What drives variation in the marginal benefits of renewable energy and demand - side efficiency

Greenhouse gas mitigation efforts in the electricity sector emphasize accelerated deployment of energy efficiency measures and renewable energy resources. Short-run benefits associated with incremental investments in energy efficiency or renewables manifest indirectly as reductions in the economic operating costs and emissions of marginal electricity generating units. We evaluate different renewable energy (RE) and energy efficiency (EE) technologies across regional power systems. Using standard social cost of carbon assumptions, our estimates of emissions-related benefits comprise a significant share of estimated returns on investment in some regions. On a per-MWh basis, regional variation in emissions displaced and costs avoided is more significant than variation across technologies within individual regions. This implies that the choice of location, more than the technology choice, determines the value generated by these investments. We also find that regional variation in avoided carbon benefits generates significant regional variation in the implied abatement costs associated with each technology. These results underscore the importance of designing policy incentives that accurately capture regional differences in emissions-related returns on RE and EE