Evaluating the Costs and Benefits of Renewable Energy Portfolio Standards

Renewable Portfolio Standards (RPS), now existing in 29 states and the District of Columbia, require utilities to provide a certain percentage of electricity consumption from wind, solar, and other forms of renewable energy. Federal policies, such as the wind production tax credit and the solar investment tax credit, also promote the production of wind and solar power. Given the widespread use of rate of return regulation based upon average cost pricing, the costs of these policies are less than transparent. Moreover, to the extent that these policies drive up electricity prices, output and employment could be adversely affected. This study ultimately finds that Renewable Portfolio Standards for the twelve states examined in this study are a costly and inefficient means to reduce greenhouse gas emissions and they reduce economic growth and employment.

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