New study on the costs, benefits, and impacts of state RPS programs

We are pleased to announce a new study, A Prospective Analysis of the Costs, Benefits, and Impacts of U.S. Renewable Portfolio Standards, conducted jointly by Berkeley Lab and the National Renewable Energy Laboratory (NREL).

This is the third in a series of reports exploring the potential costs, benefits, and other impacts of state renewable portfolio standards (RPS). Prior studies in the series have examined the historical effects of RPS programs. This new report, instead, evaluates RPS policies prospectively, under both a continuation of existing policies as well as possible expansions.

The report, along with an accompanying fact-sheet, can be downloaded here. A webinar summarizing key findings from the report will be held next Monday, January 9th at 11:00 am Pacific Time. Register for the free webinar here.

Relying on a well-vetted set of methods, the study evaluates the costs, benefits, and other impacts of renewable energy used to meet future RPS demand growth over the 2015-2050 period. The study considers both the current set of state RPS policies, as well as a high renewable energy scenario in which most states adopt relatively aggressive targets. Those two scenarios are compared to a No RPS scenario, which assumes no further growth in RPS requirements beyond 2015. A variety of caveats and limitations to the study and its scope are described in the full report. Key findings are summarized below and in the info-graphic (click to expand).

By 2050, renewables (including hydropower) reach 40% of U.S. electricity generation under the Existing RPS scenario and 49% under the High RE scenario, compared to 34% in the baseline No RPS scenario. These estimates are up from about 14% renewable penetration in 2015. The Existing RPS scenario results in 122 gigawatts (GW ) (296 terawatt-hours [TWh]) of renewables above the No RPS scenario by 2050, while the High RE scenario results in 331 GW (765 TWh) of incremental renewable generation by 2050. These increases are estimated to avoid primarily fossil—both coal and gas—generation. These values reflect the amount of incremental RE needed to satisfy RPS requirements beyond 2014 and serve as the basis for which we evaluate the costs, benefits, and impacts.

Costs: We estimate incremental costs, relative to the No RPS scenario, in terms of both the net present value of electric system costs over 2015-2050 and the difference in retail electricity prices. Both measures of costs are evaluated over a set of sensitivity cases related to future natural gas prices and renewable technology costs. Both measures consider fuel costs, operations and maintenance (O&M) costs, and capital costs for new generation, storage, and transmission infrastructure.

• Electric System Costs: For the Existing RPS scenario, incremental system costs (2015-2050) range from ±$31 billion (-0.7% to 0.8% of the No RPS total system costs) across the sensitivity cases. On a levelized basis, these costs equate to about ±0.75￠ per kilowatt-hour of renewable energy (kWh-RE). In the High RE scenario, incremental system costs range from $23 billion (0.6%) to $194 billion (4.5%), which equates to an incremental levelized cost ranging from 0.26￠/kWh-RE to 1.5￠/kWh-RE. 
• Electricity Prices: Across the various sensitivity cases and census regions, retail electricity prices in the Existing RE scenario are up to a maximum of roughly 1￠/kWh higher than electricity prices in the No RPS scenario. However, estimated incremental prices vary significantly between regions and years and depend on future RE technology costs and fossil fuel prices. For some sensitivity cases and regions, we find that electricity prices are lower in the Existing RPS scenario than in the No RPS scenario. The High RE scenario has a considerably higher upper bound to the range of possible electricity price increases, with up to a 4.2￠/kWh increase in the most expensive case. Under certain conditions, however, even the High RE case may result in electricity price reductions in some regions and years.

Benefits: The study evaluates benefits associated with reduced air pollutant emissions and avoided human health damages, reduced greenhouse gas (GHG) emissions and avoided climate change damages, and reduced water use for electric power generation. These benefits are associated with all RE used to meet the RPS requirements and not with the RPS policies specifically.

