Are Renewables Portfolio Standards Cost-Effective Emission Abatement Policy?

<p>Renewables portfolio standards (RPS) could be an important policy instrument for 3P and 4P control. We examine the costs of renewable power, accounting for the federal production tax credit, the market value of a renewable credit, and the value of producing electricity without emissions of SO₂, NO<em>_x</em>, mercury, and CO₂. We focus on Texas, which has a large RPS and is the largest U.S. electricity producer and one of the largest emitters of pollutants and CO₂. We estimate the private and social costs of wind generation in an RPS compared with the current cost of fossil generation, accounting for the pollution and CO₂ emissions. We find that society paid about 5.7 ¢/kWh more for wind power, counting the additional generation, transmission, intermittency, and other costs. The higher cost includes credits amounting to 1.1 ¢/kWh in reduced SO₂, NO<em>_x</em>, and Hg emissions. These pollution reductions and lower CO₂ emissions could be attained at about the same cost using pulverized coal (PC) or natural gas combined cycle (NGCC) plants with carbon capture and sequestration (CCS); the reductions could be obtained more cheaply with an integrated coal gasification combined cycle (IGCC) plant with CCS.</p>