Weighing the Costs and Benefits of State Renewables Portfolio Standards

The work described in this report was funded by the Office of Electricity Delivery and Energy Reliability (Permitting, Siting and Analysis Division) and the Office of Energy Efficiency and Renewable Energy (Wind & Hydropower Technologies Program) of the U.S. Department of Energy under Contract No. DE-AC02-05CH11231. The authors are solely responsible for any omissions or errors contained herein.

Executive Summary


State renewables portfolio standards (RPS) have emerged as one of the most important policy drivers of renewable energy capacity expansion in the U.S. Collectively, these policies now apply to roughly 40% of U.S. electricity load, and may have substantial impacts on electricity markets, ratepayers, and local economies. As RPS policies have been proposed or adopted in an increasing number of states, a growing number of studies have attempted to quantify the potential impacts of these policies, focusing primarily on projecting cost impacts, but sometimes also estimating macroeconomic and environmental effects.

This report synthesizes and analyzes the results and methodologies of 28 distinct state or utility-level RPS cost impact analyses completed since 1998.1 Together, these studies model proposed or adopted RPS policies in 18 different states. We highlight the key findings of these studies on the costs and benefits of state RPS policies, examine the sensitivity of projected costs to model assumptions, assess the attributes of different modeling approaches, and suggest possible areas of improvement for future state RPS analysis.

Key Findings

Projected rate impacts are generally modest. Seventy percent of the state RPS cost studies in our sample project base-case retail electricity rate increases of no greater than one percent in the year that each modeled RPS policy reaches its peak percentage target.2 In six of those studies, electricity consumers are expected to experience cost savings as a result of the state RPS policies being modeled. On the other extreme, nine studies predict rate increases above 1%, and two of these studies predict rate increases of more than 5%. Though most of the studies project relatively limited impacts on retail electricity rates, the wide range of impacts shown in Figure ES - 1 underscores the large variability among the studies’ results. When translated to monthly electricity bill impacts for a typical residential customer, these impacts range from a savings of over five dollars per month to an increase of over seven dollars per month.3 However, the median bill impact across all of the studies in our sample is an increase of only $0.38 per month.

Weighing Costs Benefits Of State Rps

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Weighing Costs Benefits Of State Rps

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MAR 1 2007
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