IDEAS home Printed from https://ideas.repec.org/a/eee/rensus/v106y2019icp79-96.html
   My bibliography  Save this article

The economic geography of variable renewable energy and impacts of trade formulations for renewable mandates

Author

Listed:
  • Bistline, John
  • Santen, Nidhi
  • Young, David

Abstract

This paper examines electricity market responses to flexibility provisions in prospective renewable energy mandates and the geographical incidence of impacts. Using an integrated model of electric sector investments and operations with detailed spatial and temporal resolutions, the analysis demonstrates how renewable mandate trade formulations for electricity and renewable energy certificates can materially impact power sector outcomes like capacity planning decisions, compliance costs, CO2 emissions, and the regional distribution of renewable development. There are substantial welfare gains, up to $84 billion in present value terms through 2050, from inter-regional electricity and permit trade (and costs of market fragmentation), but the degree and direction of impact depend on region-specific considerations. Allowing permit trade encourages greater deployment of wind and solar in regions with favorable investment environments and resources, but renewable capacity additions are appreciable in all regions since diminishing marginal returns and transmission constraints limit the benefits of overdevelopment in any single region. Model results suggest that regions will likely find it beneficial to generate at least half of their renewable mandate compliance obligations through in-state resources and that most of the economic benefits from inter-regional REC exchange can be captured with a relatively modest amount of trading flexibility. Trade flexibility is shown to have minimal impacts on CO2 emissions leakage nationally.

Suggested Citation

  • Bistline, John & Santen, Nidhi & Young, David, 2019. "The economic geography of variable renewable energy and impacts of trade formulations for renewable mandates," Renewable and Sustainable Energy Reviews, Elsevier, vol. 106(C), pages 79-96.
    • Handle: RePEc:eee:rensus:v:106:y:2019:i:c:p:79-96
    DOI: 10.1016/j.rser.2019.02.026
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1364032119301194
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.rser.2019.02.026?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 search for a different version of it.

