Op-ed: Ineffectiveness of Renewable Portfolio Standards

Renewable portfolio standards (RPS) require a certain percentage of the electricity sold by utilities to be from qualifying sources as determined by state statute. RPS are one of the most common state-level environmental policies; 29 states and Washington DC have mandatory standards. Despite their popularity, however, renewable portfolio standards may not achieve their environmental ends in a cost-effective manner.

Basic analysis of the effects of implementing RPS shows only a nominal impact on carbon emissions, but a large impact on electricity prices. Professors at Louisiana State University compared states that had enacted RPS to states that had not, and showed that RPS states have seen neither a decrease in carbon emissions or an increase in renewable energy development relative to non-RPS states. The authors conclude, however, that RPS enactment is associated with a 10.9% to 11.4% increase in electricity prices.

In addition to evidence that RPS enactment is associated with higher electricity prices, there’s also evidence that they are much more expensive than other environmental policies. Academic research estimates that in order to achieve the same emissions reduction, current RPS policies “cost a mind-numbing 18.6 times more than a broader portfolio that includes those low-carbon sources.”

Ultimately, most academic research shows RPS to be expensive and ineffective environmental policies. Considering that one in five households struggled to pay its utility bills without having to give up or reduce its consumption of basic necessities like food or medicine, these findings are a serious challenge to RPS as an effective environmental policy.

Yet, given the inertia surrounding renewable portfolio standards, it’s unlikely that RPS will disappear. There are, however, still many ways in which they may be reformed and made more effective. Moving away from supporting only a select group of renewables in favor of allowing all less carbon-intensive resources is a promising start. Both natural gas and nuclear, for example, are much less carbon intensive than coal. Reforming RPS to be technologically neutral will likely help make RPS more environmentally effective and less costly economically.