US renewable energy mandates bring down fossil fuel use, power costs

08. January 2016 | Markets & Trends, Top News | By:  Christian Roselund

A new report by the U.S. government's NREL and Berkeley Lab finds a 3.6% reduction in fossil fuel generation and up to US$3.9 billion in net savings for electricity customers in 2013, as well as reduced water use and the creation of 200,000 jobs.

The report found that RPS policies created 200,000 jobs in 2013, with solar installation making up a large portion of these

State-level Renewable Portfolio Standards (RPS, also called Renewable Energy Standards) have been perhaps the most important and effective policy tool utilized in the United States to increase deployment of renewable energy.

29 states and Washington DC currently have RPS policies. These vary greatly in ambition, with Hawaii (100% by 2045) California (50% by 2030) and New York's 50% by 2030 pledge leading the pack.

A new report by the U.S. Department of Energy's National Renewable Energy Laboratories (NREL) and Berkeley Laboratory attempts to broadly quantify the impacts of these policies across a range of areas. These include reductions in fossil fuel use and avoided greenhouse gases, effects on wholesale electricity prices, reductions in water use, employment and cost to utilities and ratepayers.

A Retrospective Analysis of the Benefits and Impacts of U.S. Renewable Portfolio Standards finds that RPS- compliant systems made up 2.4% of nationwide electricity generation in 2013. This created 200,000 jobs, reduced wholesale electricity prices and reduced fossil fuel generation by 3.6%, resulting in 59 million metric tons fewer greenhouse gas emissions.

This did not come for free. A previous study found $1 billion in RPS compliance costs annually, which varied greatly from state to state. Hawaii and California, two of the states with the most aggressive goals, actually showed negative compliance costs. On the other end of the spectrum, in Massachusetts RPS compliance represented more than 4% of retail electricity rates in 2013. The national average came out at less than 2%.

However, this most recent report found that these costs were outweighed by savings, even before greenhouse gas and other pollution is considered. NREL and Berkeley Lab found that in 2013 RPS policies brought down wholesale electricity prices by from $0-1.2 billion, and also reduced natural gas prices to consumers by $1.3-$3.7 billion.

Assuming $1 billion in RPS compliance, at the low end of estimates this would mean $300 million in net cost savings to customers, at the high end, $3.9 billion. NREL and Berkeley Lab was careful to point out that these are not necessarily net societal benefits, but represent shifts in costs. Another way to say this is that RPS policies are saving electricity customers money, but reducing profit for conventional fossil fuel and nuclear generation, especially gas generators.

Other metrics showed a more clear societal benefit. In addition to greenhouse gas emissions, the report found the reduction of 77,400 metric tons of sulfur dioxide, 43,900 tons of nitrogen oxides, and 4,800 tons of particulate matter. They also allowed a reduction of 830 billion gallons of water withdrawals and 27 billion gallons of water consumption.

These benefits were highly regional, with the U.S. Northeast and Mid-Atlantic benefiting the most from reduced pollution. Texas and California, which are both experiencing major droughts, gained the most from reduced water use.

Additionally, these RPS policies supported nearly 200,000 gross domestic renewable energy jobs and drove over $20 billion in GDP. This benefit was also highly regional, and California showed the most job growth due to construction of a large number of utility-scale solar projects.

Quantifying the economics of reduced GHG and other air pollution was more difficult, and based upon different estimates for cost the report found from $2.6-$9.9 billion in savings from reduced greenhouse gas emissions and $0.7-$6.3 billion in savings from reduction in air pollution overall.

Just as this study was a follow-up on an earlier study, NREL plans to follow up the current study with another look at the benefits of RPS policies in 2016/2017. Whatever the new findings, it seems unlikely that the main finding will change. The shift to renewable energies is clearly a benefit on both cost and environmental levels.


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