Initial review of “Impacts of Voluntary Renewable Energy Demand on Deployment: A Market-Based Approach”

The US Environmental Protection Agency’s (EPA) Green Power Partnership published a report in January 2025 on the impacts of the voluntary market for renewable energy certificates (RECs) and power purchase agreements (O’Shaughnessy, 2025). The following provides a brief initial review of the report and the robustness of the results.

1. A key input value used in the report is a price elasticity of supply coefficient from a study of compliance RECs, and therefore a key assumption in the analysis is that this is representative of the price elasticity of supply for voluntary RECs. One reason for expecting that it is not representative is due to the uncertainty of future prices for voluntary RECs, which means they are discounted by investors (Gillenwater et al., 2014), and an increase in voluntary REC prices/revenues is unlikely to cause the same supply response as compliance RECs. The price data in the report illustrates the volatility/uncertainty of voluntary REC prices.


2. Another reason why the price elasticity of supply coefficient that is used should not be assumed to be representative is that study from which the coefficient was sourced was published in 2011, and it is likely that significant aspects of the market have changed since that time, e.g. increasing interconnection queue bottlenecks and transmission constraints. These factors would decrease the price elasticity of supply coefficient and reduce the estimate of impact from voluntary REC purchasing. It is also worth noting that the source of the coefficient is a working paper that does not appear to have subsequentially gone through peer review.


3. The narrative summary of the findings, in the Summary section and the Conclusions, does not accurately reflect the results from the analysis. For example, the report states that ‘These results suggest that the voluntary market is a key component of the U.S. renewable energy transition’ (O’Shaughnessy, 2025, p. 1). However, the lower estimate (which may be significantly lower given the points above) is that voluntary REC revenues caused 7% of new renewable capacity. It is questionable whether 7% warrants the description of being a ‘key component’ and a more neutral framing would discuss this.


4. The report states that revenues ‘that increase profits for already-profitable projects may bolster the overall viability of individual renewable energy developers or the industry in the aggregate.’ (O’Shaughnessy, 2025, p. 5). It is questionable whether profit-maximising firms would cross-subsidise non-financially viable projects, i.e. this is contrary to profit maximisation/capital allocation theory.


5. The way the market-level analysis is described appears to assume the conclusion that it is seeking to prove, e.g. ‘The core distinguishing feature of the market-level analytical framework is that market inputs must result in market outputs’ (O’Shaughnessy, 2025, p. 7). Assuming that the conclusion is true does not provide evidence that the conclusion is actually true.


6. The report does not clearly identify the factors that apply at the market-level, and which are not considered within project-level analysis. One type of effect that is not included within project-level analysis are spill-over effects, e.g. if an initial project causes the construction of transmission infrastructure which then enables further projects, or if the deployment of a technology reduces the costs of subsequent projects via learning rates. However, spill-over effects are not mentioned within the market-level analysis in the report.


7. The report discusses existing project-level financial modelling and energy systems modelling methods, but does not mention econometric methods e.g. Hamburger and Harangozó ​(2018)​. Econometric models provide a form of ‘market-level’ analysis, different to that undertaken in the report, and should also be considered. Such methods can be used for estimating the price elasticity of supply for voluntary RECs.

References

1. Gillenwater, M., Lu, X., & Fischlein, M. (2014). Additionality of wind energy investments in the U.S. voluntary green power market. Renewable Energy, 63, 452–457.


2. Hamburger, Á., & Harangozó, G. (2018). Factors affecting the evolution of renewable electricity generating capacities: A panel data analysis of European countries. International Journal of Energy Economics and Policy, 8(5), 161–172.


3. O’Shaughnessy, E. (2025). Impacts of Voluntary Renewable Energy Demand on Deployment: A Market-Based Approach.

Read the other thought leadership articles in Matthew’s series on scope 2 emissions and electricity reporting

• Why a causal relationship is essential for accurate market-based greenhouse gas inventories
• Additionality, deliverability, and double counting in scope 2 greenhouse gas emissions accounting

Author

Matthew Brander is our Personal Chair of Carbon Accounting.