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

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  • 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
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

    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;

    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

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