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Why Do States Adopt Renewable Portfolio Standards?: An Empirical Investigation

Thomas P. Lyon and Haitao Yin

Year: 2010
Volume: Volume 31
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol31-No3-7
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Abstract:
Renewable portfolio standards (RPSs) for electricity generation are politically popular in many U.S. states although economic analysis suggests they are not first-best policies. We present an empirical analysis of the political and economic factors that drive state governments to adopt an RPS, and the factors that lead to the inclusion of in-state requirements given the adoption of an RPS. Although advocates claim an RPS will stimulate job growth, we find that states with high unemployment rates are slower to adopt an RPS. Local environmental conditions and preferences have no significant effect on the timing of adoption. Overall, RPS adoption seems to be driven more by political ideology and private interests than by local environmental and employment benefits, raising questions as to when environmental federalism serves the public interest.



The Economic Effects of Interregional Trading of Renewable Energy Certificates in the U.S. WECC

Andres P. Perez, Enzo E. Sauma, Francisco D. Munoz, and Benjamin F. Hobbs

Year: 2016
Volume: Volume 37
Number: Number 4
DOI: 10.5547/01956574.37.4.aper
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Abstract:
In the U.S., individual states enact Renewable Portfolio Standards (RPSs) for renewable electricity production with little coordination. Each state imposes restrictions on the amounts and locations of qualifying renewable generation. Using a co-optimization (transmission and generation) planning model, we quantify the long run economic benefits of allowing flexibility in the trading of Renewable Energy Credits (RECs) among the U.S. states belonging to the Western Electricity Coordinating Council (WECC). We characterize flexibility in terms of the amount and geographic eligibility of out-of-state RECs that can be used to meet a state’s RPS goal. Although more trade would be expected to have economic benefits, neither the size of these benefits nor the effects of such trading on infrastructure investments, CO2 emissions and energy prices have been previously quantified. We find that up to 90% of the economic benefits are captured if approximately 25% of unbundled RECs are allowed to be acquired from out of state. Furthermore, increasing REC trading flexibility does not necessarily result in either higher transmission investment costs or a substantial impact on CO2 emissions. Finally, increasing REC trading flexibility decreases energy prices in some states and increases them elsewhere, while the WECC-wide average energy price decreases. Keywords: Renewable Portfolio Standards, Renewable Energy Credits, Transmission planning, Western Electricity Coordinating Council, Electricity markets



Spatial Dependence in State Renewable Policy: Effects of Renewable Portfolio Standards on Renewable Generation within NERC Regions

Eric Bowen and Donald J. Lacombe

Year: 2017
Volume: Volume 38
Number: Number 3
DOI: 10.5547/01956574.38.3.ebow
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Abstract:
While several studies have examined the effect of renewable portfolio standard laws on renewable generation in states, previous literature has not assessed the potential for spatial dependence in these policies. Using recent spatial panel methods, this paper estimates a number of econometric models to examine the impact of RPS policies when spatial autocorrelation is taken into account. Consistent with previous literature, we find that RPS laws do not have a significant impact on renewable generation within a state. However, we find evidence that state RPS laws have a significant positive impact on the share of renewable generation in the NERC region as a whole. These findings provide evidence that electricity markets are efficiently finding the lowest-cost locations to serve renewable load in states with more stringent RPS laws. In addition, our results suggest that RPS laws may be more effective tools for environmental policy than for economic development.



The Other Renewable: Hydropower Upgrades and Renewable Portfolio Standards

Stein-Erik Fleten, Johannes Mauritzen, and Carl J. Ullrich

Year: 2018
Volume: Volume 39
Number: Number 2
DOI: 10.5547/01956574.39.2.sfle
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Abstract:
A total of 29 U.S. states and the District of Columbia have in place mandatory Renewable Portfolio Standards (RPS) which require that a minimum amount of energy come from renewable resources. We investigate the role of hydropower vis-a-vis other renewables under RPS. Using a Bayesian multilevel model, we find that hydropower plants subject to RPS are more likely to plan upgrades. These planned upgrades appear to be a substitute for solar and wind rather than complementary reserve generation.



Solar Bait: How U.S. States Attract Solar Investments from Large Corporations

Jed J. Cohen, Levan Elbakidze, and Randall Jackson

Year: 2020
Volume: Volume 41
Number: Number 2
DOI: 10.5547/01956574.41.2.jcoh
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Abstract:
Past solar adoption literature has focused primarily on households without significant attention to the potential of commercial properties as sites for solar generation. We examine firms' decisions to install solar panels on their properties using state and firm level data from the U.S. We are interested in the effects of state level characteristics, including policies and regulations, on firm decisions regarding solar investments. We find that state characteristics that influence the return-on-investment from solar installations, most notably solar intensity, are important for commercial adoption decisions. Further, the results suggest that certain state level policies, including solar carve-outs in renewable portfolio standards, financing programs and tax breaks, can incentivize firms to install solar panels. Across different model specifications, we observe that firm installation decisions are correlated with personal electric vehicle ownership rates. This may indicate a 'green' business marketing strategy, whereby firms install solar to improve their social responsibility image.



Consumer Preferences for Solar Energy: A Choice Experiment Study

Jamal Mamkhezri, Jennifer A. Thacher, and Janie M. Chermak

Year: 2020
Volume: Volume 41
Number: Number 5
DOI: 10.5547/01956574.41.5.jmam
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Abstract:
Electricity generation in the United States is rapidly moving towards integrating more renewables into the system due to several factors, including cost competitiveness, consumer preferences, and state and federal policies, such as production and income tax incentives, renewable portfolio standards (RPSs), and state level subsidies for solar energy. While these policies have been researched comprehensively, in this paper we investigate consumer preference and willingness to pay toward renewable energy. Consumer preferences may impact the type of renewable energy utilized, as well as state-determined RPS requirements. We implement a choice experiment survey to gain understanding of consumer preferences and their preference heterogeneity. We conduct the survey in New Mexico, a state with RPS and great potential for renewables, particularly in solar where it ranks third in the U.S. for that potential. Focusing on the consumers of the state�s major utility, our choice experiment considers an increase in renewable energy and preference for different types of solar energy (rooftop solar and solar farm). We control for location heterogeneity (i.e., rural vs. urban), as well as exposure to solar installations. Utilizing multinomial logit and random parameter logit our results suggest respondents support an increased RPS solar requirement and they have a positive marginal willingness to pay (MWTP) for rooftop solar and smart meter installation. These values are impacted by several factors, including location and exposure to solar. We also observe a distance decay effect on respondents� MWTP for different solar plans. For regulators considering additional RPS levels, or utilities considering solar installations, the results provide improved information on consumer preferences, heterogeneity of response, and MWTP for solar energy.



Internal Carbon Financing with Transferable Offsets from Renewable Portfolio Standard

Jongmin Yu and Hyo-Sun Kim

Year: 2021
Volume: Volume 42
Number: Number 2
DOI: 10.5547/01956574.42.2.joyu
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Abstract:
Power generation under the Renewable Portfolio Standard (RPS) can reduce greenhouse gas emissions below the baseline level, so entities may argue to use this attribute to meet the goal of Emission Trading Scheme (ETS). Although these two quantity-based regulation systems have different policy objectives, both mechanisms are implicitly linked by credit conversions depending on credit prices. This paper builds an analytic partial equilibrium model and derives market equilibria in a closed form to demonstrate how each mechanism influences the other by policy instruments such as a renewable requirement, a reduction target in greenhouse gas emission, levels of penalties, or marginal costs. We can compare �direct vs indirect� effectiveness of a regulatory changes across both markets with the case where converting renewable offsets are completed prohibited.





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