U.S. state policies for renewable energy: Context and effectiveness

Abstract

a b s t r a c tOver the past decade, state policies on renewable energy have been on the rise in the U.S., providing states with various options for encouraging the generation of renewable electricity. Two promising policies, the Renewable Portfolio Standard (RPS) and the Mandatory Green Power Option (MGPO), have been implemented in many states but the evidence about their effectiveness is mixed. In this paper, we argue that recognizing the natural, social, and policy context under which MGPO and RPS are adopted is necessary in order to measure their true effectiveness. This is because the context rather than the policy might lead to positive outcomes and there is the possibility for sample bias. When controlling for the context in which the policies are implemented, we find that RPS has a negative impact on investments in renewable capacity. However, we find that investor owned utilities seem to respond more positively to RPS mandates than publicly owned utilities. By contrast, MGPO appears to have a significant effect on installed renewable capacity for all utilities regardless of the context in which it is implemented. IntroductionAddressing climate change has become an important priority for the U.S. administration. In the U.S., greenhouse gas emissions come primarily from the combustion of fossil fuels in energy use. Energy related carbon dioxide emissions, resulting from the combustion of petroleum, coal, and natural gas, represented 82% of total U.S. anthropogenic greenhouse gas emissions in 2006. 1 While the U.S. generates 3% of its electricity from renewable resources, 2 other developed countries such as Denmark, Germany, Spain, and New Zealand generate 25%, 20%, 16%, and 8% of their electricity from renewables, respectively. 3 In addition, all of the European Union member states have aggressive renewable energy percentages they plan to reach by 2020, while the U.S. has no federally defined targets for renewable generation. 4 While there are current debates about the implementation of a federal renewable policy, U.S. states have taken a leading role in establishing renewable energy policies since the late 1990s. These include Renewable Portfolio Standards, the requirement to sell green products, disclosure policies, and subsidies. Analyzing the effectiveness of state renewable policies can be helpful to inform the current policy debate at the federal level.Recent research has started to look at the effectiveness of state policies on the generation of renewable electricity but has found mixed results. While some studies have found positive results (Bird et al., 2005;Menz and Vachon, 2006;Zarnikau, 2003;Yin and Powers, 2010), others have found no significant results (Carley, 2009).Furthermore, most of these studies provide little information on the natural and institutional conditions under which state renewable policies are adopted, which could have an impact on their effectiveness. For example, the relationship between installed renewable capacity and a state's resource endowment (e.g., sun, biomass...

Who invests in renewable electricity production? Empirical evidence and suggestions for further research

“…These studies also demonstrate the importance of motives, previous experience and social networks. With regards to motives, Delmas and Montes-Sancho (2011) argue that the technological capabilities together with the extent to which utilities are motivated by profit influences their investments in renewables. With regards to previous experience and networks, studies show that access to information (Drury et al, 2012) and the earlier introduction of solar PV panels in the near neighbourhood of potential investors (Bollinger and Gillingham, 2012) have had a positive impact on the adoption of solar PV panels in California.…”

“…Awerbuch, 2003;Bode and Michaelowa, 2003;Carlson, 2002;Huang and Wu, 2008;Kahn, 1996;Söderholm et al, 2007), whereas others compare different renewable energy technologies with each other (e.g. Delmas and Montes-Sancho, 2011;Finon and Perez, 2007;Fleten et al, 2007;Muñoz et al, 2009). …”

Corporate Environmental Performance and Lobbying

“…This is especially relevant to climate change, as there is considerable variation in each state's stance on the issue (Cragg, Zhou, Gurney, & Kahn, 2012;Delmas & Montes-Sancho, 2011;DeShazo & Freeman, 2007;Reid & Toffel, 2009). To account for heterogeneity in state-level regulation, we include three binary variables indicating whether a firm is headquartered in a state that (at the time): (1) has passed climate change legislation (i.e., California); (2) is a member of the Regional Greenhouse Gas Initiative (RGGI); and (3) has enacted Renewable Portfolio Standards (RPS).…”

A diverse and resilient financial system for investments in the energy transition

“…To address network externalities and reduce private risks regarding complementary assets, public investments are suggested [68,69]. The (quality) regulation of the (clean energy) portfolio and emission standards advances deployment of more mature technologies [70,71]. Systemic policies such as longterm planning and policy support accelerate both early and later investments [5,39,72].…”