otherwise qualify. This approach, however, will require some design decisions, such as what year to use as a baseline against which emissions reductions are compared (e.g., 80% reduction in CO₂ from 2005 levels by 2030). North Carolina, for example, requires the utility to achieve a 70% reduction of CO₂ emissions by 2030 and carbon neutrality by 2050.²³ In addition, states will need to consider how to calculate the carbon intensity of generation that uses fuels such as biomass, biogas, and hydrogen.  

2. Eligible clean electricity sources  

A technology-inclusive CES that requires an increasing amount of clean electricity permits a wide array of low- and zero-emission resources to qualify as clean electricity. In addition to renewable energy, hydropower, and geothermal, clean resources may include nuclear power and fossil fuel generators outfitted with high levels of carbon capture. These resources are critical for providing clean, firm power to the grid, especially as electric loads increase with the electrification of other sectors and increased U.S.-based manufacturing. Under an RPS, some clean firm sources do not qualify because they are not renewable. Nuclear energy, however, already plays a significant role as a carbon-free resource, and fossil generation with carbon capture can be used to supply nearly carbon-free electricity. Most, if not all, realistic modeling of net-zero scenarios indicate long-term decarbonization costs are lower with a broader technology solution set.²⁴ 

The presence of existing clean energy technologies, like nuclear or hydropower, within a state also raises the question of whether such non-incremental clean resources should count toward CES compliance or otherwise be accounted for within the CES design. A technology-inclusive CES also makes room for resources that may not be viable at the time of policy adoption but could be important in the future, like fusion and superhot rock geothermal (SHR) technology. Fusion and SHR are not widely available commercial power generation options today, but significant public and private funding for research and development may lead to a transformative breakthrough. Further, states will need to consider eligibility of technologies such as distributed generation or demand-side management to count toward CES compliance targets.²⁵  

3. Stringency 

Regardless of the form of the standard, policymakers must decide on the stringency of interim and final CES targets. The stringency of the standard will strongly influence the rate of clean electricity growth and emissions reductions, which is why the CES should be ambitious. Five states require 100% clean electricity by 2040 (CT, MI, MN, NY, and OR) and another four states require 100% clean electricity by 2045 (CA, NM, VA,²⁶ and WA).  

Policymakers will undoubtedly consider their state’s current generation portfolio when making these important decisions, weighing the cost and benefits associated with varying levels of stringency and the timeline for compliance. Preferably, the CES will set both intermediate and final targets, thereby ensuring near-term progress while providing a long-term market signal. There are existing technologies that can be deployed at scale to decarbonize much of the grid this decade, particularly through wind and solar.²⁷ The final percentages of power sector decarbonization may require new or improved technologies, and a CES provides a predictable policy framework for achieving ambitious clean energy deployment while meeting increasing electric loads.  

4. Point of regulation 

Under a CES, the entity with the compliance obligation is determined by the “point of regulation.” Policymakers may choose to (1) preference clean electricity resource types and tie compliance to retail electricity sales, or (2) regulate in-state generators and link CES compliance to their emissions.²⁸ Several existing state CESs regulate retail sales of electricity.²⁹ This approach provides added flexibility; utilities can use mechanisms like energy efficiency to help meet the standard because a reduction in overall sales reduces the amount of clean energy sales required to achieve the standard. The retail-sales approach also can enhance reliability and reduce costs by utilizing interstate resources to comply. Further, it controls emissions leakage because utilities are responsible for all the emissions associated with the power they sell, even if that power is generated in another state. On the other hand, regulating emissions from in-state generation sets a requirement that can be tracked easily and may align with a state’s overall climate goal if that goal is specifically based on in-state emissions. States should be aware that electricity procured and delivered outside the retail market (e.g., a wholesale grid connected large data center) may be outside the purview of a CES that ties compliance to retail sales. If such resources comprise a significant percentage of a state’s electricity use, then the state could broaden a CES’s applicability to non-retail sales or customers.    

5. Compliance 

In designing a CES, policymakers must clarify the agency or body charged with administration, tracking, and enforcement. This is usually the state PUC or the state environmental regulator. When the PUC administers the CES, utilities generally demonstrate compliance through long-term resource plans (e.g., Integrated Resource Plans [IRPs]), which are reviewed and approved by the PUC. 

