Download We find that the cost of compliance is higher for an RPS than

THE REGIONAL IMPACTS OF A NATIOANL RENEWABLE PORTFOLIO
STANDARD
Audrey J. Lee, U.S. Department of Energy, 202-586-7039, [email protected]
Thomas Alfstad, Brookhaven National Laboratory, 202-646-5235, [email protected]
Peter Whitman, U.S. Department of Energy, 202-586-1010, [email protected]
Overview
While the U.S. does not yet have a national climate policy to regulate greenhouse gas emissions, many states have moved ahead
with policies that are meant to complement climate objectives, such as renewable portfolio standards (RPS). Currently, 33 states
have an RPS, which obligate electricity suppliers to include a minimum share of eligible renewable resources in their power sales.
On the Federal level, the Obama-Biden New Energy for America plan promotes an RPS where 10 percent of our electricity is
produced from renewable sources by 2012, and 25 percent by 2025. In Congress, Chairman Bingaman on the Senate Energy and
Natural Resources Committee may soon announce a proposal for a national 20% renewable electricity standard (RES) by 2020.
This paper examines the effectiveness of a national RPS with trading to reduce greenhouse gas emissions and further discusses the
regional implications of such a policy. Renewable resources are not evenly distributed, so if utilities across the nation are required
to meet a given share of their customers’ demand with renewable energy then there is a risk that some regions become long term
buyers of Renewable Electricity Credits (REC). This will lead to a stream of transfer payments from renewable-resource-poor to
renewable-resource-rich regions, which in turn may jeopardize the political attractiveness of such a national RPS. This paper aims
to identify and quantify these imbalances.
Methods
We take a scenario-based approach to our analysis of a national RPS. The effectiveness of an RPS is compared to other climate
policies and we study the regional balances. Sensitivity analysis is performed on some of the most important parameters such as
resource eligibility, actual target levels, and compliance mechanisms.
A ten-region MARKAL (MARKet ALlocation) model of the US energy system is used as the analytical tool for this study.
MARKAL-based models are partial equilibrium models that incorporate a description of the physical energy systems and are
solved as a cost-minimization problem.
Results
We find that the cost of compliance is higher for an RPS than for a carbon-cap policy achieving the same emission reduction. By
limiting the policy to a given sector and a particular set of technologies, lower cost mitigation options are not fully utilized.
Nevertheless, the federal RPS still leads to major reductions in emissions of greenhouse gases.
A federal RPS applied uniformly across the US will lead to significant differences in market penetration of renewables for different
regions. Regions rich in renewable resources will develop them beyond the levels mandated and sell excess REC to regions that
are not as well endowed.
Conclusions
While less efficient as a climate policy than a carbon-cap or a carbon tax, a national RPS would still lead to significant reductions
in carbon emissions. RPS policies have proven popular in states and are more prevalent than state climate policies. This is partly
because taxes and caps are often less popular than subsidies or mandates, such as the RPS, that promote specific industries.
However, because renewable resources are unevenly distributed across the nation, some regions will become REC buyers and bear
some of the additional costs of the national RPS without the economic and job creation benefits. This inequity among regions
suggests that more inclusive policies that do not pick technologies should also be considered to reach environmental goals. For
example, a broad clean energy portfolio standard could also admit other low carbon technologies including energy efficiency,
nuclear, and fossil fuel generation with carbon capture and storage, and should be evaluated.
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