Understanding the decarbonization and labor market implications of renewable energy policy in the US

About

In the United States, a low-carbon energy transition is underway. Utility-scale wind and solar projects have grown rapidly in recent years, and there are now more than 55,000 wind turbines and more than 1,000 solar plants installed in the US. The growth of this renewable generation and capacity reflects a myriad of factors, one of which is the implementation of Renewable Portfolio Standards (RPS). RPS policies mandate that renewable generation sources meet a specified fraction of electricity supply in a state. Despite difficulties in passing broad federal climate regulation in the US, 29 states and the District of Columbia have implemented RPS policies since 1993. 

An important motivation underlying low-carbon energy transition policies is the expectation that they create many new, high-quality jobs: from solar and wind turbine installation and maintenance workers, to pollution-control technicians and environmental engineers. This study explored how RPS policies impact the deployment of renewables across the U.S. over a long time horizon while also examining the specific implications of the renewable energy transition on labor market outcomes, such as wages, job creation and destruction, and long-term employment.

Approach

We employed recently developed, applied econometric methods to evaluate the links between RPS, the installation of solar and wind capacity, and the labor market in the United States. In the first stage of this project, we estimated a staggered adoption panel model to estimate the relationship between state-level RPS implementation and utility-scale solar and wind energy capacity and generation. In the second phase, we used a panel model to estimate the relationship between county-level deployment of renewables and local labor market conditions.

Key findings

Causal effects of Renewable Portfolio Standards on renewable investments and generation

Renewable Portfolio Standards (RPS) are the most prominent policy lever to stimulate investments in renewable electricity in the US. Despite a 30-year long history, RPSs remain controversial and debates continue to surround their efficacy in leading the low-carbon transition in the electricity sector. Contributing to the ongoing debates is the lack of definitive causal evidence on their impact on investments in renewable capacity and generation. Leveraging state-level data and recent econometric methods, we provide the most detailed analysis to date of the impact of RPSs on renewable electricity capacity investments and on generation. We find that, on average, RPS policies increase wind generation capacity by 600–1200 MW, a 44% increase, but have no significant effect on investments in solar capacity. Additionally, we demonstrate that RPSs have slow dynamic effects: most of the capacity additions occur 5 years after RPS implementation. Learn more in our Resource and Energy Economics publication. 

The US and many other advanced economies are at a turning point where detailed and aggressive decarbonization plans are established. The Clean Energy Standard proposed by President Biden in 2021 shares many features with RPSs as they have been implemented by U.S. states since 1991. Taken together, the evidence presented in our paper indicates that a national Clean Energy Standard may promote investments in wind and solar production capacity and actual generation of renewable electricity. 

Partners

This work was supported by the Alfred P. Sloan Foundation.