Abstract
The Renewable Portfolio Standard (RPS), which mandates electricity suppliers procure a specified percentage of sales from renewable sources, is one of the most important policies that combat climate change and encourage renewable energy adoption at the state level. However, the economic and environmental impacts of RPS remain inconclusive, partly because past studies do not account for heterogeneity in the design of RPS law. In this paper, I explore the effects of several often-overlooked differences in RPS policy by leveraging a unique dataset that quantifies the effect of various aspects of RPS policies and exemptions, and derive the amount of discrepancy between the nominal RPS goal and the minimum amount that suppliers need to procure to meet these goals. Using state-level panel data from 1990 to 2018, I estimate the impact of both nominal RPS goals and discrepancy on renewable generation, renewable generation capacity, carbon emissions from the electricity sector, and electricity price, using the panel two-way fixed-effect model. I find that a 10% increase in the nominal RPS goal leads to a 4.42% increase in renewable generation, a 2.02% increase in renewable generation capacity, 2.60% decrease in carbon emissions, and an increase in electricity price of 0.49 cents/kWh. A 10% increase in discrepancy leads to a 1.51% decrease in renewable generation capacity and a 1.05 cent/kWh decrease in electricity price. Back-of-envelope analysis suggests that policy discrepancy in RPS laws led to a total of 3,360 MW of unbuilt generation capacity and $7,780 million dollars in consumer savings in year 2018.