Energy, Technology

The Most Effective Clean Energy Policy Gets The Least Love

In defense of renewable energy mandates.

Back in the 1990s and 2000s, when Democrats had more power in state governments, 29 states (and DC) passed some form of renewable portfolio standard (RPS), a policy that requires a state’s utilities to get a certain percentage of their power from renewable sources by a certain year.

Standards range from California’s wildly ambitious 50-percent-by-2030 to Ohio’s modest 12.5-percent-by-2026, and everywhere in between.

Though they aren’t as sexy as perpetually-discussed-but-rarely-passed carbon taxes, and they are flawed and insufficient in a number of ways, RPSs have been the quiet workhorses of renewable energy deployment in the US. According to one Lawrence Berkeley Lab report, fully 62 percent of the growth in US non-hydro renewables since 2000 has been undertaken to satisfy RPS requirements.

Consequently, there’s been a great deal of research done about their various costs, benefits, and impacts. One thing that’s been missing, however, is a comprehensive prospective analysis, projecting the total costs and benefits of RPSs going forward.

Happily, such an analysis was just published in the journal Environmental Research Letters.

If you’ve followed previous research literature on RPSs (and who hasn’t?), the top-line results probably won’t surprise you. Spoiler: The benefits of these policies will substantially outweigh the costs, even under conservative assumptions.

Aside from the basic finding, I do think the results can shed light on two important points — one important to the future of the US grid, one important to politics and policymaking in general. And y’all know how I love to make points.

First, though, a quick summary of the results.

RPS benefits will outweigh costs under almost any assumptions

The researchers used various datasets and methods to evaluate RPSs out through 2050, assessing them along three key metrics:

(a) national electric system costs and national and regional retail electricity prices; (b) environmental and health benefits associated with reduced greenhouse gas (GHG) and air pollution emissions and reduced water use; and (c) other impacts related to gross effects on employment and reductions in natural gas prices.

They modeled three scenarios, one with no RPS, one which took into account existing RPS commitments, and a high RE scenario in which RPSs were strengthened.

Under the high RE scenario, renewables are 35 percent of US power by 2030 and 49 percent by 2050.

So how do the costs and benefits balance out? Let’s skip to the end:

In the existing RPS scenario, electricity system costs range from -0.7 percent to 0.8 percent of no RPS system costs (which roughly amounts to plus-or-minus $31 billion).

In other words, depending on assumptions about the price of renewables and natural gas in the future, the direct costs to consumers could range from mild (roughly 1 cent per kwh in the most affected regions) to negative, i.e., a net savings for consumers. RPSs could very well pay for themselves even before externalities are taken into account.

Whereas the upper-bound estimate of existing RPS costs is $31 billion, the lower-bound estimate of air-quality benefits is $48 billion and the lower-bound estimate of climate mitigation benefits is $37 billion.

So: If existing RPSs are maintained through 2050, they will impose, at the very most, $31 billion in costs, and produce, at the very least, $85 billion in benefits. Seems like a pretty good deal.

The high RE scenario, which involves cranking up RPSs even in states that currently don’t have them, entails more pronounced costs (upper bound: $194 billion) but also more pronounced benefits (lower bound: $303 billion in air quality, $132 billion in climate). Still a screaming deal.

There are interesting caveats and methodological details in the paper — it’s always worth remembering how much results like this depend on the assumptions fed into the model about natural gas costs, electricity demand, the future cost of wind and solar, etc. — but let’s get on to my two points.

Point one: anything is better than coal

The bulk of the air-quality benefits in both RPS scenarios — and a substantial portion of total benefits — comes from “reduced SO2 and subsequently reduced particulate sulfate concentrations. Particularly important is the avoided premature mortality primarily associated with reduced chronic exposure to ambient PM2.5.”

Basically, reducing smog and other particulates in the air (by reducing SO2 emissions) produces enormous health benefits.

Guess where most of that SO2 comes from. Yup: coal plants. Most of the SO2 reductions in both RPS scenarios come from coal plants shutting down in the Central and Eastern US.

What this demonstrates, more or less, is that coal is so poisonous that virtually any alternative pencils out, once health effects are internalized. Coal is public health target number one.

It also demonstrates that the regions of the country with the weakest (or no) RPSs stand to benefit most from strengthening them.

And finally, it demonstrates that coal really is a convenient bogey man for renewables. Once coal has been driven from the grid and natural gas is the primary competitor, RE’s advantage on externalities will shrink. It won’t disappear, by any means, but natural gas’s air quality and climate impacts are marginally less ludicrous than coal’s. That will put RE in a somewhat tighter race.

Point two: real policies are better than imaginary policies

The authors make a point of saying that, although RPSs are clearly cost-effective — they generate benefits well in excess of costs — “we do not claim that RPS programs represent the most cost-effective path towards achieving these air quality and climate benefits.”

The standard economist objection is that the most cost-effective way to reduce an externality is to put a price on it. From that perspective, an RPS is just an indirect, inefficient way of putting a price on (some) pollutants.

This critique is irritating and wrong in many ways, but for the purposes of my point here, let’s grant it. Let’s say that pollution taxes have an efficiency advantage over clean energy mandates.


”What clean energy mandates lack in efficiency, they make up for with another key quality that pollution taxes lack: They are real.”

RPSs might not be the most cost-effective way to improve air quality, reduce carbon emissions, or stimulate the growth of clean-energy industries and jobs … but they are real, working, doing all three of those things, right now, cost-effectively.

Democratic policies often seem caught between two sets of policy purists — on one side, wonks and economists, preoccupied with theoretical, more cost-effective alternatives; on the other side, activists, preoccupied with theoretical, stronger alternatives. (Yes, I’m still reliving the 2009 Waxman-Markey fight.)

There seems to be, on the left, less of that implacable pushing everywhere at once that you find on the right, less appreciation of half-a-loaf solutions that can be ratcheted up over time with steady effort.

RPSs are the perfect case in point. Everyone I know in energy-nerd world has their own bespoke objection to RPSs: They are too strong, or too weak, they should include this or that other technology, they don’t solve systemic externality issues, they are just a bargaining chip for carbon taxes.

But they exist. They are popular. They are working. Maybe economists could tear their eyes from carbon taxes and activists could tear their eyes from pipelines long enough to give them a few cheers.

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