1 Costs and Benefits of Renewables Portfolio Standards in the United States

As state-level renewable portfolio standards (RPS) have driven large increases in U.S. renewable generation capacity, states have sought to quantify the costs and benefits of these policies. This paper examines recent costs and benefits of RPS implementation, focusing on the net (or incremental) cost to utilities of renewables used for compliance with RPS targets during the years 2010-2012. Incremental RPS cost estimates are developed using a wide variety of methods and assumptions, which makes comparisons among states imperfect. For states with restructured electricity markets, we use a standardized method to calculate incremental costs based on renewable energy certificate prices, alternative compliance payment levels, and compliance obligations. For states with traditionally regulated electricity markets, we rely on estimates produced by utilities and regulators, whose methods and underlying assumptions vary widely. We find that recent estimated incremental RPS costs were equivalent to less than 2 % of retail rates in 17 states and about 2%–4 % in eight states, or-$4/MWh to $48/MWh of renewable energy required across all states (for the most recent year available in each state). Estimated RPS costs in most states were well below the respective cost caps, although a few states are currently operating at or near their cap. 1