The Economic Impact of Washington State's Renewable Portfolio Standard

Executive Summary

In 2006, Washington became the second state to implement a Renewable Portfolio Standard (RPS) via Initiative 937, the Energy Independence Act. The RPS had two primary requirements. The first was to require qualified utilities to “pursue all available conservation that is cost-effective, reliable, and feasible,” as well as the more common RPS requirement of producing a set percentage of energy from eligible renewable sources. “Qualifying utilities” — in the case of the Washington state RPS — refers to electric utilities that serve more than 25,000 Washington customers, which would be required to produce 15% of their electricity from renewable sources by 2020.

The Beacon Hill Institute has applied its STAMP® (State Tax Analysis Modeling Program) model to estimate the economic effects of these RPS mandates. The U.S. Energy Information Administration (EIA), a division of the Department of Energy, provides optimistic estimates of renewable electricity costs and capacity factors. This study bases our estimates on EIA projections, but we also provide three estimates of the cost of Washington’s RPS mandates — low, medium and high — using different cost and capacity factor estimates for electricity-generating technologies from other academic literature. Our major findings show:

  • The current RPS law will raise the cost of electricity by $1.22 billion for the state’s electricity consumers in 2020, within a range of $675 million and $1.675 billion
  • Washington’s electricity prices will rise by 13.6% by 2020, due to the current RPS law

These increased energy prices will hurt Washington’s households and businesses and, in turn, inflict significant harm on the state economy. In 2020, the RPS would:

  • Lower employment by an expected 8,650 jobs, within a range of 4,780 jobs and 11,885 jobs
  • Reduce real disposable income by $1.005 billion, within a range of $555 million and $1.38 billion
  • Decrease investment by $147 million, within a range of $81 million and $203 million; and
  • Increase the average electricity bill for households by $170 per year, for commercial businesses by an expected $1,135 per year, and for industrial businesses by an expected $13,225 per year

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The Beacon Hill Institute at Suffolk University develops and performs economic and statistical analyses of current and emerging public policy issues. Washington Policy Center is a non-partisan, independent research organization in Washington state. Nothing here should be construed as an attempt to aid or hinder the passage of any legislation before any legislative body.