Minnesota’s CES, for example, requires the PUC to regularly investigate whether an electric utility complies with the standard. If the PUC finds noncompliance, it may order the electric utility to construct facilities, purchase additional clean energy, purchase renewable energy credits, or engage in other activities to achieve compliance. If an electric utility fails to comply with a PUC order, the commission may impose a significant financial penalty. In Michigan, the CES specifically allows the attorney general or any customer of a municipally-owned electric utility or a cooperative electric utility to commence a civil action for injunctive relief if the utility fails to meet the applicable requirements of the state’s CES.³⁰ 

If the CES is based on emissions reductions, state environmental regulators typically would handle compliance and enforcement as they do for other air pollution control programs that place enforceable limits on emissions and impose penalties for noncompliance. Colorado’s CES requires the state Air Pollution Control Division (APCD) to independently confirm the data used by utilities to demonstrate compliance with its CES. Further, the APCD must allow public access to the data and take public comments about the data prior to the verification of a utility clean energy plan. If the APCD determines an entity has not obtained all the resources necessary to achieve the standard, the Colorado Air Quality Control Commission must adopt rules limiting greenhouse gas emissions from the utility, including by amending the entity’s air permits to ensure it meets the CES.³¹ 

6. Tracking 

The integrity of a state CES depends on accurate data to demonstrate that utilities are meeting the standards, including to ensure that each megawatt of clean electricity is counted only once. To achieve this objective, state clean electricity programs can include a system for the tracking and retirement of clean electricity credits. Tracking systems are designed to ensure there is an accurate accounting of the clean and renewable electricity being provided in the state, either through a credit, certificate, or other method of tracing different sources of electricity. 

Some regional transmission organizations and other organizations already have tracking systems in place that states can use to confirm compliance, without having to build a tracking system from scratch. The PJM interconnection has the Generation Attribute Tracking System (GATS), which tracks specific data from electric generators within their territory to create tradeable renewable energy certificates (RECs).³² The Western Renewable Energy Generation Information System (WREGIS) is an independent, web-based tracking system for RECs that covers the Western interconnection. WREGIS also facilitates REC transfers, enables permanent retirement of RECs for compliance, assists regulators with the implementation of their renewable energy programs, and brings transparency to REC markets. 

7. Requirements for in-state generation  

With an electric grid that is increasingly complex and interconnected across states, regions, and national borders, policymakers must consider how CES policies apply to in-state and out-of-state generation. Some policymakers may prefer in-state generation that provides clean power with the added benefit of supporting local economic development and workforce enhancement. Policymakers should tread cautiously as such a mandate could distort generation patterns if neighboring states offer lower cost clean electricity options. There also are constitutional issues related to interstate commerce to consider, and a restrictive state policy preferencing in-state generation could be struck down by the courts.³³ Ideally, states will coordinate on policies as the grid grows more interdependent because complementary policies across state lines will ensure the greatest economic and environmental benefits from state clean electricity policies.  

8. Flexibility for different types of providers  

Some states have adopted RPS and CES laws that include different requirements and timelines for investor-owned utilities than for public power providers and rural electric cooperatives. Tailoring the stringency and/or timing of the standards recognizes that these power providers operate under a different business model than investor-owned utilities. New Mexico’s 2019 Energy Transition Act requires investor-owned utilities to meet a zero-carbon resource standard by 2045 while the final compliance date for rural electric cooperatives is 2050.³⁴ Importantly, rural electric cooperatives and public power companies recently benefited from the IRA’s “direct pay” provisions, enabling them to unlock clean energy financing in a way they were unable to before as a “non-profit” utility.  

9. Cost containment and compliance flexibility 

Existing state CESs include a variety of mechanisms to ensure affordability and reliability as the grid transitions to clean electricity. Clean electricity standards inherently provide compliance flexibility as they are technology inclusive and allow the regulated entity to choose from a wide variety of commercially available clean electricity resources for compliance. In addition, several state CESs include cost and reliability off-ramps. When triggered, these mechanisms reduce or delay compliance obligations to protect electricity affordability and/or reliability. Typically, they require the regulated entity to show that compliance would exceed a predetermined cost threshold and allow the PUC, or similar entity, to lower or delay the compliance requirement. For example, Minnesota’s CES provides an off-ramp if a utility demonstrates either significantly increased costs or issues related to energy reliability.³⁵  

Also, transferable RECs and other flexibility mechanisms (e.g., energy efficiency and demand response) allow utilities to take advantage of least-cost opportunities for clean electricity expansion and emissions reductions. A CES also could include an alternative compliance payment, requiring the utility to make a payment to the state in lieu of complying with a CES milestone, if the cost of compliance exceeds a specified value.³⁶ For example, Massachusetts established an alternative compliance payment rate of $35 per MWh for compliance years 2022-2050.³⁷ 

