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Benefits and Impacts of U.S. Renewable Portfolio Standards

Posted by Content Coordinator on Tuesday, January 12th, 2016


Executive Summary

State renewable portfolio standards (RPS) currently exist in 29 states and Washington, D.C. Most of these policies, enacted largely during the late 1990s and 2000s, will reach their terminal targets within the next decade. As states consider extending, eliminating, or otherwise revising existing RPS programs, or developing new ones, increasing attention is being paid to the costs, benefits, and other impacts of these policies.

A prior study (Heeter et al. 2014) and subsequent update (Barbose et al. 2015) in this report series found that RPS compliance costs over the 2010–2013 period were generally equivalent to less than 2% of average statewide retail electricity rates, but varied substantially, with the net cost to utilities and other load-serving entities ranging from -0.4 to 4.8¢ per kilowatt-hour of renewable electricity (kWh-RE).1 In aggregate, total RPS compliance costs represented approximately $1 billion per year, on average, over the 2010–2013 period. The prior study also summarized RPS benefits studies published by individual state regulatory agencies; however, the small number of such studies, and their widely varying methods and scopes, ultimately limited any comparisons across states or generalization beyond the specific studies performed. This dearth of comparable analyses prompted the need for a broader evaluation of RPS program benefits and impacts, relying on a standardized methodology and scope.

The present report follows directly from the preceding study, and is intended to provide the first national-level assessment of the potential benefits and impacts of state RPS programs, using an established and uniform set of methodologies and robust data sets. The analysis focuses specifically on “new” renewable electricity (RE) resources built after RPS enactment and used to meet RPS compliance obligations in 2013—the most recent year for which the necessary data were available. Based on data compiled from regulatory filings and other sources, 98 terawatt-hours (TWh) of new RE generation was used to meet RPS obligations in 2013, representing 2.4% of total U.S. electricity generation in that year. Over the course of 2013–2014, an average of roughly 5,600 megawatts (MW) per year of new RE capacity was built to service RPS requirements.2

Using EPA’s Avoided Emissions and geneRation Tool (AVERT) model to estimate displaced fossil generation, we estimate that new RE used for RPS compliance in 2013 resulted in a 3.6% reduction in total fossil fuel generation. Based on outputs estimated with AVERT and several additional analysis tools, we evaluate potential societal benefits associated with reductions in greenhouse gas (GHG) emissions, air pollution emissions, and water use. We also assess the impacts—describing below the distinction between “impacts” and “benefits”—of state RPS policies on gross jobs and economic development, wholesale electricity prices, and natural gas prices. These benefits and impacts are quantified in both physical and monetary terms where possible. We focus on the aggregate benefits and impacts of all state RPS compliance obligations, presenting results nationally and, where data and methods allow, by region and state; we do not, however, analyze the effects of individual state RPS programs.

Based on the methods described in the full report, new RE resources used to meet RPS compliance obligations in 2013 yielded the following benefits (summarized also in Figure ES-1):

