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Renewable portfolio standards and electricity prices

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  • Lee, Kangoh

Abstract

Green targets such as renewable portfolio standards have been popular in recent years, and various aspects of green targets have been studied. However, green targets have not always been supported, and one possible reason is that green targets may increase the electricity price. This paper analytically studies the long-run effects of renewable portfolio standards on the electricity price. The analysis shows that the effects depend on the nature of the long-run average cost. With a constant average cost, an increase in the stringency of the standard increases the electricity price. With an increasing average cost, the effects hinge on whether the average cost of green electricity increases faster or slower than that of brown electricity. The paper also considers the difference between the long-run effects and the short-run effects and the difference between the effects of an increase in the stringency of an existing standard and the effects of introducing a standard.

Suggested Citation

  • Lee, Kangoh, 2023. "Renewable portfolio standards and electricity prices," Energy Economics, Elsevier, vol. 126(C).
    • Handle: RePEc:eee:eneeco:v:126:y:2023:i:c:s0140988323004577
    DOI: 10.1016/j.eneco.2023.106959
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    More about this item

    Keywords

    Renewable portfolio standards; Green electricity; Brown electricity; Electricity prices;
    All these keywords.

    JEL classification:

    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • D6 - Microeconomics - - Welfare Economics
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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