10. Aligned renewable portfolio standards  

A state CES may target 100 percent clean electricity from the full range of clean energy resources and operate in parallel to a state renewable portfolio standard (sometimes referred to as a renewable energy standard). A state RPS typically requires electricity suppliers to sell an increasing percentage of renewable energy over time.³⁸ A state creating or updating a CES could, for example, update an existing RPS simultaneously to require higher levels of renewable energy over time or could expand the RPS to a CES by broadening the suite of eligible technologies. For example, Minnesota’s 2023 CES legislation updates the state RPS to require 55 percent of power sold by 2035 to come from renewable sources while also setting a 100 percent clean electricity standard by 2040.³⁹ The original RPS law required only 25 percent renewable energy by 2025. Similarly, Michigan’s recently enacted CES legislation requires all electricity to come from clean electricity sources by 2040 and updates its renewable energy standard with targets of 50 percent renewable energy in 2030 through 2034 and 60 percent in 2035.⁴⁰ 

11. Carveouts and other incentives 

Carveouts and other incentives may be included in a CES to boost deployment of certain resources, such as distributed generation, battery storage, offshore wind, hydrogen, or geothermal. These types of technology-specific incentives can increase deployment of the selected resources. In some cases, the carveout can bring deployment of an innovative resource earlier in time or at higher levels than without the carveout. Carveouts also can support resources that may be important in the future but are not utilized today in a purely competitive marketplace. Illinois, for example, adopted a CES in 2021 with provisions designed to keep its existing nuclear plants online while also providing additional incentives for wind and solar.⁴¹ Carveouts for specific technologies, however, undermine the technology-neutral nature of a CES and may lead to reduced compliance flexibility and higher costs. Policymakers can look to federal programs for incentives to promote development and deployment of specific technologies, in addition to, or instead of, using the state CES for that purpose. 

12. Advanced design features 

Advanced CES design features, such as a clean capacity standard and hourly retail sales requirement, incentivize deployment of clean firm and long-duration storage technologies sooner than a typical CES. An annual sales-based CES does not incentivize developing and commercializing clean firm technologies until the later years of the program when the targets become more stringent, because until then, the standard largely can be met with renewables. For most of the CES timeline, high-emitting generation may be used when renewable output is low or unavailable. This delayed incentive risks ongoing emissions and deferring clean firm technology commercialization and deployment.  

A clean capacity standard requires the procurement of a specific amount of firm capacity from low-emission resources. For example, a clean capacity standard could require a load serving entity to supply a percentage of its peak load with clean firm resources by a specific date. This results in more firm capacity on a timeline sooner than a typical CES because it takes into account a resource’s likely ability to reliably meet demand.⁴² The clean capacity standard could operate in addition to a sales-based or emission-based CES, or a state could pass such a standard even without having a CES. 

An hourly retail sales requirement would incentivize clean electricity supply on an hourly basis. This requirement could increase over time, target the highest polluting hours of the year, and operate instead of or in addition to an annual retail sales CES requirement. For example, a state could require an increasing portion of customer demand to be met with clean electricity generation on an hourly basis, twenty-four hours a day, seven days a week (24/7). In an alternative design, a state could require an increasing minimum percentage of retail sales to come from clean electricity sources during the highest 1,000 marginal emission rate hours of the year. These two hourly sales requirements would accelerate emissions reductions, especially during high co-pollutant emitting hours, and accelerate deployment of clean firm generation and long-duration storage by requiring demand always be met by clean electricity (i.e., times when renewables cannot meet demand) or during the most polluting hours of the year.   

How a CES relates to other energy policies 

A successful CES will efficiently and predictably transition the electric grid to clean energy, setting specific dates to deliver identified amounts of clean electricity. In some cases, states may have, or want, other programs that can work in concert with a CES.  

Renewable portfolio standards 

A CES and an RPS can complement one another. Many states have separate RPS requirements and CES requirements, and each may have been created or updated at different points in time. In some cases, like Michigan, a state may update its RPS through legislation that establishes a CES. An RPS usually does not provide a pathway for a full clean energy transition, effectively leaving a gap once the required amount of renewable energy is achieved. Having a new or existing RPS as well as a CES will ensure a state’s renewable energy goals are met while also ensuring there are clean, firm dispatchable resources to support the increasing renewable energy deployment.  

Cap-and-invest 

Cap-and-invest programs operate differently than CESs in that they limit total emissions across multiple sources, either from a particular industry (e.g., electricity generation like with the Regional Greenhouse Gas Initiative) or across the economy (e.g., California and Washington).⁴³ As cap-and-invest is implemented, the limit on total emissions declines over time. Regulated entities in this structure must surrender an allowance for every ton of CO₂ emitted. In many cases, the allowances are purchased through an auction, with proceeds invested by the state to support further decarbonization, climate adaptation, ratepayer support programs, and equity initiatives in disadvantaged communities. 

Both CES and cap-and-invest policies set long-term requirements that achieve carbon reductions and provide a predictable market signal for clean energy deployment. In addition, they both provide flexible compliance options, including the ability to trade credits to meet requirements. With each policy, the state does not direct the specific types of clean energy sources to build and mostly leaves the decision up to the private sector and energy providers (unless the CES includes carveouts). 

