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Renewable Portfolio Standards: When Do They Lower Energy Prices?

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  • Carolyn Fischer

Abstract

Some studies of renewable portfolio standards find that regulations increase electricity generation costs; others find that the reduced demand for nonrenewable energy sources lowers natural gas prices and that electricity prices follow. This paper presents reasons for why these predictions can vary in the direction as well as the magnitude of their effects. The two driving factors are the elasticity of electricity supply from renewable energy sources relative to nonrenewable ones and the effective stringency of the target. The availability of other baseload generation helps to determine that stringency, and demand elasticity influences only the magnitude of the price effects, not the direction of those effects. The paper also evaluates circumstances under which higher standards can decrease both certificate prices and renewable energy supply. Sensitivity analysis indicates that assumptions about renewable energy supply slopes are more important than those about nonrenewable supplies in predicting the retail price impacts of renewable portfolio standards.

Suggested Citation

  • Carolyn Fischer, 2010. "Renewable Portfolio Standards: When Do They Lower Energy Prices?," The Energy Journal, , vol. 31(1), pages 101-120, January.
    • Handle: RePEc:sae:enejou:v:31:y:2010:i:1:p:101-120
    DOI: 10.5547/ISSN0195-6574-EJ-Vol31-No1-5
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    References listed on IDEAS

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    1. Krichene, Noureddine, 2002. "World crude oil and natural gas: a demand and supply model," Energy Economics, Elsevier, vol. 24(6), pages 557-576, November.
    2. Amundsen, Eirik S. & Mortensen, Jorgen Birk, 2001. "The Danish Green Certificate System: some simple analytical results," Energy Economics, Elsevier, vol. 23(5), pages 489-509, September.
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    Cited by:

    1. World Bank, 2014. "Climate Change Public Expenditure and Institutional Review Sourcebook," World Bank Publications - Reports 37953, The World Bank Group.
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    3. Christoph Böhringer & Carsten Helm, 2026. "The Impact of Sector Coupling on Climate Policy Regulations," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 13(1), pages 115-153.
    4. Allen, Thomas & Boullot, Mathieu & Dées, Stéphane & de Gaye, Annabelle & Lisack, Noëmie & Thubin, Camille & Wegner, Oriane, 2025. "Using short-term scenarios to assess the macroeconomic impacts of climate transition," Energy Economics, Elsevier, vol. 148(C).
    5. Ganhammar, Kajsa, 2025. "Bidding behaviour in interdependent markets for electricity and green certificates," Energy Economics, Elsevier, vol. 150(C).
    6. Fleance George Cocker, 2025. "Mixes of Policy Instruments for the Full Decarbonisation of Energy Systems: A Review," Energies, MDPI, vol. 18(1), pages 1-64, January.

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