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Cost-benefit analysis of various California renewable portfolio standard targets: Is a 33% RPS optimal?

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  • Rouhani, Omid M.
  • Niemeier, Debbie
  • Gao, H. Oliver
  • Bel, Germà

Abstract

Renewable portfolio standards (RPSs׳) require a certain fraction of the electricity generated for a given region be produced from renewable resources. California׳s RPS mandates that by 2020, 33% of the electricity sold in the state must be generated from renewables. Such mandates have important implications for the electricity sector as well as for the whole society. In this paper, we estimate the costs and benefits of varying 2020 California RPS targets on electricity prices, greenhouse gas (GHG) emissions, criteria pollutant emissions, the electricity generation mix, the labor market, renewable investment decisions, and social welfare. We have extended the RPS Calculator model, developed by Energy and Environmental Economics (E3) Inc., to account for distributions of fuel and generation costs, to incorporate demand functions, and to estimate the effects of RPS targets on GHG emissions, criteria pollutant emissions, and employment. The results of our modeling provide the following policy insights: (1) the average 2020 electricity price increases as the RPS target rises, with values ranging between $0.152 and $0.175/kWh (2008 dollars) for the 20% RPS to 50% RPS, respectively; (2) the 33% and 50% RPS targets decrease the GHG emissions by about 17.6 and 35.8 million metric tons of carbon dioxide equivalent (MMTCO2e) relative to the 20% RPS; (3) the GHG emission reduction costs of the RPS options are high ($71–$94 per ton) relative to results from policy options other than RPS or prices that are common in the carbon markets; and (4) a lower target (e.g., a 27% RPS) provides higher social welfare than the 33% RPS (mandate) under low and moderate CO2 social costs (lower than $35/ton); while a higher RPS target (e.g., 50%) is more beneficial when using high CO2 social costs or rapid renewable technology diffusion. However, under all studied scenarios, the mandated 33% RPS for California would not provide the best cost/benefit values among the possible targets and would not maximize the net social benefit objective.

Suggested Citation

  • Rouhani, Omid M. & Niemeier, Debbie & Gao, H. Oliver & Bel, Germà, 2016. "Cost-benefit analysis of various California renewable portfolio standard targets: Is a 33% RPS optimal?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 62(C), pages 1122-1132.
    • Handle: RePEc:eee:rensus:v:62:y:2016:i:c:p:1122-1132
    DOI: 10.1016/j.rser.2016.05.049
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    4. Choi, Gobong & Huh, Sung-Yoon & Heo, Eunnyeong & Lee, Chul-Yong, 2018. "Prices versus quantities: Comparing economic efficiency of feed-in tariff and renewable portfolio standard in promoting renewable electricity generation," Energy Policy, Elsevier, vol. 113(C), pages 239-248.
    5. Rountree, Valerie, 2019. "Nevada's experience with the Renewable Portfolio Standard," Energy Policy, Elsevier, vol. 129(C), pages 279-291.
    6. Rouhani, Omid, 2021. "Transportation Project Evaluation Methods/Approaches- Version 2," MPRA Paper 105729, University Library of Munich, Germany.
    7. Xu, Jiuping & Yang, Guocan & Wang, Fengjuan & Shu, Kejing, 2022. "A provincial renewable portfolio standards-based distribution strategy for both power plant and user: A case study from Guangdong, China," Energy Policy, Elsevier, vol. 165(C).
    8. Fan, Jing-Li & Wang, Jia-Xing & Hu, Jia-Wei & Yang, Yang & Wang, Yu, 2021. "Will China achieve its renewable portfolio standard targets? An analysis from the perspective of supply and demand," Renewable and Sustainable Energy Reviews, Elsevier, vol. 138(C).
    9. Inzunza, Andrés & Muñoz, Francisco D. & Moreno, Rodrigo, 2021. "Measuring the effects of environmental policies on electricity markets risk," Energy Economics, Elsevier, vol. 102(C).
    10. Rouhani, Omid, 2017. "Manage energy/environmental footprints of travel: A proposed solution/methodology," MPRA Paper 83344, University Library of Munich, Germany.
    11. Lee, Sang Ho & Choi, Daewoung Joey & Han, Seung Hun, 2023. "Corporate cash holdings in response to climate risk and policies," Finance Research Letters, Elsevier, vol. 55(PA).
    12. Zhang, Libo & Chen, Changqi & Wang, Qunwei & Zhou, Dequn, 2021. "The impact of feed-in tariff reduction and renewable portfolio standard on the development of distributed photovoltaic generation in China," Energy, Elsevier, vol. 232(C).

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