IDEAS home Printed from https://ideas.repec.org/a/eee/resene/v75y2023ics0928765523000489.html
   My bibliography  Save this article

Causal effects of Renewable Portfolio Standards on renewable investments and generation: The role of heterogeneity and dynamics

Author

Listed:
  • Deschenes, Olivier
  • Malloy, Christopher
  • McDonald, Gavin

Abstract

Despite a 30-year long history, Renewable Portfolio Standards (RPS) remain controversial and debates continue to surround their efficacy in leading the low-carbon transition in the electricity sector. Contributing to the ongoing debates is the lack of definitive causal evidence on their impact on investments in renewable capacity and generation. This paper provides the most detailed analysis to date of the impact of RPSs on renewable electricity capacity investments and on generation. We use state-level data from 1990–2019 and recent econometric methods designed to address dynamic and heterogeneous treatment effects in a staggered adoption panel data design. We find that, on average, RPS policies increase wind generation capacity by 600–1200 MW, a 44% increase, but have no significant effect on investments in solar capacity. Additionally, we demonstrate that RPSs have slow dynamic effects: most of the capacity additions occur 5 years after RPS implementation. Estimates for wind and solar electricity generation mimic those for capacity investments. We also find similar results using an alternate treatment definition that allows states to meet their RPS requirements with pre-existing renewable generation and renewable generation from nearby states.

