Emissions, Transmission, and the Environmental Value of Renewable Energy

American Economic Journal: Economic Policy


We examine how transmission congestion alters the environmental benefits provided by renewable generation. Using hourly data from the Texas and Mid-Continent electricity markets, we find that relaxing transmission constraints between the wind-rich areas and the demand centers of the respective markets conservatively increases the non-market value of wind by 30% for Texas and 17% for Mid-Continent markets. Much of this increase in the non-market value arises from a redistribution in where air quality improvements occur— when transmission is not constrained, wind off-sets much more pollution from fossil fuel units located near highly populated demand centers.