The Effects of Renewable Portfolio Standards on Renewable Energy Sources

Renewable Portfolio Standard (RPS) programs have experienced increased popularity at the state level with twenty-three states adopting policies. Policy makers implement these programs in the hopes of stimulating renewable energy generation and lessening the states reliance on nonrenewable sources, by requiring utility companies to provide a specified amount of electricity from renewable sources. I examine the use of renewable energy sources caused by the implementation of these programs, and determine how these renewable source markets interact in an RPS setting. Analysis performed on RPS programs indicates an increase in wind energy generation, suggesting that RPS programs are an effective method to increasing generation and reliance on wind energy. Results do not indicate that the renewable energy sources of wind, solar/photovoltaic, and geothermal, compete with one another to provide the lowest cost energy. This may be due to the infancy of the programs with economies of scale yet to be reached.Resource /Energy Economics and Policy,

The Impact of Rate-of-Return Regulation on Electricity Generation from Renewable Energy

Traditional electric utility companies face a trade-off between building generation facilities that utilize renewable energy (RE) and non-renewable energy (non-RE). The firm’s input decision to build capacity for either source depends on several constraining factors, including input prices, policies that promote or discourage RE use, and the type of regulation faced by the firm. This paper models the utility company’s decision between RE and non-RE capital types. From the model, two main results are derived. First, rate-of-return (ROR) regulation decreases the investment in RE capital relative to the unregulated firm. These findings suggest restructuring electricity generation markets, which removes the ROR on generating assets, can increase the relative use of RE. Second, the renewable portfolio standard (RPS) increases the investment in capital and labor that requires RE as a source of electricity, as expected. The model shows that the impact of an RPS depends on the amount of ROR regulation.renewable portfolio standard, renewable energy, rate-of-return regulation

Who Searches for Low Prices? Population Characteristics and Price Dispersion in the Market for Prescription Drugs

We examine the relationship between population characteristics and price dispersion for 75 prescription drugs in five markets. Based on models of price dispersion, we consider that search costs are likely lower for the elderly, who are repeat purchasers. Expected benefits from search are likely higher for low income households, who lack insurance. Our results are consistent with the hypothesis that for communities with a large percentage of elderly and poor population, search effort is greater for pharmaceutical drugs, causing lower price dispersion. By understanding the characteristics of who searches for low drug prices, we begin to identify the motives of consumers that might also lead to search for the lowest cost healthcare provider or lowest cost insurance. The results suggest that the 2004 Medicare legislation that closed the pharmaceutical donut hole may have reduced search by the elderly, increased price dispersion, and potentially increased the average price of prescription drugs.search cost; price dispersion; prescription drugs

Welfare Trade-offs between Transferable and Non-Transferable Lotteries

The Four Rivers lottery run by the National Forest Service distributes the opportunity to raft four sections of rivers in Idaho through a non-transferable lottery. The restriction of trade and focus on equity in distribution creates a deadweight loss in total surplus compared with a market or auction system. If the NFS allowed the transferring of permits, then there exists a potential for rafters to gain surplus in trade. However, non-rafters have an incentive to enter the transferable lottery to make a profit from trade. Using the NFS lottery as a guide, this paper examines welfare under the two lottery system to understand how changes in transferability affect the welfare of users and non-users, and the revenues of the government. Since variables, such as number of permits, permit fees, and application fees, also impact welfare, we derive comparative statics for these variables to demonstrate how these government controls affect rafter welfare, non-rafter welfare, and government revenue differently under transferable and non-transferable lotteries. Our results show the welfare trade-offs rafters have between transferable and non-transferable lotteries.Resource /Energy Economics and Policy,

Are Renewable Portfolio Standards a Policy Cure-All?: A Case Study of Illinois\u27s Experience

