Renewable portfolio standards and electricity prices

Kangoh Lee

Energy Economics, 2023, vol. 126, issue C

Abstract: Green targets such as renewable portfolio standards have been popular in recent years, and various aspects of green targets have been studied. However, green targets have not always been supported, and one possible reason is that green targets may increase the electricity price. This paper analytically studies the long-run effects of renewable portfolio standards on the electricity price. The analysis shows that the effects depend on the nature of the long-run average cost. With a constant average cost, an increase in the stringency of the standard increases the electricity price. With an increasing average cost, the effects hinge on whether the average cost of green electricity increases faster or slower than that of brown electricity. The paper also considers the difference between the long-run effects and the short-run effects and the difference between the effects of an increase in the stringency of an existing standard and the effects of introducing a standard.

Keywords: Renewable portfolio standards; Green electricity; Brown electricity; Electricity prices (search for similar items in EconPapers)
JEL-codes: D6 H2 Q2 Q5 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:126:y:2023:i:c:s0140988323004577

DOI: 10.1016/j.eneco.2023.106959

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