A Cost Impact Analysis of the Renewable Energy and Energy Efficiency Portfolio Standard for Investor-Owned Utilities in North Carolina

Abstract

A Renewable Portfolio Standard (RPS) is a policy tool that sets a requirement for retail sellers of electricity to provide a minimum portion of their electricity sales from renewable resources. The RPS at state levels has become one of the most important policy incentives for stimulating clean energy expansion in electricity utilities in the United States. In 2007, North Carolina promulgated a Renewable Energy and Energy Efficiency Portfolio Standard (REPS), requiring the investor-owned utilities (IOUs) to meet up to 12.5% of their energy needs through renewable energy resources by 2021. This Master’s Project is designed to evaluate the cost and rate impacts of REPS on three IOUs in North Carolina from the perspective of retail market. Referring to the core modeling approaches and assumptions in the former technical report for North Carolina, this project establishes a cost impact model to compare the total annual cost of the Utilities’ Portfolio and Alternative REPS Portfolio from 2011 to 2030. The project also analyzes the impacts of different sensitivities. The results suggest that the REPS policy exerts no cost impact on IOUs until 2017 and a 0.54 cents/kWh increase of retail electricity rate will be reached in 2030 under the REPS obligation. According to sensitivity analysis, the extended availability of Production Tax Credit (PTC), high fuel price of coal and natural gas, as well as high construction cost of nuclear plant will reduce the total incremental cost of the REPS policy over 20 years. It is noted that the design of the alternative REPS Portfolio in this project introduces major differences in model results compared to the former technical report. Levelized cost assumptions and forecasts of future fossil fuel prices would bring other uncertainties to this Master’s Project.