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Emissions, Transmission, and the Environmental Value of Renewable Energy

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  • Harrison Fell
  • Daniel T. Kaffine
  • Kevin Novan

Abstract

We examine how transmission congestion alters the environmental benefits provided by renewable generation. Using hourly data from the Texas and midcontinent electricity markets, we find that relaxing transmission constraints between the wind-rich areas and the demand centers of the respective markets conservatively increases the nonmarket value of wind by 30 percent for Texas and 17 percent for midcontinent markets. Much of this increase in the nonmarket value arises from a redistribution in where air quality improvements occur—when transmission is not constrained, wind offsets much more pollution from fossil fuel units located near highly populated demand centers.

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  • Harrison Fell & Daniel T. Kaffine & Kevin Novan, 2021. "Emissions, Transmission, and the Environmental Value of Renewable Energy," American Economic Journal: Economic Policy, American Economic Association, vol. 13(2), pages 241-272, May.
    • Handle: RePEc:aea:aejpol:v:13:y:2021:i:2:p:241-72
    DOI: 10.1257/pol.20190258
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    Cited by:

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    3. Harrison Fell & Melinda Sandler Morrill, 2024. "The Impact of Wind Energy on Air Pollution and Emergency Department Visits," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 87(1), pages 287-320, January.
    4. Katzen, Matthew & Leslie, Gordon W., 2024. "Siting and operating incentives in electrical networks: A study of mispricing in zonal markets," International Journal of Industrial Organization, Elsevier, vol. 94(C).
    5. Yang, Yuting, 2022. "Electricity interconnection with intermittent renewables," Journal of Environmental Economics and Management, Elsevier, vol. 113(C).
    6. Abrell, Jan & Kosch, Mirjam, 2022. "Cross-country spillovers of renewable energy promotion—The case of Germany," Resource and Energy Economics, Elsevier, vol. 68(C).
    7. Savelli, Iacopo & Hardy, Jeffrey & Hepburn, Cameron & Morstyn, Thomas, 2022. "Putting wind and solar in their place: Internalising congestion and other system-wide costs with enhanced contracts for difference in Great Britain," Energy Economics, Elsevier, vol. 113(C).
    8. Rivera, Nathaly M. & Ruiz-Tagle, J. Cristobal & Spiller, Elisheba, 2024. "The health benefits of solar power generation: Evidence from Chile," Journal of Environmental Economics and Management, Elsevier, vol. 126(C).
    9. Paige Weber & Matt Woerman, 2022. "Intermittency or Uncertainty? Impacts of Renewable Energy in Electricity Markets," CESifo Working Paper Series 9902, CESifo.
    10. Gugler, Klaus & Haxhimusa, Adhurim & Liebensteiner, Mario, 2023. "Carbon pricing and emissions: Causal effects of Britain's carbon tax," Energy Economics, Elsevier, vol. 121(C).
    11. Luis E. Gonzales & Koichiro Ito & Mar Reguant, 2022. "The Dynamic Impact of Market Integration: Evidence from Renewable Energy Expansion in Chile," NBER Working Papers 30016, National Bureau of Economic Research, Inc.
    12. Jamal Mamkhezri & Leonard A. Malczynski & Janie M. Chermak, 2021. "Assessing the Economic and Environmental Impacts of Alternative Renewable Portfolio Standards: Winners and Losers," Energies, MDPI, vol. 14(11), pages 1-23, June.
    13. Novan, Kevin & Wang, Yingzi, 2024. "Estimates of the marginal curtailment rates for solar and wind generation," Journal of Environmental Economics and Management, Elsevier, vol. 124(C).
    14. Xiaoying Xu & Xinxin Tian, 2023. "Dynamic Evolution and Trend Prediction in Coupling Coordination between Energy Consumption and Green Development in China," Sustainability, MDPI, vol. 15(18), pages 1-21, September.
    15. Bohland, Moritz & Schwenen, Sebastian, 2022. "Renewable support and strategic pricing in electricity markets," International Journal of Industrial Organization, Elsevier, vol. 80(C).
    16. Chu, Yin & Gao, Juanxia & Li, Haoyang, 2023. "Wind power expansion and regional allocative efficiency among fossil-fuel electricity generators," International Journal of Industrial Organization, Elsevier, vol. 91(C).
    17. Concettini, Silvia & Creti, Anna & Gualdi, Stanislao, 2022. "Assessing the regional redistributive effect of renewable power production through a spot market algorithm simulator: The case of Italy," Energy Economics, Elsevier, vol. 114(C).
    18. LaRiviere, Jacob & Lyu, Xueying, 2022. "Transmission constraints, intermittent renewables and welfare," Journal of Environmental Economics and Management, Elsevier, vol. 112(C).
    19. Harleman, Max, 2024. "Who bears the cost of renewable power transmission lines? Evidence from housing values," Energy Policy, Elsevier, vol. 191(C).

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    More about this item

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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