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Causal effects of Renewable Portfolio Standards on renewable investments and generation: The role of heterogeneity and dynamics

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  • Deschenes, Olivier
  • Malloy, Christopher
  • McDonald, Gavin

Abstract

Despite a 30-year long history, Renewable Portfolio Standards (RPS) remain controversial and debates continue to surround their efficacy in leading the low-carbon transition in the electricity sector. Contributing to the ongoing debates is the lack of definitive causal evidence on their impact on investments in renewable capacity and generation. This paper provides the most detailed analysis to date of the impact of RPSs on renewable electricity capacity investments and on generation. We use state-level data from 1990–2019 and recent econometric methods designed to address dynamic and heterogeneous treatment effects in a staggered adoption panel data design. We find that, on average, RPS policies increase wind generation capacity by 600–1200 MW, a 44% increase, but have no significant effect on investments in solar capacity. Additionally, we demonstrate that RPSs have slow dynamic effects: most of the capacity additions occur 5 years after RPS implementation. Estimates for wind and solar electricity generation mimic those for capacity investments. We also find similar results using an alternate treatment definition that allows states to meet their RPS requirements with pre-existing renewable generation and renewable generation from nearby states.

Suggested Citation

  • Deschenes, Olivier & Malloy, Christopher & McDonald, Gavin, 2023. "Causal effects of Renewable Portfolio Standards on renewable investments and generation: The role of heterogeneity and dynamics," Resource and Energy Economics, Elsevier, vol. 75(C).
    • Handle: RePEc:eee:resene:v:75:y:2023:i:c:s0928765523000489
    DOI: 10.1016/j.reseneeco.2023.101393
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    More about this item

    Keywords

    Renewables; Renewable portfolio standards; Electricity sector; Causal inference;
    All these keywords.

    JEL classification:

    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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