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Renewable Energy in the United States: Policy
Effectiveness and Economic Issues
Kristin M. Beattie
Interdisciplinary Engineering and Management, Honors Program
Clarkson University, Potsdam, NY
Mentor: Dr. Fredric Menz
Professor, Department of Economics
Clarkson University, Potsdam, NY
The United States currently relies heavily on nonrenewable sources of energy. These
nonrenewable resources have a finite amount and as they are depleted, environmental impacts and the
costs of energy rise. Renewable energy resources, most of which come directly or indirectly from the
sun’s energy, are constantly being replenished and will never run out. According to the Energy
Information Administration (EIA, 2003a), renewable energy accounted for approximately 2% of the
total electricity produced in the United States in 2001. Coal accounted for 51%, nuclear 21%, natural
gas 17%, hydro 6%, and other 3% (including oil, municipal solid waste, and other fuels).
Figure 1: United States Electricity Production, 2001
Nuclear
21%
Natural Gas
17%
Hydro
6%
Coal
51%
Other
3%
Renewable
Energy
2%
Source: Energy Information Administration, 2003a.
Renewable energy that has little to no negative effect on the environment is called green
energy. Switching from conventional fossil fuels to green energy sources greatly benefits the
environment, produces jobs and economic benefits, and decreases dependence on foreign fuel
providers which strengthens U.S. energy security. The resources available for green energy
production in US include wind energy (kinetic energy of wind used for electricity generation in wind
turbines), solar energy (solar radiation utilized for hot water production or electricity generation),
biomass (any plant matter used directly as fuel or converted into other forms before combustion),
geothermal (energy available as heat emitted from within the earth’s crust, usually in the form of hot
water or steam), and small scale hydropower (potential and kinetic energy of water converted into
electricity in hydroelectric plants).
Kristin Beattie, 2005, Engineering & Management, Clarkson University
Honors Program Summer Research Program
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In a report done by the Union of Concerned Scientists, the potential production of green
energies in the United States was estimated. They estimated, with realistic assumptions, that the US
could produce 14,244 billion kWh using wind energy, 2203 billion kWh using solar photovoltaic
energy, 742 billion kWh using biomass, and 191 billion kWh using geothermal energy. They’ve
calculated individual state potentials as well, with over half of the states producing more than 50% of
their total electricity sales in 2001 and some well over 1,000%. (Deyette, Clemmer, and Donovan,
2003.)
These capacities are more realizable since the recent deregulation of the electric power
industry. Federal and state initiatives have deregulated the electric power industry from highly
regulated monopolies, which provided a total package of all electric services to their customers, to
competitive companies that provide electricity while the utilities continue to provide transmission and
distribution services. States no longer make regulations that set rates for electricity and seek an
increasingly deregulated industry where competitive markets determine the prices. This deregulation
has increased renewable energy usage by giving consumers the choice to purchase green power
instead of conventional power. Eighteen states have restructured their electric power industry (EIA,
2003b).
While public opinion polls repeatedly reveal customer interests in purchasing renewable
power even if it costs more than non-renewable power, only a small percentage of customers follow
through with that interest. A reason for this is that green power development faces many barriers in
the United States, including regulatory, economic, and institutional barriers. Policies enacted to
promote renewable energy should be attempts to remove these barriers.
There are many different incentive programs that exist in different states to promote the use of
renewable energy technologies. The three main categories of policies to promote green power are
financial incentives, volunteer and outreach programs, and rules and regulations.
The financial incentives include personal income tax exemptions, corporate tax exemptions,
sales tax exemptions, property tax exemptions, rebate programs, grant programs, loan programs,
industry recruitment programs, leasing/lease purchase programs, and production incentives. There are
currently 200 financial incentives in place that promote renewable energy in the United States
(DSIRE, 2003).
Volunteer and Outreach Programs include green pricing programs, voluntary installer
certification programs, and outreach programs. At present, there are 201 volunteer and outreach
programs in place to promote renewable energy in the United States (DSIRE, 2003).
Rules, regulations, and policies include public benefits funds, generation disclosure rules,
renewable portfolio standards, net metering rules, line extension analysis requirements, contractor
licensing requirements, equipment certifications, solar access laws, construction and design standards,
green power purchasing/aggregation, and mandatory utility green power options. There are currently
216 rules, regulations, and policies in place to promote renewable energy in the United States (DSIRE,
2003).
A study done by the National Renewable Energy Laboratory (NREL), which analyzed ten
state financial incentive programs in six states using a case-study approach, found several reoccurring
themes regarding the effectiveness of policies enacted to promote renewable energy. The NREL’s
recommendations for effective incentive programs include the need to educate the public about
renewable energy technologies and the incentive programs available, for generous, long term
incentives that decrease over time, easy and concise application forms, quality assurance mechanisms,
complementary packages of incentives, and tracking the details of each program for future
effectiveness studies (Wisner, Pickle, and Eto, 1998).
The Union of Concerned Scientists (UCS) also studied the effectiveness of state programs that
promote renewable energy. The UCS advocates a national Renewable Portfolio Standard (RPS) to
increase renewable energy production and consumption. Their study, which analyzed many individual
state RPS programs in place, predicts an increase in supply and demand for green energy with the
Kristin Beattie, 2005, Engineering & Management, Clarkson University
Honors Program Summer Research Program
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enactment of a national RPS. The UCS feels that a national Renewable Portfolio Standard is
necessary for the nation to use renewable energy technologies as a significant amount of its energy
production (Deyette, Clemmer, and Donovan, 2003). A Renewable Portfolio Standard requires that
any company selling electricity in a competitive market include a certain percentage of renewable
energy as part of its portfolio of generating fuels. Many state governments are preparing a RPS and
some have implemented one. Seventeen states have enacted a Renewable Portfolio Standard: Arizona,
California, Colorado, Connecticut, Florida, Hawaii, Illinois, Iowa, Maine, Massachusetts, Minnesota,
Nevada, New Jersey, New Mexico, Pennsylvania, Texas, and Wisconsin (DSIRE, 2003).
By increasing the nation’s dependence on renewable sources of energy, the United States
could benefit environmentally and economically, strengthen national security, and improve the health
of its inhabitants. Strong commitments to adopting renewable energy technologies, through
regulations and mandates, financial incentives, and outreach programs, are necessary to realize these
benefits.
References
Deyette, Jeff, Steve Clemmer, and Deborah Donovan. 2003. Plugging in Renewable
Energy, Grading the States. Union of Concerned Scientists, Cambridge, MA.
DSIRE: Database of State Incentives for Renewable Energy. 2003.
http://www.dsireusa.org. Last accessed on 15 July 2003.
Energy Information Administration, 2003a. Annual Energy Review 2001: Energy
Overview. http://www.eia.doe.gov/emeu/aer/overview.html. Last accessed 15 July 2003.
Energy Information Administration. 2003b. Electricity Restructuring Fact Sheets.
http://www.eia.doe.gov. Last accessed 20 June 2003.
Wisner, Ryan, Steven Pickle, and Joseph Eto. 1998. Details, Details… The Impact of
Market Rules on Emerging “Green” Energy Markets. LBNL-41812. Berkeley, CA:
Lawrence Berkeley National Laboratory.
Kristin Beattie, 2005, Engineering & Management, Clarkson University
Honors Program Summer Research Program