RUNNING IN PLACE:RENEWABLE PORTFOLIO STANDARDS AND CLIMATE CHANGEByMichael T. HoganB.S. Aerospace & Aeronautical EngineeringB.A. PhilosophyUniversity of Notre Dame, 1980Master of Business AdministrationHarvard University, 1988SUBMITTED TO THE DEPARTMENT OF URBAN STUDIES AND PLANNING INPARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OFMASTER OF SCIENCE IN URBAN STUDIES AND PLANNINGAT THE MASSACHUSETTS INSTITUTE OF TECHNOLOGYSEPTEMBER 2008©2008 Michael T. Hogan. All rights reserved.This author hereby grants to MIT permission to reproduce and to distribute publicly paperand electronic copies of this thesis document in whole or in part in any medium now knownor hereafter created.Signature of Author: ___________________________________________________________Department of Urban Studies and Planning15 August 2008Certified by: __________________________________________________________________Lawrence E. SusskindFord Professor of Urban and Environmental PlanningDepartment of Urban Studies and PlanningAccepted by: __________________________________________________________________Xavier de Souza BriggsAssociate ProfessorDepartment of Urban Studies and Planning
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RUNNING IN PLACE:RENEWABLE PORTFOLIO STANDARDS AND CLIMATE CHANGEbyMichael T. HoganSubmitted to the Department of Urban Studies and Planning on 18 August 2008 in partialfulfillment of the requirements for the degree of Master of Science in Urban Studies andPlanningABSTRACT
Renewable portfolio standards (“RPS”) have spread widely as states have made an effortto promote electricity production from renewable energy sources, granting privileged marketaccess to eligible technologies and resources. One prominent public policy objective drivingtheir rapid adoption and expansion in recent years has been the desire to mitigate greenhouse gasemissions from the power sector. Eighty percent of power sector CO
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, and thus one third of allU.S. CO
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, comes from 620 conventional coal-fired power plants. Any one of the range of recentproposals to mitigate U.S. GHG emissions will require dramatic reductions in the CO
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emissionsfrom these plants. This constitutes the essential challenge of power sector GHG policy – in avery real sense, nothing else matters.With this in mind, I have reviewed four state RPS programs – Connecticut, Minnesota,Colorado and California. I offer a thorough analysis of the available data regarding theexperience to date in each of these states as well as indications of future compliance activity. Mykey finding is that the dominant policy approach imposes three key constraints on the RPSmarket space – targets expressed only in units of bulk energy, aggressive quantities andtimelines, and restrictive program cost limits – resulting in the over-stimulation of terrestrialwind at the expense of other renewable technologies often far better suited to displacing coal andfar more likely to experience dramatic improvements in cost and performance.In order to enhance the efficacy of these programs as climate policies, the followingreforms are recommended: (1) create bands based on technological maturity and strongly favorpromising early-stage technologies; (2) express targets in metrics more appropriate to replacingthe grid’s reliance on coal-fired plants; (3); establish compliance guidelines allowing marketparticipants to select higher-cost, early-stage technologies that promise a wider range of servicesbefitting their system requirements; (4) express cost constraints in terms of overall program costrather than per-unit price caps; (5) skew compliance schedules to smaller quantities fromtargeted early-stage technologies at the front end, ramping up more rapidly at the back end; and(6) optimize program costs and benefits by allowing some portion of compliance throughgeographically unrestricted purchase of renewable energy credits, with the balance mandatedthrough purchases from strategic local resources.Thesis Supervisor: Lawrence E. Susskind, Ford Professor of Urban and Environmental PlanningThesis Reader: Henry D. Jacoby, Professor of Management, Sloan School of Management
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