Location, location, location: The variable value of renewable energy and demand-side efficiency resources

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. ∗Callaway: Energy and Resources Group, 310 Barrows Hall, Berkeley CA 94720 (e-mail: [email protected]); Fowlie: Department of Agricultural and Resource Economics, University of California, Berkeley, CA 94720 (e-mail: [email protected]); McCormick: Department of Agricultural and Resource Economics, University of California, Berkeley, CA 94720). The authors would like to acknowledge the generous support of the UC Berkeley Hellman Faculty Fund. We thank Ryan Kellogg and seminar participants at UC Berkeley and the University of Alberta for helpful comments and suggestions.