Assessment of the House Renewable Electricity Standard and Expanded Clean Energy Scenarios

Bill Prindle, Maggie Eldridge, John A. "Skip" Laitner, R. Neal Elliott, and Steven Nadel

December 2007

Key Findings PowerPoint (118 KB)

Executive Summary

The American Council for an Energy-Efficient Economy’s analysis of the Renewable Electricity Standard (RES) included in the August House energy bill (H.R. 3221) shows that this provision would provide positive energy, economic, and environmental benefits. It would reduce wholesale electricity prices and customer bills, decrease the need for new fossil fuel powerplants, and create new jobs, while also lowering carbon emissions. The analysis dispels arguments that the RES would raise electricity rates and harm the reliability of the power grid.

Our analysis uses the Integrated Planning Model (IPM^®) model developed by ICF International specifically to model the electric power sector in the U.S.  IPM^® is widely used by federal and state agencies, utilities, and others in energy and environmental policy analysis.  For macroeconomic analysis, we use the DEEPER model (a dynamic input-output model) to estimate the net employment and income effects as well as the impact on the national and regional Gross Domestic Product (GDP).

The House RES would require utilities to provide 15% of total sales from renewable energy generation by 2020.  Energy efficiency resources could provide up to 27% of this requirement. As a national policy, it is expected that states would use varying mixes of renewable electricity generation, energy efficiency resources, and purchased credits. This provision would in 2030 reduce carbon dioxide (CO₂) emissions by 100 million metric tons (MMT), save 22 billion kilowatt-hours (kWh) of electricity usage, create 32,000 net new jobs annually, and displace the need for 29 500-MW coal-fired powerplants compared to a business-as-usual (BAU) scenario.¹ These savings would be worth over $60 billion cumulatively through 2030. 

Our analysis also looks beyond the current RES provision, which results in relatively modest additional renewable energy and energy efficiency resources since many states are already pursuing these policies. Twenty-five states plus Washington, D.C. have renewable resource standards for utilities, and 10 or more states have utility resource requirements for efficiency. The federal RES would moderately expand the impact of these policies while spreading the benefits to more regions of the country that do not currently have renewable energy or energy efficiency policies in place at the state level.

Because the House RES provision is relatively modest, we also modeled more aggressive renewable and efficiency standards, including a 10% electricity efficiency target coupled with 5% natural gas efficiency, and a 15% RES coupled with a separate 15% Energy Efficiency Resource Standard (EERS).  The latter “15-15” policy package would by 2030 avoid 121,000 MW of conventional powerplant construction, reduce wholesale electricity prices by about 0.5 cents per kWh, save 507 billion kWh of electricity usage per year, and reduce annual CO₂ emissions by about 590 MMT per year.  The policy would also create nearly $591 billion in net consumer savings and 259,000 net new jobs in 2030 compared to business-as-usual.

Because concerns have been raised about the regional impacts of RES policies, our analysis examined the effects on energy prices and other variables in the Midwest and Southeast regions. Our regional findings were comparable with the national-level results: electricity prices fall, capacity needs are reduce, consumers realize net savings, and jobs grow.  In the House RES, consumers save a net $14 billion and $13 billion in the Midwest and Southeast regions, respectively.  These savings grow to $102 billion and $118 billion in the more aggressive 15-15 scenario. We find that the concerns about negative impacts in these regions are not borne out by quantitative analysis.

The analysis also shows that RES and EERS policies can be key foundation stones for a U.S. power sector climate policy. We modeled the effect of these provisions within a climate policy scenario, using the Bingaman-Specter bill as a moderate climate policy framework. We ran the same RES-EERS scenarios, adding a set of assumptions based on the Bingaman-Specter bill, using IPM^® in similar fashion. The results show that in a climate policy context, RES-EERS policies would provide even greater benefits. The House RES provision would save 55,000 MW of conventional capacity, 246 billion kWh, and about 750 MMT of carbon emissions compared to business-as-usual.  The more aggressive 15-15 policy package would contribute 153,000 MW of conventional powerplant capacity avoidance, nearly 700 billion kWh in energy savings, and about 960 MMT of CO₂ emissions.

The IPM^® modeling performed in this analysis clearly shows that the House RES and the more aggressive clean energy scenarios all serve to reduce wholesale electricity prices. In the Southeast and Midwest regions, IPM^® results show prices falling modestly for the House RES, and more substantially for the more aggressive scenarios.  These same effects occur when the clean energy scenarios are modeled in a carbon policy framework (see Figure ES-1). 

Figure ES-1.  Wholesale Electricity Prices in Climate Framework and Clean Energy Scenarios

The House RES and other RES-EERS policies would help not only electricity prices, bills, capacity, and emissions, but would also help reduce prices for natural gas. Because so much electricity generation on the margin is natural-gas fired, bringing more renewables onto the grid and backing off demand through efficiency provide major savings for natural gas. Our analysis shows moderate natural gas price savings, ranging as high as $0.53 per MMBtu at the wholesale level. These gas price reductions provide a range of other benefits, including consumer heating bills savings, and an economic boost for industries heavily dependent on natural gas for feedstocks as well as fuel.

Perhaps most strikingly, the cumulative carbon emission reductions through 2030 from the 15-15 RES-EERS policy package would be roughly the same as the total power sector carbon emission reductions from the Bingaman-Specter bill. But the RES-EERS package would achieve these carbon savings while reducing wholesale electricity prices and providing other energy and economic benefits.² While some increase in retail rates would occur to support programs for realizing these savings, net consumer electric bills would decrease. These findings add urgency to the case for enacting strong RES-EERS standards, either now in an energy policy or later in a climate policy bill.

We conclude that this analysis of the House RES provision and more aggressive RES-EERS targets shows strongly that setting strong renewable and efficiency standards for utilities reduces electricity and natural gas wholesale prices, cuts consumer electricity bills, avoids needs for new powerplants, and cuts carbon emissions. Moreover, an aggressive RES-EERS policy achieves similar carbon savings in the power sector than would the Bingaman-Specter bill (see Figure ES-2) at substantially lower energy and carbon prices. RES-EERS policies are thus Congress’ best policy path for the power sector, and should be a specific and integral part of any U.S. energy and climate policy.

Figure ES-2. Annual CO₂ Emissions in BAU and Clean Energy Scenarios

¹ Displaced conventional capacity is from avoided coal, natural gas, and nuclear powerplant construction.
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² Wholesale electricity price reductions reported from IPM® do not take into account costs of energy efficiency programs.  These costs for efficiency are included in the macro-economic analysis, which estimates impacts on total consumer energy bills, employment, wages and GDP.  While we do not explicitly model how efficiency program costs impact retail electricity prices, the net effect on consumer energy bills takes into account these program costs.
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41 pp., 2007, $25.00, E079