While structured differently, the policies can work in tandem. Benefits of using both policies may include increasing in-state CO₂ and co-pollutant emission reductions, lowering the cost per ton of CO₂ reduced, and achieving near-term reductions in coal generation.⁴⁴ Additional considerations include impacts on out-of-state emissions, existing and new capacity, and customer rates and bills. A cap-and-invest program provides significant auction revenue for investment in state priorities, which is unavailable under a CES. Depending on how revenue is invested, it can lead to lower customer bills through bill assistance and create jobs, including through energy efficiency retrofits.⁴⁵ Impacts will vary by state, so state-specific analyses are useful to assess trade-offs of using a CES, cap-and-invest program, both, or neither. 

Federal regulations 

States may need to consider how a CES would interact with EPA Section 111 rules under the Clean Air Act limiting carbon pollution from new and existing fossil generation. EPA rules may establish emission guidelines for some, but not all, fossil-fuel generators (e.g., current rule excludes existing natural gas plants) and can vary in stringency. A CES can be designed to cover all electricity generation sources in the state and to achieve more ambitious targets than likely will be achieved through Section 111 compliance. Regardless of the presence or stringency of EPA carbon pollution rules for power plants, a CES is an important policy option for states that want to realize the economic, environmental, and health benefits that come with a full transition to clean electricity.  

Federal funding opportunities  

There are significant federal resources available to help states adopt and implement clean energy polices, including a CES. This federal funding makes statewide policies such as a CES significantly less costly and encourages utilities to invest in clean energy resources.⁴⁶ The IRA’s tax credits and financing incentives have created a more favorable landscape for long-term clean energy investments, which can help states achieve their clean energy goals by deploying more clean energy at lower costs.⁴⁷ The IRA uniquely provides at least a 10-year window to utilize many of these incentives. Enacting new state policies, like a CES, can further encourage utilities, developers, and other parties to seek federal funding, bringing additional resources to CES states. A statewide CES and the IRA, working together, provide long-term stability and predictability for a successful clean energy transition while lowering costs for consumers. 

The IRA includes direct federal funding opportunities through new and existing grant and loan programs such as the Innovative Energy Program and Energy Infrastructure Reinvestment Program, which are authorized to provide more than $300 million in loans to eligible clean energy projects.⁴⁸ Additionally, significant tax incentives including the Clean Electricity Production Tax Credit and Clean Electricity Investment Tax Credit provide technology-neutral financial incentives that apply to all generation facilities with zero GHG emissions.⁴⁹ Importantly, the IRA created two new policies that open access to tax credits for entities that previously were left out. Elective (or “direct”) pay and transferability now allow tax exempt entities like state and local governments or non-profit utilities like rural co-ops to directly take advantage of the new tax incentives of the IRA.⁵⁰ This change in the law opens access to the Investment Tax Credit and Production Tax Credit, and potentially has an outsized impact on reducing costs for these entities to achieve their clean energy goals. 

Several new and expanded existing programs are now available for clean energy deployment. The IRA provides a wide array of resources, which include the following: 

• Production Tax Credit for Electricity from Renewables 

• Zero-Emission Nuclear Power Production Credit 

• Advanced Energy Project Credit 

• Clean Fuel Production Credit 

• Credit for Carbon Dioxide Sequestration 

• Clean Hydrogen Production Tax Credit⁵¹ 

The IRA also provides additional bonus or incentive credits if projects are located within defined low-income or energy communities, pay prevailing wages, include qualified apprenticeship programs, and utilize domestic content.⁵²  

The tax credits listed above work with the technology-neutral principle of a CES by applying to a wide range of clean energy technologies. For example, the Production Tax Credit for Electricity from renewables provides a 0.3 cents/kW credit for electricity produced from renewable sources (e.g., PV solar, onshore wind), the Zero-Emission Nuclear Power Production Credit offers a 0.3 cents/kW credit for electricity from qualified nuclear power facilities, and the Credit for Carbon Dioxide Sequestration provides $17/metric ton of CO₂ captured and sequestered at qualifying electricity generating facilities (e.g., natural gas combined cycle).⁵³ Utilities and developers can choose where, what, and how they transition to clean energy with these federal incentives. 

Conclusion 

Public support for cleaner, more affordable, reliable energy continues to grow, and states are in the driver’s seat. Implementing a CES makes sense from economic, health, and environmental standpoints, while providing needed flexibility for each state and the private sector to determine what works best within their jurisdictions. There are well-trodden paths of success for implementing CES policies, and federal resources now exist like never before to help enable this transition. A CES allows states to choose the specific policies, timeline, and path that works best for them. 

---