Duncan Callaway, Meredith Fowlie, and Gavin McCormick, "Location, Location, Location: The Variable Value of Renewable Energy and Demand-side Efficiency Resources" (September 2015) (Revised version published in the Journal of the Association of Environmental and Resource Economists, 5(1): 39-75, January 2018) Full Paper
Greenhouse gas mitigation efforts in the electricity sector emphasize accelerated deployment of energy efficiency measures and renewable energy resources. We evaluate renewable energy (RE) and energy efficiency (EE) technologies across regional power systems in the United States in terms of carbon dioxide emissions displaced, operating costs avoided, and capacity value generated. We estimate that external, emissions-related benefits account for between one quarter and one half of the total value generated per MWh over our study period. Regional variation in these emissions benefits gives rise to economically significant, regional differences in second-best production subsidies. This variation is not reflected in the prevailing policy incentives that currently guide new investments.