A Survey of State-Level Cost and Benefit Estimates of Renewable Portfolio Standards

Renewable portfolio standard (RPS) policies are in place in more than half of all U.S. states and have played a critical role in driving renewable energy deployment over the past decade.  In many states, however, fierce debates have recently arisen regarding the cost of RPS policies, and proposals have been introduced to repeal, reduce, or freeze existing requirements.  This report seeks to inform these debates by summarizing available data on the costs and benefits of RPS policies to-date and by highlighting key methodological issues that must be considered.  

The report draws upon a variety of data sources, including estimates developed by utilities and public utility commissions (PUCs) as well renewable energy certificate pricing, to summarize the net (or “incremental”) costs incurred by utilities to comply with RPS requirements.  The report also surveys recent studies that have assessed the magnitude of potential broader societal benefits (though for a variety of reasons, those benefits estimates cannot be directly compared to RPS compliance costs).

Key findings from this study include the following: 

• Among the 24 states for which the requisite data were available, estimated RPS compliance costs over the 2010-2012 period were equivalent to, on average, roughly 1% of retail electricity rates, though substantial variation exists across states and years.
• Expressed in terms of the incremental (or “above-market”) cost per unit of renewable generation, average RPS compliance costs during 2010-2012 ranged from -$4/MWh (i.e., a net savings) to $44/MWh across states.
• Methodologies for estimating RPS compliance costs vary considerably among utilities and states, though a number of states are in the process of refining and standardizing their methods.
• Utilities in eight states assess surcharges on customer bills to recoup RPS compliance costs, which in 2012, ranged from about $0.50/month to $4.00/month for average residential customers.
• Cost containment mechanisms incorporated into current RPS policies will limit future compliance costs, in the worst case, to no more than 5% of average retail rates in many states and to 10% or less in most others.
• Although typically not considered within utilities’ estimates of net compliance costs, a number of states have separately estimated the value of RPS benefits associated with avoided emissions (ranging from $4-23/MWh of renewable generation), economic development ($22-30/MWh), and/or wholesale electricity price suppression ($2-50/MWh).

Findings from this report were presented at the 37th International Association for Energy Economics (IAEE) International Conference in New York, NY in June 2014. To download the proceedings posted online, please click here.

This research was also featured in an issue of the IAEE Energy Forum. To download the published version, please click here.

This research has also been accepted for publication with Renewable and Sustainable Energy Reviews. To see a pre-print version of this article, click here.