Feasibility of U.S. Renewable Portfolio Standards Under Cost Caps and Case Study for Illinois

Abstract

Recently enacted state Renewable Portfolio Standards (RPSs) collectively require that U.S. electricity generation by non-hydro renewables more than double by 2025. These goals are not certain to be met, however, because many RPSs apply cost caps that alter requirements if costs exceed targets. We analyze here the 2008 Illinois RPS, which is fairly typical, and find that at current electricity prices, complete implementation will require significant decreases in renewables costs even given the continuation of federal renewables subsidies. Full implementation is possible but not assured. The statutory design raises additional concerns about unintended potential consequences. The fact that windpower and solar carve-outs fall under a single cost cap means that in failure mode, a less cost-effective technology can curtail deployment of a more cost-effective one. Adjacent-state provisions mean the bulk of the RPS can be met by existing wind facilities and that new wind builds will likely occur in Iowa. The Illinois RPS, like that of many other states, appears to combine objectives inherently in conflict: preferences for local jobs, for specific technologies, for environmental benefits, and for low costs. Revisiting the legislation may be needed to make legislative success likely and to ensure that failure modes do not compromise goals.