Panel Paper: State Renewable Portfolio Standards (RPS) and Renewable Energy Diversification

Thursday, November 6, 2014 : 1:40 PM
Apache (Convention Center)

*Names in bold indicate Presenter

Jung Eun Kim, University of Hong Kong and Tian Tang, Florida State University
US electricity sector accounts for approximately 40 % of the nation’s CO2 emissions and 30% of its total greenhouse gas emissions. In response to the global climate change and energy security concerns, increasing the share of renewable energy in electricity supply has been proposed as a promising solution. State governments have taken initiative to use a variety of policy instruments to incentivize investments in renewable energy technologies. One of the most prevalent policy instruments used by most states is the renewable portfolio standards (RPS), which mandates that a percentage of a state’s overall electricity generation must come from renewable sources. Major policy objectives of RPS include increasing the deployment of renewable energy, diversifying state’s electricity generation portfolio, reduce state’s reliance on fossil fuels and reduce carbon emissions etc. However, the design of RPS and its effectiveness vary across states (Wiser et al., 2008; Holt et al., 2008).

In this research, we are going to examine how the state-level RPS policies are designed and implemented, and whether the different RPS designs affect multiple goals of renewable energy technology development across states. To be more specific, this research uses state level data and asks whether different RPS policy designs affect the level of diversity in the state’s renewable energy technology portfolio.

Since the traditional RPS program is not necessarily designed to promote renewable energy diversity, there has been no empirical research on the effects of RPS on renewable energy diversity. However, an increasing number of states have adopted “set-asides” or “REC multiplier” to provide support for renewable energy technologies that are currently have higher cost than wind. The set-asides design requires that some fraction of the RPS must be met with electricity generated from favored renewable resources. For an example, 12 states have adopted set-asides for solar according to the statistics in 2007 (Wiser and Barbose, 2008). In California, for example, the contracts for renewable energy projects signed between 2002 and 2007 by the state’s IOUs and POUs have 58% of the total capacity for wind, 23% for solar, 12% for geothermal, and 7% biomass, which  demonstrates a greater level of diversity than historical trends. Due to the technology tiers that exist in a number of states, a growing amount of solar energy is being motivated by the RPS set aside targets (Wiser et al, 2008). We expect this study contributes to the literature by examining the diversity of the state’s renewable energy technology selection rather than only focusing on the level of adoption. We also expect this research informs policy makers whether different policy designs have given the right incentives to the private sector to achieve one of the long-term goals of renewable energy policies – the promotion of diversity in renewable energy technologies.