Changes in Renewable Energy Demand: A look at the Renewable Energy Electricity Demand Portfolio

1. Changes in Renewable Energy Demand: A look at the Renewable Energy Electricity Demand Portfolio By Melissa Lynes PhD Candidate Department of Agricultural Economics Kansas State University Manhattan, KS, USA Partial funding provided by the USDA, NIFA National Needs Fellowship Program

2. Push for more renewable energies • As of 2011, renewable energy accounted for 11% of total energy production • Different governmental agencies have set goals and made predictions to how much renewable energy the US should be producing • 20% wind energy by 2030 – Department of Energy • 85% clean energy sources by 2035 – President Barack Obama • 16% renewable energy by 2040 – International Energy Agency • These policies have helped shaped the use of renewable energies

3. Purpose of this Presentation • To determine the demand for electricity produced from each of the five main types of renewable energy: hydroelectric, geothermal, biomass, wind, and solar/photovoltaic (PV) power • And to determine how the political and social environment affects the demand for renewable energy

4. Demand Model • A system of demand equations was estimated simaltaneously to determine the demand for each type of renewable energy • One equation was dropped so the models would estimate • A Political and Social Environment (PSE) index was created in place of prices for renewable energy

5. Demand Model • Linear Approximation Almost Ideal Demand System was used • Where • is the Political and Social Environment index of the renewable energy • is the quantity of the renewable energy • is sum of the Political and Social Environment index times quantity across all renewable energies in a state each year • is a vector of variables that vary across state and/or time but not across type of energy • is the share of the PSE index and quantity for the renewable energy • is the political capacity • Adding-up, homogeneity, and symmetry restrictions were imposed

6. Data Set • Panel data set for each type of renewable energy • 1984 – 2010 • All 50 states plus Washington D.C. • State level population and per capita income • Year dummy variables were included

7. Political and social environmental index • Created from the inverse of the summation of pro renewable energy policies • More closely resembles prices, as price goes up people demand less, as the index goes up the political and social environment is worse implying people are demanding less renewable energy • A lower number implies a lower transaction cost • 8 national and state level mandatory policies were included • 2 state level voluntary policies were included • Varies across state, year, and type of renewable energy

8. The Political and Social Environmental Index

9. Results Note: * denotes statistical significance at the 10% level, ** denotes statistical significance at the 5% level, and *** denotes statistical significance at the 1% level. • is the sum of the PSE index across all renewable divided by political capacity • is the PSE for the renewable energy in the equation

10. Compensated Political and Social Environment Elasticities • Hydroelectric and wind energy are both greater than -1 indicating that political will is not showing up strong for these • Hydroelectric power may already be close to capacity • The political and social environment is already highest for wind so increasing the policies may not increase capacity by much • Increasing the political will for biomass wood and waste, geothermal, and solar/PV may greatly increase the demand of these

11. Political Capacity Elasticities • All of these are essentially one indicating that as the total political capacity increases all of the renewable energies similarly

12. Conclusions and future work • A better political and social environment helps lead to an increase in demand for all types of renewable energy • However, increasing policies relating to wood waste and biomass, geothermal, and solar energy will likely have greater results than increasing wind or hydroelectric related policies • Increasing the overall political capacity results in similar results for all types of renewable energy • Test the validity of the PSE index

13. Questions or comments

14. The Political and Social Environment Index • In 1984, the PSE was close to eight for all types of renewable energies (when averaged across all states) • The index decreased to range between 3.6 and 4.4 by 2010 • The most dramatic decreases coming in the 2000s • Wind has the lowest PSE index • The first Renewable Portfolio Standard was enacted in Iowa in 1983 • The first Public Benefit Fund were enacted in California and Pennsylvania in 1996 • As of 2010: • 30 states had mandatory Renewable Portfolio Standard in place • 7 states had voluntary Renewable Portfolio Standard in place • 22 states were suppose to be meeting some level of target • 19 states had mandatory or voluntary Public Benefit Fund in place • All but 7 states have net metering in place • 7 states gave their consumers the option to purchase specified amounts of renewable energy

15. elasticities • Political Capacity elasticity • Uncompensated PSE elasticity • Where if and if • Compensated PSE elasticity