Do Renewable Portfolio Standards Deliver Cost-Effective Carbon Abatement?
Bottom Line: Renewable Portfolio Standards (RPSs) require a certain amount of electricity in a state to be derived from renewable technologies, such as wind and solar power. At varying levels, 29 states and the District of Columbia currently have a RPS for the goal of reducing greenhouse gas emissions to abate climate change. After putting together the findings on electricity prices and emissions, the evidence indicates that RPS programs achieve CO2 abatement but at a very high cost. This equates to $30 billion in extra costs for a state’s electricity consumers within just seven years of RPS adoption.
The U.S. has had great difficulty developing significant and enduring climate policy.
One major exception has been renewable portfolio standards (RPS) that require a certain percentage of electricity supply in a state to be met by generation from sources designated as “renewable,” which can actually not include large hydro facilities, for instance.
The first RPS was passed in Iowa in 1991 and RPS policies have been enacted in 29 states and the District of Columbia.
Despite the popularity of these policies, there has been little systematic study on RPS’ impacts on electricity prices, carbon emissions, or the cost per ton of avoided CO2 at even the modest levels of stringency that have prevailed to date.
The studies of the RPS subject have generally only captured the direct costs of renewable energy production.
Specifically, they fail to capture several costs that renewables impose on the electricity market that are socialized and must be borne by some combination of distribution companies, generators, ratepayers, and potentially taxpayers.
These costs include:
- the costs associated with renewables’ intermittency that requires other sources to fill in when the sun or wind resources are unavailable
- the higher transmission costs associated with transporting renewable electricity from its most advantageous geographic locations to population centers
- payments to compensate electricity generators that have reduced utilization or are prematurely closed
The present study concludes that after putting together the findings on electricity prices and emissions RPS programs achieve CO2 abatement at a relatively high cost.
For example, after just seven years from adoption, a RPS adds $30 billion in extra costs for the state’s electricity consumers.
Read the full study here.
Renewable Portfolio Standards by State (as of 2020)
- A Renewable Portfolio Standard (RPS) policies’ statutory requirements for renewable generation frequently overstate their net impact on generation.
- Electricity prices increase substantially after RPS adoption, adding $30 billion in extra costs for a state's consumers in just seven years.
- The estimates do indicate, however, that passage of RPS programs substantially reduce carbon emissions.
- Putting together the findings on electricity prices and emissions show that RPS programs achieve CO2 abatement at a relatively high cost.
Read the full study here.