What Determines Effectiveness of Renewable Energy Standards? General Equilibrium Analytical Model and Empirical Analysis

Our analytical general equilibrium model investigates impacts of renewable portfolio standards (RPS) on electricity price, fossil-fuel use, renewable generation, and carbon emissions. Component effects include income, substitution, import, and direct policy effects. This breakdown helps explain how stricter RPS rules have ambiguous effects on renewable generation but negative effects on emissions. The model generates theorems and testable hypotheses about how these impacts depend on state characteristics like availability of renewable sources that are intermittent (sun, wind) or dispatchable (hydro, geothermal, biomass). We use state-level panel data from 1990 to 2015 to test these hypotheses. Our theorems and empirical tests provide most support for two hypotheses about states with stricter RPS requirements. First, having more dispatchable renewable potential is associated negatively with electricity prices and positively with fossil fuel use, emissions, and use of intermittent renewables. Second, having more wind intermittency is negatively associated with fossil fuel use and emissions.