  • GHG Emissions and Climate Change Damage Reductions: Life-cycle GHG emissions were reduced by 59 million metric tons of carbon dioxide-equivalent (CO2e) in 2013, which translates into $2.2 billion of global benefits when applying a “central value” ($37/metric ton of CO2) for the social cost of carbon. These global benefits are equivalent to 2.2¢ per kilowatt-hour (kWh) of new RE (kWh-RE) used to meet 2013 RPS compliance. Benefits estimates span $0.7 billion to $6.3 billion (0.7 to 6.4¢/kWh-RE) across the full range of social cost of carbon estimates considered.
  • Air Pollution Emissions and Human Health and Environmental Benefits: National emissions of sulfur dioxide (SO2), nitrogen oxides (NOx), and particulate matter 2.5 (PM2.5) were reduced by 77,400, 43,900, and 4,800 metric tons in 2013, respectively. We estimate that these reductions—using a range of approaches—produced health and environmental benefits equal to $5.2 billion, on average. These benefits are equivalent to 5.3¢/kWh of new RE used for 2013 RPS compliance. Across the full range of approaches considered, health and environmental benefits span $2.6 billion to $9.9 billion (2.6 to 10.1¢/kWh-RE). The largest health benefits accrue to the eastern half of the country, especially in the Mid-Atlantic, Great Lakes, Northeast, and Texas.
  • Water Use Reduction: National water withdrawals and consumption in 2013 were reduced by 830 billion gallons and 27 billion gallons, respectively, equivalent to savings of 8,420 gallons of withdrawal and 270 gallons of consumption per megawatt-hour (MWh) of new RE used for 2013 RPS compliance.3 These reductions amount to 2% of both total 2013 power sector water withdrawals and consumption. Water use reductions vary seasonally and come predominantly from freshwater sources, with reductions varying regionally due to geographic differences in power plant fuel types and cooling system configurations. The largest withdrawal and consumption reductions were in California and Texas, respectively, demonstrating the benefits RPS policies can have in water-stressed regions.

In addition to the set of societal benefits described above, we estimate three other impacts associated with new RE used to meet RPS compliance obligations in 2013. We distinguish these impacts from societal costs and benefits, because the direction of impact (positive or negative) varies by market participant. These impacts might thus best be considered resource transfers, and the present study does not assess their net, economy-wide effects. Given that context, we estimate that new RE resources used to meet RPS compliance obligations in 2013 produced the following impacts:

  • Gross Jobs and Economic Development: Renewable generation used to meet 2013 RPS compliance obligations, along with average annual RPS-related capacity additions in 2013 and 2014, supported nearly 200,000 U.S.-based gross jobs in 2013 and drove over $20 billion in gross domestic product (GDP), primarily based on NREL’s Jobs and Economic Development Impacts (JEDI) suite of models. More than 30,000 of these gross domestic jobs are related to ongoing operations and maintenance (O&M), while 170,000 gross jobs are related to construction activity. Solar photovoltaic (PV) installations account for the majority of construction jobs, while established wind plants account for the majority of O&M jobs. California had the most significant renewable capacity expansion and generation associated with RPS compliance obligations, and thus had more of the associated onsite RE jobs than any other state.
  • Wholesale Electricity Price Reductions: Renewable generation used to meet 2013 RPS compliance obligations potentially shifted the supply curve for electric power, reducing wholesale electricity prices and yielding an estimated $0.0 to $1.2 billion in savings to electricity consumers across the United States. These consumer savings are equivalent to 0.0 to 1.2¢/kWh of new RE used to meet 2013 RPS compliance. The wide range of estimates reflects bounding assumptions about how the effects of renewable generation on wholesale spot market prices decline over time and the extent to which consumers are exposed to those prices.
  • Natural Gas Price Reductions: Renewable generation used to meet 2013 RPS compliance obligations reduced natural gas demand by an estimated 0.42 quads (422 million MMBtu). This reduction lowered average natural gas prices by an estimated 5¢ to 14¢/MMBtu in 2013, resulting in consumer savings ranging from $1.3 billion to $3.7 billion. These consumer savings are equivalent to 1.3¢ to 3.7¢/kWh of new RE used to meet 2013 RPS compliance. The range in estimates reflects bounding assumptions about when RPS-induced reductions in natural gas demand begin to affect prices.

Figure ES-1. Benefits and impacts of new RE used to meet 2013 RPS compliance

Download full version (PDF): A Retrospective Analysis of the Benefits and Impacts of U.S. Renewable Portfolio Standards

About the National Renewable Energy Laboratory

“At the National Renewable Energy Laboratory (NREL), we focus on creative answers to today’s energy challenges. From fundamental science and energy analysis to validating new products for the commercial market, NREL researchers are dedicated to transforming the way the world uses energy.  With more than 35 years of successful innovation in energy efficiency and renewable energy, today our discoveries provide sustainable alternatives for powering our homes, businesses, and our transportation system.”

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