Abstract

This paper looks at Ohio Senate Bill 221 (SB 221) and its effects on the Ohio wholesale electricity market. I analyze the merit order effects of renewable energy on the market through SB 221. Merit order effects are the result of changes in the price of electricity due to merit ordering – the resulting sequence by which electricity producers are ranked due to their marginal costs. When the merit order is changed, merit order effects are generated. Using a difference-in-difference approach, I analyze electricity retail price data for Ohio (the treatment group), against three different control groups: Michigan, Maine, and Pennsylvania, covering the period 2006 – 2014. I find that Ohio SB 221 was successful in lowering electricity prices during its implementation when compared to other states. I also find that states within Ohio’s regional transmission organization (RTO) (PJM Interconnection LLC (PJM)) are also affected by the bill. One would expect that initial investments in a new technology would cause electrical prices to rise as firms construct renewable energy generators, storage, and hire specialist for this technology. However, I do not find that prices initially rose during the initial implementation of SB 221 during 2009. If electrical prices did rise during the first quarters of 2009 (2009q1 to 2009q3), it was overcome by the decrease in price (fully operational renewables) by the end of the fourth quarter and subsequent quarter years following 2009. Thus, I conclude that a renewable energy policy like SB 221 increases merit order effects, reducing price of electricity, through the addition of renewables. States should work together in crafting bilateral bills which increase renewable energy in energy generation profiles. This would reduce increases in electricity price in neighboring states under similar RTO regions when bills are passed in a single state.

Advisor

Luri, Moses

Department

Business Economics

Disciplines

Energy and Utilities Law | Energy Policy | Power and Energy

Keywords

renewable energy, electricity, ohio, difference-in-difference, alternative energy, energy, policy

Publication Date

2021

Degree Granted

Bachelor of Arts

Document Type

Senior Independent Study Thesis

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