Cost-effectiveness of renewable electricity policies

We analyze policies to promote renewable sources of electricity. A portfolio standard (RPS) raises electricity prices and primarily reduces gas-fired generation. A knee of the Cost Curve exists between 15% and 20% goals for 2020 in our central case, and higher natural gas prices lower the cost of greater reliance on renewables. A renewable energy production tax credit lowers electricity price at the expense of taxpayers, which limits its effectiveness in reducing carbon emissions, and it is less cost-effective at increasing renewables than a portfolio standard. Neither policy is as cost-effective as a cap-and-trade policy for achieving carbon emission reductions. (c) 2005 Elsevier B.V. All rights reserved.