What do renewable portfolio standards cost states? Not a lot, national labs say

Source: Nathanael Massey, E&E reporter • Posted: Thursday, June 12, 2014

For over a decade, state renewable portfolio standards (RPSs) have been a major driver of clean energy in the United States. They’ve fed the growth of solar and wind power even in the absence of federal climate policy and laid some of the foundations on which U.S. EPA’s proposed carbon rule for existing power plants builds.

At the same time, they’ve been subject to attacks in several GOP-led states, inevitably along the lines that they curb economic growth.

So what are the costs of state standards for renewable energy? The National Renewable Energy Laboratory and the Lawrence Berkeley National Laboratory recently crunched the numbers, and their answer is: only about 1 percent of retail electricity rates.

Analyzing RPS costs across the 29 states that employ them is complicated, the report’s authors acknowledge, largely because different accounting methods among regulators and utilities make a standardized approach impossible. The 1 percent figure represents “average incremental compliance costs,” meaning the cost of renewable energy that wouldn’t have been added absent an RPS.

The “average” cost also hides differences among states, whose impacts depend on the stringency of their standards, the overall state of their economy and price declines of renewable energy technology.

Oregon, for example, is estimated to have seen a net benefit from its RPS, as costs of added renewable resources were estimated to be less than the long-run costs of a combined-cycle natural gas plant, said Galen Barbose, a research scientist in the Electricity Markets and Policy Group of Lawrence Berkeley National Laboratory, who helped author the report.

Wisconsin appears to have experienced much higher incremental costs than other states, but this is a result of the state’s depressed economy over the period of study, Barbose said. Load growth remained low, depressing wholesale electricity market prices, so the relative cost of renewables appears higher, he said.

Texas offers another interesting example. There, a boom in wind energy has greatly oversupplied the state with renewable energy relative to the original RPS goal.

On the opposite end of Texas’ spectrum are Northeastern states, where the supply of renewable energy credits has been tightening under the Regional Greenhouse Gas Initiative. That has put upward pressure on the cost of those states’ RPSs.

In the future, “the costs as well as the benefits of RPS compliance will be influenced by a variety of factors, including technology costs, fuel costs and increasing RPS target levels,” Barbose said. But even with projected increases, most RPS costs still fall well below the price caps set by state legislatures.