Preventing early lock-in with technology-specific policy designs: The Renewable Portfolio Standards and diversity in renewable energy technologies

Abstract

While renewable energy (RE) deployment policies can help drive down the costs of RE technologies, they may lead to premature lock-in of the current dominant technology and result in long-term inefficiency. Recent literature has developed a technology-specificity framework to analyze how the technology-specificity level of deployment policies affects technology selection and avoids early technological lock-in. Adopting this framework, we ask whether RE deployment policy designs that specifically target different technology tiers promote RE diversity and avoid premature technological lock-in in the RE market. We examine this research question in the context of Renewable Portfolio Standards (RPS) in the United States, which has a unique design feature of nested technology specificity. Using panel data of 50 states between 1997 and 2016, we examine the effects of the nested RPS designs on diversifying RE technologies and the interactions between different tiers of technology-specificity designs. We find that field-level RPS targets do not have a statistically significant impact on diversifying RE technologies; however, they act as a base for technology-specific RPS designs. Empirical evidence suggests that quantity-based set-aside targets increase in-state shares of the targeted technologies, whereas price-based credit multipliers on competitive technologies have a spillover effect on less competitive technologies.