Do Renewable Portfolio Standards Deliver?

46 Pages Posted: 19 Apr 2019 Last revised: 12 May 2019

See all articles by Michael Greenstone

Michael Greenstone

University of Chicago - Department of Economics; Becker Friedman Institute for Economics; National Bureau of Economic Research (NBER)

Ishan Nath

University of Chicago - Department of Economics

Date Written: May 9, 2019

Abstract

Renewable Portfolio Standards (RPS) are the largest and perhaps most popular climate policy in the US, having been enacted by 29 states and the District of Columbia. Using the most comprehensive panel data set ever compiled on program characteristics and key outcomes, we compare states that did and did not adopt RPS policies, exploiting the substantial differences in timing of adoption. The estimates indicate that 7 years after passage of an RPS program, the required renewable share of generation is 1.8 percentage points higher and average retail electricity prices are 1.3 cents per kWh, or 11% higher; the comparable figures for 12 years after adoption are a 4.2 percentage point increase in renewables’ share and a price increase of 2.0 cents per kWh or 17%. These cost estimates significantly exceed the marginal operational costs of renewables and likely reflect costs that renewables impose on the generation system, including those associated with their intermittency, higher transmission costs, and any stranded asset costs assigned to ratepayers. The estimated reduction in carbon emissions is imprecise, but, together with the price results, indicates that the cost per metric ton of CO2 abated exceeds $115 in all specifications and ranges up to $530, making it least several times larger than conventional estimates of the social cost of carbon. These results do not rule out the possibility that RPS policies could dynamically reduce the cost of abatement in the future by causing improvements in renewable technology.

Keywords: Energy, Environment, Renewable Energy, Carbon Emissions, Carbon Abatement, Climate Change, Electricity

JEL Classification: Q2, Q28, Q5, Q52, Q4, Q42

Suggested Citation

Greenstone, Michael and Nath, Ishan, Do Renewable Portfolio Standards Deliver? (May 9, 2019). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2019-62. Available at SSRN: https://ssrn.com/abstract=3374942 or http://dx.doi.org/10.2139/ssrn.3374942

Michael Greenstone (Contact Author)

University of Chicago - Department of Economics

1126 East 59th Street
Chicago, IL 60637
United States

Becker Friedman Institute for Economics ( email )

Chicago, IL 60637
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ishan Nath

University of Chicago - Department of Economics

1126 East 59th Street
Chicago, IL 60637
United States

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