Renewable Portfolio Standards: Design and Impact Haitao Yin Shanghai Jiao Tong University

1. Renewable Portfolio Standards: Design and Impact Haitao Yin Shanghai Jiao Tong University Nick Powers University of Michigan

2. My Research Interests • Environmental / Natural Disaster Insurance • Corporate Environmental Management • Renewable Energy Policies

3. Renewable Portfolio Standards: Design and Impact Haitao Yin Shanghai Jiao Tong University Nick Powers University of Michigan

4. Renewables PortfolioStandards 34 States and DC State RPS State Goal Solar water heating eligible • Minimum solar or customer-sited RE requirement * Increased credit for solar or customer-sited RE • **Includes separate tier of non-renewable “alternative” energy resources An RPS requires all electricity generators (or retailers) to demonstrate that they have supported a certain amount of renewable energy generation.

5. Motivations • Existing research sends mixed message on the potential impacts of RPS • Positive relationship between RPS and renewable development (Menz and Vachon, 2006; Adelaja and Hailu, 2007) • “RPS adoption is a major driver of installed wind capacity in the United States.” (Adelaja and Hailu, 2007) • The impact of RPS is questionable. (Michaels, 2007; Bushnell, Peterman and Wolfram, 2007; Kneifel, 2008) • “The actual record of state implementations has been largely symbolic” (Michaels, 2007)

6. Motivations • Existing research takes a blunt approach when studying the impact of RPS • A cross sectional approach is adopted (Menz and Vachon, 2006; Adelaja and Hailu, 2007); • But states have inherent differences that could be driving this correlation. • Design of RPS is ignored (Menz and Vachon, 2006; Adelaja and Hailu, 2007; Kneifel, 2008); • However, the devil is in details……

7. RPS Design: Requirement • This approach does not consider two critical factors • Coverage of RPS • 100% Covered: IA, (VT), DC, TX, HI, MD, MN, WI • Less than 60% covered: CT, PA, MT, AZ, IL, CO • Whether existing renewable generation is eligible

8. RPS Design: Requirement

9. Growth of Renewable Capacity in Selected States

10. RPS Design: In-State Protection • Some states have imposed restrictions, called in-state requirements, on the system. • Allow no REC trading (IA, HI); • Set aside: require that a certain percentage of RECs must be purchased from within the state (NY, MT, NC); • Give extra credit to in-state renewable generation (DE, CO, AZ); • Output of the facility must be physically metered and verified in-state by the program administrator (TX, NV).

11. Empirical Analysis • ENEWSHARECAP is the percentage of generating capacity in a state that is non-hydro renewable, • represents a state-specific intercept, • represents year fixed effects, • represent other state policies that are designed to encourage renewable investment, and • represents various social and economic variables that might have an impact on the development of renewable energy. • is a measure for the RPS policy that varies both within and between states.

12. Estimation Results

13. Conclusions • RPS, if designed appropriately, appears to be an effective tool to encourage renewable energy investment. • It is crucial to dig into policy design details when assessing policy effectiveness.

14. The Growth of Renewable Generation: RPS States vs. Non-RPS States “RPS states” refers to those states that passed an RPS in or before 2006.

15. Percentage of Renewable Generation RPS States vs. Non-RPS States “RPS states” refers to those states that passed an RPS in or before 2000.