Association for Public Policy Analysis & Management

Since the mid 1990s Renewable Portfolio Standards (RPS) have been the policy mechanism through which state governments in the US have developed local energy generation from renewable sources such as solar and wind power. A possible adoption and more importantly, viable implementation and execution of RPS, changes a state’s energy mix in terms of electricity percent derived from renewable energy sources. Among the most frequently stated reasons for wanting to increase this proportion are greater price stability in energy markets, creation of jobs, and reduction of the negative health and environmental costs attributed to fossil fuel energy consumption. The literatures on green economic development and policy diffusion have looked at RPS implementation among states from a variety of lenses, including benefit/cost analysis, impacts of policy change, policy design, innovation and learning. Implementation is only one aspect of RPS proliferation. The collective findings of previous studies conclude that not all states that adopt RPS follow or adhere to guidelines congruently. Our paper examines economic and political factors behind this discretion, generally termed RPS stringency, with a focus on direct market outcomes.

We examine two dependent variables that are proxies for the impact of RPS implementation on energy markets. One is the percent growth of renewable energy in a state’s energy mix. The other is the actual amount of thermal energy units produced - BTUs. We study their growth at the state level from 2004 to 2014 as a function of RPS stringency by developing an ordinal measure based on the equation of Carley and Miller (2012), categorizing states on a scale ranging from no RPS policy in place to ones with strong mandatory RPS directives. As major controls we include proxies for what we call, economic energy intensity, that is: the reliance of a state’s economy on cheap energy for manufacturing, extractive industries and industrial recruitment strategies based on offering low commercial electricity prices. In light of the economic downturn during the “Great Recession”, we look at how such a reliance on labor/energy intensive economic output affects RPS stringency outcomes. Our findings suggest that although BTUs can and do grow substantially, such growth does not lead to a significant change in the energy mix in the majority of American states. We show that such a change is most directly affected by the state of the economy, the political ideology of its government, and its economic dependence on cheap electricity. Our results suggest that relatively wealthier states with relatively high industrial electricity rates had better outcomes in terms of changing their energy mix but only when their governments became more liberal.