The spillover effect of mandatory renewable portfolio standards

Abstract

Renewable Portfolio Standards (RPSs) are one of the most prevalent and impactful clean energy policies implemented by states in the United States. This paper investigates the regional spillover effect of RPS policies using a directed dyad panel dataset of renewable electricity generation in US states from 1991 to 2021. Regional spillover effect is measured in two ways: by considering the influence of an RPS enacted in neighboring states and in states in the same regional transmission organization or independent system operator region. We use dyadic fixed effects estimation and conclude that the neighboring state’s RPS stringency score is a strong determinant of a state’s total renewable electricity generation. For states without an RPS, the positive influence of an RPS in a neighboring state is larger when the non-RPS state has more abundant renewable energy resources than the neighboring RPS state. Our findings suggest that past RPS policy evaluation research using a confined within-state focus may have underestimated the holistic impact of an RPS, as the impacts of an RPS policy can extend beyond the enacting state’s borders. Overall, this study contributes to an improved understanding of the holistic impact of state RPS policies.