    References listed on IDEAS

    as
    1. Defever, Fabrice & Imbruno, Michele & Kneller, Richard, 2020. "Trade liberalization, input intermediaries and firm productivity: Evidence from China," Journal of International Economics, Elsevier, vol. 126(C).
    2. Richard Schmalensee & Robert N. Stavins, 2017. "Lessons Learned from Three Decades of Experience with Cap and Trade," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 11(1), pages 59-79.
    3. Young, David & Bistline, John, 2018. "The costs and value of renewable portfolio standards in meeting decarbonization goals," Energy Economics, Elsevier, vol. 73(C), pages 337-351.
    4. Hitaj, Claudia, 2013. "Wind power development in the United States," Journal of Environmental Economics and Management, Elsevier, vol. 65(3), pages 394-410.
    5. 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.
    6. Yin, Haitao & Powers, Nicholas, 2010. "Do state renewable portfolio standards promote in-state renewable generation[glottal stop]," Energy Policy, Elsevier, vol. 38(2), pages 1140-1149, February.
    7. Thomas P. Lyon & Haitao Yin, 2010. "Why Do States Adopt Renewable Portfolio Standards?: An Empirical Investigation," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 133-158.
    8. Fischer, Carolyn & Newell, Richard G., 2008. "Environmental and technology policies for climate mitigation," Journal of Environmental Economics and Management, Elsevier, vol. 55(2), pages 142-162, March.
    9. Spyros Galanis, 2021. "Speculative trade and the value of public information," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 23(1), pages 53-68, February.
    10. Menz, Fredric C. & Vachon, Stephan, 2006. "The effectiveness of different policy regimes for promoting wind power: Experiences from the states," Energy Policy, Elsevier, vol. 34(14), pages 1786-1796, September.
    11. Palmer, Karen & Burtraw, Dallas, 2005. "Cost-effectiveness of renewable electricity policies," Energy Economics, Elsevier, vol. 27(6), pages 873-894, November.
    12. Lion Hirth, 2015. "The Optimal Share of Variable Renewables: How the Variability of Wind and Solar Power affects their Welfare-optimal Deployment," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    13. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    14. Elmar Kriegler & John Weyant & Geoffrey Blanford & Volker Krey & Leon Clarke & Jae Edmonds & Allen Fawcett & Gunnar Luderer & Keywan Riahi & Richard Richels & Steven Rose & Massimo Tavoni & Detlef Vuu, 2014. "The role of technology for achieving climate policy objectives: overview of the EMF 27 study on global technology and climate policy strategies," Climatic Change, Springer, vol. 123(3), pages 353-367, April.
    15. Martin Drechsler & Jonas Egerer & Martin Lange & Frank Masurowski & Jürgen Meyerhoff & Malte Oehlmann, 2017. "Efficient and equitable spatial allocation of renewable power plants at the country scale," Nature Energy, Nature, vol. 2(9), pages 1-9, September.
    16. Fell, Harrison & Linn, Joshua, 2013. "Renewable electricity policies, heterogeneity, and cost effectiveness," Journal of Environmental Economics and Management, Elsevier, vol. 66(3), pages 688-707.
    17. 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.
    18. Eric Bowen & Donald J. Lacombe, 2017. "Spatial Dependence in State Renewable Policy: Effects of Renewable Portfolio Standards on Renewable Generation within NERC Regions," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    19. Geoffrey J. Blanford, James H. Merrick, John E.T. Bistline, and David T. Young, 2018. "Simulating Annual Variation in Load, Wind, and Solar by Representative Hour Selection," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    20. Abrell, Jan & Rausch, Sebastian, 2016. "Cross-country electricity trade, renewable energy and European transmission infrastructure policy," Journal of Environmental Economics and Management, Elsevier, vol. 79(C), pages 87-113.
    21. Lion Hirth, 2013. "The Market Value of Variable Renewables. The Effect of Solar and Wind Power Variability on their Relative Price," RSCAS Working Papers 2013/36, European University Institute.
    22. Chan, H. Ron & Chupp, B. Andrew & Cropper, Maureen L. & Muller, Nicholas Z., 2018. "The impact of trading on the costs and benefits of the Acid Rain Program," Journal of Environmental Economics and Management, Elsevier, vol. 88(C), pages 180-209.
    23. Bistline, John E., 2017. "Economic and technical challenges of flexible operations under large-scale variable renewable deployment," Energy Economics, Elsevier, vol. 64(C), pages 363-372.
    24. Allen A. Fawcett, Leon C. Clarke, Sebastian Rausch, and John P. Weyant, 2014. "Overview of EMF 24 Policy Scenarios," The Energy Journal, International Association for Energy Economics, vol. 0(Special I).
    25. Paul L. Joskow, 2011. "Comparing the Costs of Intermittent and Dispatchable Electricity Generating Technologies," American Economic Review, American Economic Association, vol. 101(3), pages 238-241, May.
    26. Fell, Harrison & Maniloff, Peter, 2018. "Leakage in regional environmental policy: The case of the regional greenhouse gas initiative," Journal of Environmental Economics and Management, Elsevier, vol. 87(C), pages 1-23.
    27. Sinha, Avik, 2017. "Inequality of renewable energy generation across OECD countries: A note," Renewable and Sustainable Energy Reviews, Elsevier, vol. 79(C), pages 9-14.
    28. Fullerton, Don & Karney, Daniel H., 2018. "Multiple pollutants, co-benefits, and suboptimal environmental policies," Journal of Environmental Economics and Management, Elsevier, vol. 87(C), pages 52-71.
