IAEE Members and subscribers to The Energy Journal: Please log in to access the full text article or receive discounted pricing for this article.

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

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

Download Executive Summary Purchase ( $25 )



JEL Codes: Q20: Renewable Resources and Conservation: General, Q21: Renewable Resources and Conservation: Demand and Supply; Prices, Q42: Alternative Energy Sources, Q54: Climate; Natural Disasters and Their Management; Global Warming, Q48: Energy: Government Policy

Keywords: Renewable Portfolio Standards, Renewable Energy Credits, Transmission planning, Western Electricity Coordinating Council, Electricity markets

DOI: 10.5547/01956574.37.4.aper

References: Reference information is available for this article. Join IAEE, log in, or purchase the article to view reference data.

Published in Volume 37, Number 4 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.

 

© 2024 International Association for Energy Economics | Privacy Policy | Return Policy