In recent years, both compliance and voluntary markets have emerged to help support the development of renewable energy resources. Compliance markets are primarily driven by state renewable portfolio standards (RPS), which require utilities or other load serving entities to procure renewable energy for part of their electricity supplies. Voluntary markets differ in that they provide consumers with the option to purchase or support renewable energy for a portion or all of their electricity needs. We refer to this as the voluntary market or the “green power market” because these renewable energy purchases are made on a voluntary basis, driven largely by an interest in using cleaner and more sustainable sources of electricity. In addition to these two markets, utilities may also enter into contracts for renewable energy generation that is deemed cost competitive under the Integrated Resource Planning (IRP) process or otherwise, but we do not focus on renewable energy obtained through IRP processes in this paper. Both compliance and voluntary renewable energy markets are growing rapidly. Today, about half of U.S. states have RPS policies in place, with a number of these policies adopted in the last several years. In addition, many states have recently increased the stringency of their RPS policies. For example, Colorado expanded from a 10% renewable energy target to a 20% target in March 2007. And a national RPS is being debated in Congress. Voluntary markets are also growing rapidly, driven largely by interest on the part of large corporations and institutional customers. In fact, renewable energy sales in voluntary markets have grown at rates ranging from 40% to 60% annually for the past several years. Collectively, the compliance and voluntary renewable energy markets made up an estimated 1.7% of total U.S. electric power sales in 2006. [1] As these markets evolve and grow, a number of issues arise with respect to their interplay. For example, how do these two markets interact in terms of providing demand for renewable energy and supporting new renewable energy development? Are these markets complementary? Do voluntary consumer purchases support renewable energy beyond those supported by renewable energy mandates? Do the markets support different technologies or renewable energy development in different regions of the country? How does demand from the two markets impact prices? And, finally, as the number and stringency of RPS policies increases, is there a need for voluntary markets and will consumers continue to be interested in making voluntary purchases?
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