California's Soft Renewable Portfolio Standard

Abstract

Across the world, there is a growing commitment to power from renewable sources. The benefits are obvious and well known: reduce reliance on fossil fuel consumption and thereby achieve both lower greenhouse gas emissions and greater local control over the power industry. The main challenge, however, is that private costs of green power production remain higher than for power from conventional resources. There are numerous policy approaches that can be used to overcome this competitive disadvantage, one of which is to legislate that power from renewable sources is to constitute a minimum percent of all power sold to end users, i.e., a Renewable Portfolio Standard (RPS). Such standards have previously been reviewed in general terms by Rader and Norgaard (1996), who motivate the RPS on efficiency grounds given market imperfections. Rader (1998) points out that it is unlikely that restructured electricity markets will enhance the market position of renewable sources of electricity. Accordingly, many states and countries that have gone through restructuring to enhance competition have adopted an RPS. Berry and Jaccard (200 I) review implementation issues in several countries and US stales that have taken this route.