Association for Public Policy Analysis & Management

The majority of U.S. states have some form of a renewable portfolio standard, as designed to diversify state electricity portfolios through renewable energy development. Over the nearly two decades of experience with state RPS policies, we have observed immense growth in renewable energy markets, particularly in wind energy. We have also witnessed significant policy reinvention over time, as states have continued to modify the design of their policies in order to target other energy sources such as solar energy; increase the flexibility through which obligated entities can comply with this mandate; and ensure costs of compliance remain modest. This analysis provides context for these changes, and subsequently analyzes how various policy design features relate to different renewable energy market outcomes.

 Using state panel data from 1990 through 2015 as well as primary data gathered via semi-structured interviews with industry and government expert informants, we find that policy design matters. It matters not simply whether a policy is in place, or how stringent that policy is, but also whether a state’s RPS includes other energy resources as RPS-eligible, how many years the policy has been in place, what type of planning process the state uses to oversee the RPS, and how geographically restricted is the state’s credit trading program. We confirm these results through a variety of robustness checks.

 This study is a value-added to the energy policy literature because it is the first to analyze how different states’ policy designs lead to different market outcomes. If, for example, a state is interested in developing a robust solar industry, how might they design their RPS policy to best encourage such solar developments? Or, as another example, are there certain design features that states should avoid entirely, since they attenuate the positive effects of the policy? The findings from this study addresses these questions, and also lends broader insights about the importance of policy design in energy markets. It also plays well to the APPAM conference theme, with a mixed methods approach and two sources of data, as well as a focus on valid measurement and data accuracy.