Suggested Citation

  • Deschenes, Olivier & Malloy, Christopher & McDonald, Gavin, 2023. "Causal effects of Renewable Portfolio Standards on renewable investments and generation: The role of heterogeneity and dynamics," Resource and Energy Economics, Elsevier, vol. 75(C).
    • Handle: RePEc:eee:resene:v:75:y:2023:i:c:s0928765523000489
    DOI: 10.1016/j.reseneeco.2023.101393
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0928765523000489
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.reseneeco.2023.101393?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Alex Hollingsworth & Ivan Rudik, 2019. "External Impacts of Local Energy Policy: The Case of Renewable Portfolio Standards," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 6(1), pages 187-213.
    2. Clément de Chaisemartin & Xavier D'Haultfœuille, 2020. "Two-Way Fixed Effects Estimators with Heterogeneous Treatment Effects," American Economic Review, American Economic Association, vol. 110(9), pages 2964-2996, September.
    3. Gireesh Shrimali, Gabriel Chan, Steffen Jenner, Felix Groba and Joe Indvik, 2015. "Evaluating Renewable Portfolio Standards for In-State Renewable Deployment: Accounting for Policy Heterogeneity," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
    4. Eli Ben‐Michael & Avi Feller & Jesse Rothstein, 2022. "Synthetic controls with staggered adoption," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 84(2), pages 351-381, April.
    5. Kline Patrick & Santos Andres, 2012. "A Score Based Approach to Wild Bootstrap Inference," Journal of Econometric Methods, De Gruyter, vol. 1(1), pages 23-41, August.
    6. Bento, Antonio M. & Garg, Teevrat & Kaffine, Daniel, 2018. "Emissions reductions or green booms? General equilibrium effects of a renewable portfolio standard," Journal of Environmental Economics and Management, Elsevier, vol. 90(C), pages 78-100.
    7. Victor Chernozhukov & Iván Fernández‐Val & Ye Luo, 2018. "The Sorted Effects Method: Discovering Heterogeneous Effects Beyond Their Averages," Econometrica, Econometric Society, vol. 86(6), pages 1911-1938, November.
    8. Shakeeb Khan & Elie Tamer, 2010. "Irregular Identification, Support Conditions, and Inverse Weight Estimation," Econometrica, Econometric Society, vol. 78(6), pages 2021-2042, November.
    9. Sant’Anna, Pedro H.C. & Zhao, Jun, 2020. "Doubly robust difference-in-differences estimators," Journal of Econometrics, Elsevier, vol. 219(1), pages 101-122.
    10. Ann Wolverton & Ron Shadbegian & Wayne Gray, 2022. "The U.S. Manufacturing Sector’s Response to Higher Electricity Prices: Evidence from State-Level Renewable Portfolio Standards," Working Papers 22-47, Center for Economic Studies, U.S. Census Bureau.
    11. Upton, Gregory B. & Snyder, Brian F., 2017. "Funding renewable energy: An analysis of renewable portfolio standards," Energy Economics, Elsevier, vol. 66(C), pages 205-216.
    12. Thomas P. Lyon, 2016. "Drivers and Impacts of Renewable Portfolio Standards," Annual Review of Resource Economics, Annual Reviews, vol. 8(1), pages 141-155, October.
    13. Sun, Liyang & Abraham, Sarah, 2021. "Estimating dynamic treatment effects in event studies with heterogeneous treatment effects," Journal of Econometrics, Elsevier, vol. 225(2), pages 175-199.
    14. Brantly Callaway & Andrew Goodman-Bacon & Pedro H. C. Sant'Anna, 2021. "Difference-in-Differences with a Continuous Treatment," Papers 2107.02637, arXiv.org, revised Jan 2024.
    15. A. Belloni & V. Chernozhukov & I. Fernández‐Val & C. Hansen, 2017. "Program Evaluation and Causal Inference With High‐Dimensional Data," Econometrica, Econometric Society, vol. 85, pages 233-298, January.
    16. Callaway, Brantly & Sant’Anna, Pedro H.C., 2021. "Difference-in-Differences with multiple time periods," Journal of Econometrics, Elsevier, vol. 225(2), pages 200-230.
    17. Rachel Feldman and Arik Levinson, 2023. "Renewable Portfolio Standards," The Energy Journal, International Association for Energy Economics, vol. 0(Number 5).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Roth, Jonathan & Sant’Anna, Pedro H.C. & Bilinski, Alyssa & Poe, John, 2023. "What’s trending in difference-in-differences? A synthesis of the recent econometrics literature," Journal of Econometrics, Elsevier, vol. 235(2), pages 2218-2244.
    2. Callaway, Brantly & Sant’Anna, Pedro H.C., 2021. "Difference-in-Differences with multiple time periods," Journal of Econometrics, Elsevier, vol. 225(2), pages 200-230.
    3. Don Fullerton & Chi L. Ta, 2022. "What Determines Effectiveness of Renewable Energy Standards? General Equilibrium Analytical Model and Empirical Analysis," CESifo Working Paper Series 9565, CESifo.
    4. Vinish Shrestha, 2022. "Revisiting the Effects of Cigarette Taxes on Smoking Outcomes," Working Papers 2022-02, Towson University, Department of Economics, revised Oct 2022.
    5. Isabelle Chort & Berk Öktem, 2023. "Agricultural shocks, coping policies and deforestation: evidence from the coffee leaf rust epidemic in mexico," Working Papers hal-03715600, HAL.
    6. Xin Nie & Jianxian Wu & Han Wang & Weijuan Li & Chengdao Huang & Lihua Li, 2022. "Contributing to carbon peak: Estimating the causal impact of eco‐industrial parks on low‐carbon development in China," Journal of Industrial Ecology, Yale University, vol. 26(4), pages 1578-1593, August.
    7. Dmitry Arkhangelsky & Guido Imbens, 2023. "Causal Models for Longitudinal and Panel Data: A Survey," Papers 2311.15458, arXiv.org, revised Mar 2024.
    8. Cl'ement de Chaisemartin & Xavier D'Haultfoeuille & F'elix Pasquier & Gonzalo Vazquez-Bare, 2022. "Difference-in-Differences Estimators for Treatments Continuously Distributed at Every Period," Papers 2201.06898, arXiv.org, revised Dec 2023.
    9. Jha, Chandan Kumar & Joshi, Swarup, 2023. "Municipal bankruptcies and crime," International Review of Financial Analysis, Elsevier, vol. 89(C).
    10. Goodman-Bacon, Andrew, 2021. "Difference-in-differences with variation in treatment timing," Journal of Econometrics, Elsevier, vol. 225(2), pages 254-277.
    11. Kim, Woojin, 2022. "Television and American consumerism," Journal of Public Economics, Elsevier, vol. 208(C).
    12. Albanese, Andrea & Nieto, Adrián & Tatsiramos, Konstantinos, 2022. "Job Location Decisions and the Effect of Children on the Employment Gender Gap," GLO Discussion Paper Series 1113, Global Labor Organization (GLO).
    13. Lin, Lihua & Zhang, Zhengyu, 2022. "Interpreting the coefficients in dynamic two-way fixed effects regressions with time-varying covariates," Economics Letters, Elsevier, vol. 216(C).
    14. Clément de Chaisemartin & Xavier D’Haultfœuille, 2023. "Two-way fixed effects and differences-in-differences with heterogeneous treatment effects: a survey," The Econometrics Journal, Royal Economic Society, vol. 26(3), pages 1-30.
    15. Marin Skidmore & Tihitina Andarge & Jeremy Foltz, 2023. "Effectiveness of local regulations on nonpoint source pollution: Evidence from Wisconsin dairy farms," American Journal of Agricultural Economics, John Wiley & Sons, vol. 105(5), pages 1333-1364, October.
    16. Michelle Marcus & Pedro H. C. Sant’Anna, 2021. "The Role of Parallel Trends in Event Study Settings: An Application to Environmental Economics," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 8(2), pages 235-275.
    17. Kyunghoon Ban & D'esir'e K'edagni, 2022. "Robust Difference-in-differences Models," Papers 2211.06710, arXiv.org, revised Aug 2023.
    18. Blemings, Benjamin & Zhang, Peilu & Neill, Clinton L., 2023. "Where is the value? The impacts of sow gestation crate laws on pork supply and consumer value perceptions," Food Policy, Elsevier, vol. 117(C).
    19. Liyang Sun & Jesse M. Shapiro, 2022. "A Linear Panel Model with Heterogeneous Coefficients and Variation in Exposure," Journal of Economic Perspectives, American Economic Association, vol. 36(4), pages 193-204, Fall.
    20. Mareen Bastiaans & Robert Dur & Anne C. Gielen, 2023. "Activating the Long-Term Inactive: Labor Market and Mental Health Effects," Tinbergen Institute Discussion Papers 23-003/V, Tinbergen Institute.

    More about this item

    Keywords

    Renewables; Renewable portfolio standards; Electricity sector; Causal inference;
    All these keywords.

    JEL classification:

    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:resene:v:75:y:2023:i:c:s0928765523000489. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505569 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.