Renewable Portfolio Standards (“RPS”) are stated to have a plethora of benefits: job creation, renewable energy growth, reduced carbon emissions, and a reduction in retail electricity prices. Often when a policy has multiple agendas, the policy fails to meet any of the objectives. Twenty-nine states have implemented an RPS, but state policies vary with regard to the sources considered eligible, out-of-state generation, credit trading, and the process of ensuring compliance. The various policy facets affect the growth of renewable energy within the state and affect the additional stated benefits of job creation and reduced emissions. This paper examines Illinois’s RPS as a case study for analyzing the many goals and impacts of other RPSs. We use Illinois’s market for electricity as a case study for several reasons. First, the RPS in Illinois focuses on encouraging wind generation by requiring seventy-five percent of the standard be generated from wind. This aspect allows us to focus on the growth of the wind industry. Next, the electricity market in Illinois allows customers to choose their electricity supplier. We can analyze restructuring and its impact on the renewable sector. Finally, Illinois is surrounded by states whose renewable industry may benefit from Illinois’s mandate. We will also examine the impact of Illinois’s standard on the renewable electricity generation in the surrounding states

Interst Group Incentives for Post-lottery Trade Restrictions

The rights to use publicly-managed natural resources are sometimes distributed by lottery,and typically these rights are non-transferable. Prohibition of post-lottery permit transfers discourages applicants from entering the lottery solely for protable permit sale, so only those who personally value the use of the resource apply. However, because permits are distributed randomly and trade is restricted, permits may not be used by those who value them most. We examine a possible rationale for restrictions on permit transfers based on the distribution of welfare across interest groups, and characterize the economic conditions under which post-lottery prohibitions on trade are likely to arise. We develop our model using the specic case of the Four Rivers Lottery used to allocate rafting permits on four river sections in Idaho and Oregon.lottery, trade prohibition, interest groups

The Effects of Renewable Portfolio Standards on Renewable Energy Sources

Renewable Portfolio Standard (RPS) programs have experienced increased popularity at the state level with twenty-three states adopting policies. Policy makers implement these programs in the hopes of stimulating renewable energy generation and lessening the state's reliance on nonrenewable sources, by requiring utility companies to provide a specified amount of electricity from renewable sources. I examine the use of renewable energy sources caused by the implementation of these programs, and determine how these renewable source markets interact in an RPS setting. Analysis performed on RPS programs indicates an increase in wind energy generation, suggesting that RPS programs are an effective method to increasing generation and reliance on wind energy. Results do not indicate that the renewable energy sources of wind, solar/photovoltaic, and geothermal, compete with one another to provide the lowest cost energy. This may be due to the infancy of the programs with economies of scale yet to be reached

Three essays on natural resource allocation and public policy

This dissertation provides three papers on natural resource allocation and public policy. The first and second papers examine the allocation of rafting permits in the Four Rivers Lottery. The third paper examines the policy of implementing renewable portfolio standards. The first paper creates a measure for rafter surplus from lotteries with and without a restriction on permit transfers. We examine the impact of policy changes on the surplus trade-off between restricted and unrestricted permits in order to determine the conditions that lead to restricted permits generating more surplus than unrestricted permits. We provide a possible rationale for why a restriction on permit transfers is common among lotteries that distribute natural resources and policy recommendations based on the analysis. The second paper models the choices of the lottery applicants. In a ranked-choice lottery, applicants reveal their preferences for different characteristics of a good by ranking the options. Individuals make a trade-off between the different characteristics; and the marginal rate of substitution (MRS) indicates the relative preference of one characteristic over another. We derive the MRS. Applying the model to the United State Forest Service's Four Rivers Lottery, we show that on average applicants are willing to accept less river discharge to obtain a permit. In the third paper, we present an alternative approach to modeling the renewable portfolio standard as a proportional constraint on the utility company's input decision. The constraint model is more consistent with the incentives created by the RP standard, and illustrates that a binding RP standard cannot cause electricity prices to decrease. Empirical analysis of sixteen states with an RP standard supports the theory that the RP standard increases the price of electricity