    29. Robert Mendelsohn & Nicholas Z Muller, 2013. "Using Marginal Damages in Environmental Policy: A Study of Air Pollution in the United States," Books, American Enterprise Institute, number 10375, September.
    30. Hirth, Lion, 2013. "The market value of variable renewables," Energy Economics, Elsevier, vol. 38(C), pages 218-236.
    31. Galanis, S. & Ioannou, C. & Kotronis, S., 2019. "Information Aggregation Under Ambiguity: Theory and Experimental Evidence," Working Papers 20/05, Department of Economics, City University London.
    32. Gautam Gowrisankaran & Stanley S. Reynolds & Mario Samano, 2016. "Intermittency and the Value of Renewable Energy," Journal of Political Economy, University of Chicago Press, vol. 124(4), pages 1187-1234.
    33. Mack, Joel H. & Gianvecchio, Natasha & Campopiano, Marc T. & M. Logan, Suzanne, 2011. "All RECs Are Local: How In-State Generation Requirements Adversely Affect Development of a Robust REC Market," The Electricity Journal, Elsevier, vol. 24(4), pages 8-25, May.
    34. Paul Levine & Joseph Pearlman & Stephen Wright & Bo Yang, 2019. "Information, VARs and DSGE Models," School of Economics Discussion Papers 1619, School of Economics, University of Surrey.
    35. Mai, Trieu & Bistline, John & Sun, Yinong & Cole, Wesley & Marcy, Cara & Namovicz, Chris & Young, David, 2018. "The role of input assumptions and model structures in projections of variable renewable energy: A multi-model perspective of the U.S. electricity system," Energy Economics, Elsevier, vol. 76(C), pages 313-324.
    36. Leah C. Stokes & Christopher Warshaw, 2017. "Renewable energy policy design and framing influence public support in the United States," Nature Energy, Nature, vol. 2(8), pages 1-6, August.
    37. Joseph Cullen, 2013. "Measuring the Environmental Benefits of Wind-Generated Electricity," American Economic Journal: Economic Policy, American Economic Association, vol. 5(4), pages 107-133, November.
    38. Harrison Fell & Daniel T. Kaffine, 2018. "The Fall of Coal: Joint Impacts of Fuel Prices and Renewables on Generation and Emissions," American Economic Journal: Economic Policy, American Economic Association, vol. 10(2), pages 90-116, May.
    39. Mamageishvili, A. & Schlegel, J. C., 2019. "Optimal Smart Contracts with Costly Verification," Working Papers 19/13, Department of Economics, City University London.
    40. John P. Weyant, 2008. "A Critique of the Stern Review's Mitigation Cost Analyses and Integrated Assessment," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 2(1), pages 77-93, Winter.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Avraam, Charalampos & Bistline, John E.T. & Brown, Maxwell & Vaillancourt, Kathleen & Siddiqui, Sauleh, 2021. "North American natural gas market and infrastructure developments under different mechanisms of renewable policy coordination," Energy Policy, Elsevier, vol. 148(PB).
    2. Lopez, Neil Stephen A. & Foo, Dominic C.Y. & Tan, Raymond R., 2021. "Optimizing regional electricity trading with Carbon Emissions Pinch Analysis," Energy, Elsevier, vol. 237(C).
    3. Bistline, John E.T. & Brown, Maxwell & Siddiqui, Sauleh A. & Vaillancourt, Kathleen, 2020. "Electric sector impacts of renewable policy coordination: A multi-model study of the North American energy system," Energy Policy, Elsevier, vol. 145(C).
    4. Bistline, John E.T. & Young, David T., 2020. "Emissions impacts of future battery storage deployment on regional power systems," Applied Energy, Elsevier, vol. 264(C).
    5. Edmonds, James & Nichols, Christopher & Adamantiades, Misha & Bistline, John & Huster, Jonathan & Iyer, Gokul & Johnson, Nils & Patel, Pralit & Showalter, Sharon & Victor, Nadja & Waldhoff, Stephanie , 2020. "Could congressionally mandated incentives lead to deployment of large-scale CO2 capture, facilities for enhanced oil recovery CO2 markets and geologic CO2 storage?," Energy Policy, Elsevier, vol. 146(C).
    6. Bistline, John & Blanford, Geoffrey & Mai, Trieu & Merrick, James, 2021. "Modeling variable renewable energy and storage in the power sector," Energy Policy, Elsevier, vol. 156(C).
    7. Guo, Wen & Liu, Xiaorui, 2022. "Market fragmentation of energy resource prices and green total factor energy efficiency in China," Resources Policy, Elsevier, vol. 76(C).
    8. Dranka, Géremi Gilson & Ferreira, Paula & Vaz, A. Ismael F., 2021. "A review of co-optimization approaches for operational and planning problems in the energy sector," Applied Energy, Elsevier, vol. 304(C).
    9. Mukhopadhyay, Bineeta & Das, Debapriya, 2020. "Multi-objective dynamic and static reconfiguration with optimized allocation of PV-DG and battery energy storage system," Renewable and Sustainable Energy Reviews, Elsevier, vol. 124(C).
    10. Hu, Bo & Zhou, P., 2022. "Can the renewable power consumption guarantee mechanism help activate China's power trading market?," Energy, Elsevier, vol. 253(C).
    11. Kałuża, Tomasz & Hämmerling, Mateusz & Zawadzki, Paweł & Czekała, Wojciech & Kasperek, Robert & Sojka, Mariusz & Mokwa, Marian & Ptak, Mariusz & Szkudlarek, Arkadiusz & Czechlowski, Mirosław & Dach, J, 2022. "The hydropower sector in Poland: Historical development and current status," Renewable and Sustainable Energy Reviews, Elsevier, vol. 158(C).
    12. Guillermo Valencia Ochoa & Jose Nunez Alvarez & Carlos Acevedo, 2019. "Research Evolution on Renewable Energies Resources from 2007 to 2017: A Comparative Study on Solar, Geothermal, Wind and Biomass Energy," International Journal of Energy Economics and Policy, Econjournals, vol. 9(6), pages 242-253.

