Are the benefits of an RPS correct?

Lawrence Berkeley Lab released a report estimating the economic benefits from the renewable portfolio standards (RPS) around the U.S. Two surprising findings were:

  • ratepayers saved up to $1.2 billion in wholesale power costs (on top of a $1.3-$3.7 billion reduction in natural gas costs from reduced overall demand); and
  • air quality benefits were about equal to GHG reductions in economic value.

Both of these claims require a deeper review because they run contrary to previous analyses.

Based on PG&E’s Power Charge Indifference Adjustment (PCIA), the renewables contracts that it holds are increasing its rates by almost 2 cents per kilowatt-hour. It is only recently that renewable contract prices have started approaching conventional resource costs, so it’s hard to understand how an RPS could have already reduced electricity rates. (I do see that this will eventually be the case.)

Typically the emission reduction benefits from GHG reductions are several multiples of those from criteria air pollutants (e.g., NOx and volatile organic compounds (VOC or ROG) that produce ozone; particulate matter (PM 2.5)). For example, ClimateCost has issued studies estimating reduced energy impacts and health benefits compared to air quality benefits that show much larger GHG benefits.

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One thought on “Are the benefits of an RPS correct?

  1. Mark Miller

    Thanks for the reference to the RES paper by LBL. I concur that for PG&E rate payers the Avg cost for a kWh has gone up due to the PRS, Your reference to the PCIA sums up the effect of the PPA’s put in place to meet the 20% RES.

    The Division of Rate Payer Advocates (CPUC) also indicated that the RES will be increasing AVG kWh prices in the state: http://www.greentechmedia.com/articles/read/Renewables-Raise-Utility-Bills-Despite-Falling-Solar-and-Wind-Costs

    A few years back PG&E denoted how many dollars were associated with the RPS (in their 2012 General Rate Case filing):
    Page 2-7 Table 2-4 PG&E cumulative Impacts of the 33% RPS on NON-CARE residential rates- http://docs.cpuc.ca.gov/published/proceedings/A1202020.htm
    “Year- 2015
    RPS Premium (1000s) = $1,159,000.
    Residential Share (1000s)= 486,000
    Cumulative Class Average Rate Increase= $.0.015
    Cumulative Tier 3/4 Rate Increase= $0.048″

    Thanks for references. As we move to 33% of the generation in the state falling under long term PPA’s looking at the wholesale market for power doesn’t seem to capture the true costs being paid by the utilities (nor the retail customers of say PG&E). How to capture the actual costs for generation seems like it needs to be reevaluated- using wholesale market prices in a macro model no longer is sufficient to explain retail prices.

    Mark

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