How Can Renewable Portfolio Standards Lower Electricity Prices?
AbstractSome studies of renewable portfolio standards find that regulations increase generation costs; others find that reduced demand for nonrenewable energy sources lowers natural gas prices and that electricity prices follow. This paper presents reasoning for why these predictions can vary in the direction as well as in the magnitude of their effects. The driving factors are the relative elasticities of electricity supply from both fossil and renewable energy sources. The availability of other baseload generation is another factor, whereas demand elasticity influences only the magnitude of the price effects, not the direction of those effects.
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Bibliographic InfoPaper provided by Resources For the Future in its series Discussion Papers with number dp-06-20.
Date of creation: 05 May 2006
Date of revision:
portfolio standards; natural gas; renewable energy; climate change;
Find related papers by JEL classification:
- Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
- Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-05-13 (All new papers)
- NEP-ENE-2006-05-13 (Energy Economics)
- NEP-PBE-2006-05-13 (Public Economics)
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