    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. Bistline, John E.T. & Brown, Maxwell & Siddiqui, Sauleh A. & Vaillancourt, Kathleen, 2020. "Electric sector impacts of renewable policy coordination: A multi-model study of the North American energy system," Energy Policy, Elsevier, vol. 145(C).
    2. 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.
    3. Avraam, Charalampos & Bistline, John E.T. & Brown, Maxwell & Vaillancourt, Kathleen & Siddiqui, Sauleh, 2021. "North American natural gas market and infrastructure developments under different mechanisms of renewable policy coordination," Energy Policy, Elsevier, vol. 148(PB).
    4. Bistline, John & Blanford, Geoffrey & Mai, Trieu & Merrick, James, 2021. "Modeling variable renewable energy and storage in the power sector," Energy Policy, Elsevier, vol. 156(C).
    5. Bistline, John E.T. & Blanford, Geoffrey J., 2020. "Value of technology in the U.S. electric power sector: Impacts of full portfolios and technological change on the costs of meeting decarbonization goals," Energy Economics, Elsevier, vol. 86(C).
    6. Bistline, John E.T. & Young, David T., 2020. "Emissions impacts of future battery storage deployment on regional power systems," Applied Energy, Elsevier, vol. 264(C).
    7. Helm, Carsten & Mier, Mathias, 2019. "On the efficient market diffusion of intermittent renewable energies," Energy Economics, Elsevier, vol. 80(C), pages 812-830.
    8. Mai, Trieu & Bistline, John & Sun, Yinong & Cole, Wesley & Marcy, Cara & Namovicz, Chris & Young, David, 2018. "The role of input assumptions and model structures in projections of variable renewable energy: A multi-model perspective of the U.S. electricity system," Energy Economics, Elsevier, vol. 76(C), pages 313-324.
    9. Acevedo, Giancarlo & Bernales, Alejandro & Flores, Andrés & Inzunza, Andrés & Moreno, Rodrigo, 2021. "The effect of environmental policies on risk reductions in energy generation," Journal of Economic Dynamics and Control, Elsevier, vol. 126(C).
    10. Fa, Kwok Sau, 2020. "A class of nonlinear Langevin equation with the drift and diffusion coefficients separable in time and space driven by different noises," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 545(C).
    11. Keppler, Jan Horst & Quemin, Simon & Saguan, Marcelo, 2022. "Why the sustainable provision of low-carbon electricity needs hybrid markets," Energy Policy, Elsevier, vol. 171(C).
    12. Liu, Changqing & He, Yigang & Peng, Guanghan, 2019. "The stabilization effect of self-delayed flux integral for two-lane lattice hydrodynamic model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 535(C).
    13. Torres-Vargas, G. & Fossion, R. & Méndez-Bermúdez, J.A., 2020. "Normal mode analysis of spectra of random networks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 545(C).
    14. Kowalski, A.M. & Plastino, A., 2019. "A nonlinear matter-field Hamiltonian analyzed with Renyi and Tsallis statistics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 535(C).
    15. James H. Merrick & John E. T. Bistline & Geoffrey J. Blanford, 2021. "On representation of energy storage in electricity planning models," Papers 2105.03707, arXiv.org, revised May 2021.
    16. Cebreiros, Florencia & Clavijo, Leonardo & Boix, Elzeario & Ferrari, Mario Daniel & Lareo, Claudia, 2020. "Integrated valorization of eucalyptus sawdust within a biorefinery approach by autohydrolysis and organosolv pretreatments," Renewable Energy, Elsevier, vol. 149(C), pages 115-127.
    17. Algaba, Encarnación & Béal, Sylvain & Fragnelli, Vito & Llorca, Natividad & Sánchez-Soriano, Joaquin, 2019. "Relationship between labeled network games and other cooperative games arising from attributes situations," Economics Letters, Elsevier, vol. 185(C).
    18. Ruhnau, Oliver & Hirth, Lion & Praktiknjo, Aaron, 2020. "Heating with wind: Economics of heat pumps and variable renewables," Energy Economics, Elsevier, vol. 92(C).
    19. Nunes, Maria Eugênia Silva & de Mello Silva, Érica & Martins, Paulo H.L. & Florencio, João & Plascak, J.A., 2020. "Dynamics of the one-dimensional isotropic Heisenberg model with Dzyaloshinskii–Moryia interaction in a random transverse field," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 541(C).
    20. Karen Maguire & Abdul Munasib, 2013. "Do Renewables Portfolio Standards Increase Electricity Prices? A Synthetic Control Approach," Economics Working Paper Series 1403, Oklahoma State University, Department of Economics and Legal Studies in Business, revised Aug 2013.

    More about this item

    Keywords

    F18; L94; Q28; Q42; Q48; Variable renewable energy; Trade; Market integration; Policy flexibility; Multiregional models; Spatial economics; Renewable energy certificates;
    All these keywords.

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

    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:rensus:v:106:y:2019:i:c:p:79-96. 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/wps/find/journaldescription.cws_home/600126/description#description .

    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.