How Does Restructuring of Electricity Generation Affect Renewable Power?

Abstract

As states and the federal government seek to advance renewable energy deployment, one possible policy tool is restructuring of electricity generation regulation in order to increase competition. There have been a wide range of generation restructuring measures at both the state and federal level in the electric power sector since the 1990s. In this Article, we compile a comprehensive dataset of different types of generation restructuring policies, including divestiture, procurement, siting, and interconnection requirements at the state level as well as the establishment of regional grid governance entities. Leveraging variation in timing of state-level policy adoption, creation and roll-out of regional grid governance entities, we show that restructuring efforts on divestiture and siting
overall matter a lot. While the absolute magnitude of the changes from these policies appears small (increasing renewable electricity capacity by 1.7-2.5%), they represent very large – and statistically significant – increases from the low baseline level of renewable capacity in our measured time period. For instance, changes to state regulations for siting generation facilities increase renewable energy capacity levels in a state by 50%. Development of regional transmission organizations and independent system operators have had smaller positive direct impacts, and amplifies the effects of other renewable policies. By contrast, we find little impacts for generation restructuring related to interconnection and procurement, and we find little impact of public versus private ownership in determining renewable investment. Our results show that some forms of generation markets can advance renewable energy development, but that the public versus private status of a utility system is unlikely to be a key driver of outcomes.

Keywords: electricity, restructuring, renewable energy

JEL Classification: Q48