State RPS Policies: Projected Costs & Benefits for the U.S.

While state-level renewables portfolio standards (RPS) have become important drivers for renewable energy in the U.S., the adoption of these policies often hinges on debates over expected costs and benefits. Many state-level studies have been conducted to forecast these potential impacts, but the methods and assumptions used by these studies vary.

A new report from Lawrence Berkeley National Laboratory synthesizes and analyzes the results and methodologies of previous state RPS cost-benefit projections. “Weighing the Costs and Benefits of State Renewables Portfolio Standards: A Comparative Analysis of State-Level Policy Impact Projections” aims to provide methodological guidance for future state RPS impact projections. Introduction Renewables portfolio standards (RPS) require that a minimum amount of renewable energy is included in each retail electricity supplier’s portfolio of electricity resources. They do so by establishing numeric targets for renewable energy supply, which generally increase over time. To date, 21 states in the U.S., along with the District of Columbia, have adopted such standards. Additional states, such as Illinois and Vermont, have established voluntary standards, while still others are considering enacting obligatory RPS policies. RPS policies have also been developed in several other countries, and have been considered (but not adopted) by the U.S. Congress. A well-designed RPS should generally encourage competition among renewable developers and provide incentives to electricity suppliers to meet their renewable purchase obligations in a least cost fashion. In part to accommodate diverse goals and regional differences, however, state RPS policies differ in their design. The definition of eligible renewable projects and the amount of renewable energy that is required varies. In many — but not all — jurisdictions, electricity suppliers can meet their RPS obligations through the use of tradable renewable energy certificates (RECs); in theory, the use of RECs increases compliance flexibility and may therefore reduce overall compliance costs. RPS policies in some states provide for resource tiers or credit multipliers, which are designed to promote diversity among renewable technologies. State RPS policies also vary in their scope of application (e.g., whether publicly owned utilities are required to comply), and in their use of compliance flexibility and non-compliance penalties. Opponents of state RPS policies frequently claim that these policies are not worth implementing because the incremental costs of renewable energy may lead to substantial increases in electricity prices. State RPS proponents often counter these claims by presenting evidence of the modest cost of renewable energy resources and touting the macroeconomic and social benefits of state RPS policies. In many states, RPS stakeholders — often proponents or neutral parties, but possibly opponents as well — have authored or commissioned studies to analyze the potential costs and benefits of such policies. This report summarizes the results and methodologies of 28 state RPS cost-impact analyses completed since 1998 in the United States. Though a number of additional national- and regional-level cost-impact studies have also been performed, we limit our survey to state- or utility-level analyses to reflect the present reality in which no national or regional-level RPS policy exists in the United States. Because our primary aim is to compare studies that report the projected impacts of state RPS policies on retail electricity rates, we also exclude state RPS analyses that do not report such impacts but that instead focus exclusively or primarily on projections of macroeconomic effects (e.g., effects on employment and gross state output). We similarly exclude studies that model state RPS policies as part of a larger portfolio of climate change or clean energy policies, unless RPS-specific costs are provided. Finally, we exclude two otherwise-relevant cost studies that were published after our analysis had already begun. The primary purpose of this report is to summarize, in as consistent a fashion as possible, the results of these 28 cost-impact analyses, including both the projected costs and benefits of state and utility-level RPS programs. In so doing, we hope to illustrate the expected bounds of likely impacts. We also highlight and, in some cases, critique the various methods used by these studies, with a goal of identifying possible areas of improvement for future state RPS analyses.

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