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CEIC-07-14

"Do RTOs Promote Renewables? A Study of State-Level Data over Time"
Kathleen Spees and Lester Lave

Abstract:
We examine data for the 48 contiguous states from calendar years 1990 to
2005 to explore whether a state's membership in an organized wholesale market promotes the development of renewable electricity generation. Since states in regional transmission organizations (RTOs) generate most of the renewable electricity, some have asserted this is a benefit of RTOs. We find that, in contrast to wind, much of the development of geothermal, wood, and waste biomass took place prior to states joining RTOs. The development of solar and geothermal is concentrated in only a few states, preventing a firm conclusion about the role of RTOs. Our statistical analysis of wind, wood, and waste estimated a structural model of renewables development using feasible generalized least squares to correct for autocorrelation and heteroscedasticity. The estimated coefficients have the hypothesized signs except for the negative, statistically significant coefficient for membership in an RTO, implying that membership in an RTO impedes the development of the wind resource. The regressions for wood and waste biomass do not show a significant coefficient with RTO membership. We explored a wide range of plausible specifications for the relationship between renewables, membership in an RTO, and other factors, finding little indication that RTOs promote renewables. We cannot explain the indication that RTOs are negatively correlated with the development of wind.

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