• Air Quality Benefits: Cumulative (2015-2050) national emissions of sulfur dioxide (SO2), nitrogen oxides (NOx), and fine inhalable particles with diameters that are generally 2.5 micrometers and smaller (PM2.5) decrease by 5.5%, 5.7%, and 4.5%, respectively, in the Existing RPS scenario. As a result of these reductions, we estimate the health and environmental benefits of the Existing RPS scenario to be equal to $97 billion using a "central" estimate, equivalent to 2.4￠/kWh-RE. For the High RE scenario, we estimate cumulative emission reductions of 29% for each of the three air pollutants assessed (SO2, NOx, and PM2.5), resulting in health and environmental benefits of $558 billion using the central estimate, equivalent to 5.0￠/kWh-RE. In both scenarios, air quality benefits come primarily from avoided premature mortality, particularly in eastern United States.
• Reductions in GHG Emissions: Cumulative (2015-2050) life-cycle GHG emissions decrease by 6% in the Existing RPS scenario, which translates into $161 billion of global benefits when applying a "central value" for the social cost of carbon. These global benefits equal 3.9￠/kWh-RE. In the High RE scenario, cumulative life-cycle GHG emissions decrease by 23%, resulting in $599 billion of global benefits when using the central value for the social cost of carbon, equivalent to 5.4￠/kWh-RE.
• Water Use Reduction: Cumulative water consumption in the Existing RPS scenario is 4% lower and water withdrawals are 3% lower compared to the No RPS scenario. On average, we find that each megawatt-hour of renewable energy used to meet Existing RPS targets saves withdrawal of 3,400 gallons of water and consumption of 290 gallons of water. In the High RE scenario, water consumption and withdrawals are both 18% lower. To put these figures in context, the 2030 annual consumption savings are equal to the water demands of 420,000 U.S. households in the Existing RPS scenario, and 1.9 million households in the High RE scenario. Many U.S. regions, including water-stressed regions, see water savings. We do not estimate the monetized water savings benefits because no standard valuation methods exist. 

Impacts: The study evaluates two other "impacts." Such impacts are best considered resource transfers rather than societal benefits, benefiting some stakeholders at a cost to others, though they may nevertheless be relevant to evaluating state RPS programs. 

• RE Workforce Requirement and Economic Development: The Existing RPS scenario requires 4.7 million full-time job-years in RE-related employment, about a 19% increase over the 2015 to 2050 study period compared to the No RPS scenario. The High RE scenario requires in 11.5 million job-years of RE-related employment, or a 47% increase from the No RPS scenario. Gross RE jobs include onsite, supply chain, and induced jobs. Gross onsite jobs, which include construction and O&M jobs, represent 28% and 29% of all gross jobs, respectively, in the Existing RPS and High RE scenarios. We do not estimate economy-wide net impacts, and the increased RE jobs noted here will be offset by job contraction in other parts of the economy.
• Natural Gas Price Reductions: Achieving the Existing RPS and High RE scenarios reduces cumulative (2015-2050) electricity-sector natural gas demand by a total of 35 quads and 46 quads, respectively, relative to the No RPS baseline. These reductions represent 3.3% and 4.3% of total projected economy-wide natural gas consumption in the United States over the same period, and tend to suppress natural gas prices. As a result, natural gas consumer bill savings outside the electric sector from the Existing RPS scenario total $78 billion on a discounted, present-value basis, which is equal to a levelized impact of 1.9￠/kWh-RE. Under the High RE scenario, total consumer savings equal $99 billion, or 0.9￠/kWh-RE. These savings come at the expense of producers, and therefore do not represent societal net benefits but rather resource transfers

The findings above must be understood within the context of the study's limitations. First, the analysis considers an important subset-but not all-potential costs, benefits, and impacts; for example, we do not quantify land use and wildlife impacts. In addition, while the analysis examines the renewable energy needed to meet RPS demand growth going forward, it does not seek to attribute those effects solely to RPS policies, as a variety of other policy and market forces may also contribute to renewables growth over the study horizon. Finally, although this analysis shows that the estimated benefits of RPS policies are greater than their costs, this does not imply that these policies are necessarily the most cost-effective way to achieve the benefits and impacts discussed in this paper.