econ486 exam2

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REC

A tradable certificate that proves renewable energy was produced.

why are RECs relevant

Utilities need RECs to meet their RPS targets.
you can trade RECs with each other to meet their clean energy goals.

RPS

rule that requires utilities to get a certain % of their electricity from renewable sources like wind or solar

what policies encourage renewables?

• Production tax credit

• Investment tax credit

• Renewable portfolio standards

• Feed-in tariff

• Rebates

• Net metering

Why is the transition to wind & solar so gradual?

old fossil plants are still running and building new renewables takes time

How do cost of wind/solar compare to natural gas?

Wind and solar are often cheaper or competitive on cost (LCOE), but natural gas is still more flexible and available anytime.

How do RPS and other policies help?

push utilities to buy clean energy, and offer money or market guarantees to make renewable projects more attractive.

How do investors choose which technology to invest in?

They look at cost (LCOE), value (LACE), and incentives (like tax credits or RECs)

LCOE vs LACE

LCOE tells us the cost, LACE tells us the value. A project is a good investment if LACE > LCOE.

LACE?

Levelized Avoided Cost of Electricity
The value of the electricity the plant generates — how much it offsets more expensive electricity elsewhere.

LCOE

Levelized Cost of Electricity

The average cost to build and run a power plant over its lifetime, per unit of electricity.