Essays on Renewable Energy Markets and Environmental Policy

Abstract

My dissertation seeks to understand how firms and individuals make decisions in energy markets and the implications of those choices on the environment. Each of the three chapters focuses on different aspects of the electricity sector. The electricity sector is a vital part of the economy and can have serious consequences for local environments and the global climate.

In the first chapter, I focus on an emerging renewable energy market, the market for residential solar photovoltaic (PV) systems. Many national and local governments view solar PV investments as essential for reducing carbon emissions from the electricity sector and have offered generous subsidies to promote the technology. Despite government subsidies and declining PV hardware costs, total PV installation prices remain too high for the majority of households to adopt the technology. I investigate the impact of improving information access and price transparency in the rooftop solar market. In particular, I evaluate the effect of introducing an online platform on market prices, solar panel adoption, and welfare. In the second chapter, I measure the effect of regulatory policy uncertainty on investment choices at coal power plants. Environmental policy uncertainty has been especially apparent in recent years due to transitions in political power and court challenges of new federal agency rules. This uncertainty can make future market conditions less predictable and plausibly delays firms’ investments. To evaluate the effects of policy uncertainty on investment, I exploit a legal challenge to the Clean Air Interstate Rule (CAIR) that created variation in the probability that individual plants would need to comply with the new environmental regulations. Specifically, I compare pollution reduction investments at power plants located in states subject to more uncertainty to plants in states that that were not. In the final chapter of my dissertation, I investigate the benefits of expanding electricity storage capacity on the California electricity grid. Storage could reduce the cost of electricity and facilitate the expansion of intermittent renewable energy sources like wind and solar PV. In particular, I analyze the arbitrage value of a storage device in the California market during the three-year period from 2015 to 2017 and estimate how increases in solar generation change the value of storage.