Impacts of Voluntary Renewable Energy Demand on Deployment: A Market-Based Approach


Impacts of Voluntary Renewable
Energy Demand on Deployment:
A Market-Based Approach

Prepared for:

U.S. EPA's Green
Power Partnership

Prepared by:

Dr. Eric O'Shaughnessy



&EPA

GREEN
POWER

PARTNERSHIP

January 2025

EPA Publication Number: 430S25001

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Impacts of Voluntary Renewable Energy Demand on Deployment:

A Market-Based Approach

Summary

Millions of electricity customers in the United States voluntarily buy renewable energy through
a variety of market-based procurement strategies. This procurement is called "voluntary" to
distinguish it from renewable energy procured to comply with state clean energy mandates.
Renewable energy use for both voluntary and compliance purposes is legally tracked through
the same market-based instruments. The legal foundation of the voluntary renewable energy
market lets buyers signal support for more renewable electricity. Those market signals do not
necessarily map directly to the deployment of new renewable energy projects. However, the
voluntary market generates revenues and long-term demand signals that are likely to affect
decisions to deploy projects. In public claims (e.g., corporate sustainability reports), some
voluntary buyers imply that voluntary renewable energy procurement drives the deployment of
new projects. As a result, market participants and observers have become increasingly
interested in the impact of the voluntary market on new renewable energy projects.

Prior research on the impacts of voluntary renewable energy demand is primarily based on
modeled outcomes of individual projects or of modeled energy systems. Project- and system-
level modeling provide useful but limited approaches for characterizing the full impacts of
voluntary renewable energy demand. Here, we develop an alternative approach that describes
voluntary market impacts in terms of the estimated effects of voluntary market functions
(revenues, de-risking through long-term contracts, and long-term demand signals) on the
renewable energy development industry in the aggregate. We analyze observed market-level
metrics in four categories:

•	Market size. Voluntary market sales have grown for over two decades, reaching about
319 million megawatt-hours (MWh) in 2023, or about 44% of all U.S. non-hydropower
renewable energy sales.

•	Long-term contracts. Voluntary buyers have collectively signed long-term contracts to
procure energy from over 70 gigawatts (GW) of renewable energy capacity.

•	Voluntary market revenues. An estimated $3 billion to $5 billion of voluntary market
revenues accrued to the U.S. renewable energy industry from 2014 to 2023, in addition
to about $5 billion to $10 billion in power sales in voluntary long-term contracts.

•	Voluntary buyer public commitments. Hundreds of non-residential institutions have
made credible public commitments to voluntarily procure renewable energy.

Based on these metrics, we estimate that the voluntary market drove 17-60% of non-
hydropower renewable energy deployment outside of state clean energy mandates from 2014
to 2023, or 7-25% of all renewable energy deployment. These results suggest that the voluntary
market is a key component of the U.S. renewable energy transition. We suggest that analysis

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Impacts of Voluntary Renewable Energy Demand on Deployment: A Market-Based Approach

from multiple perspectives can support a more comprehensive and accurate understanding of
the role of the voluntary market in the renewable energy transition.

1. Introduction

Millions of U.S. retail electricity customers voluntarily buy renewable energy through various
market-based procurement strategies. This procurement is called "voluntary" to distinguish it
from renewable energy procured to comply with state clean energy mandates. In this report, we
use the term "voluntary demand" to refer to all voluntary procurement of renewable energy,
and we use the term "voluntary market" to refer to the ecosystem of market exchanges of
renewable energy between generators, market intermediaries, and end users. Voluntary market
exchanges do not necessarily imply that buyers caused new renewable energy capacity to be
added to the grid (Harvard Law 2024). However, the voluntary market provides additional
revenues and long-term demand signals that are likely to affect the supply of renewable energy.
Voluntary demand can therefore have a real-world impact on renewable energy deployment. In
this report, we explore the degree to which the voluntary market supports the deployment of
new renewable energy projects. We provide further clarity on concepts of impact in Section 2.
Voluntary market stakeholders are exploring other impacts, including effects on grid emissions,
environmental impacts, and social impacts. These other related impacts are important
considerations for future work but are outside the scope of this report.

The voluntary market's impact on renewable energy deployment has become an area of
growing interest among scholars, voluntary buyers, policymakers, and other market
stakeholders. Voluntary market impacts have primarily been analyzed through modeled
outcomes of individual projects or energy systems (Langer, Brander et al. 2024). Project- and
system-level modeling can be powerful tools for understanding voluntary market impacts and
informing the decisions of voluntary buyers. However, as will be discussed in Section 2, these
modeling approaches have important limitations that affect the interpretation of results from
prior studies.

Voluntary market impact research in this vein to date has supported the conclusion that broad
classes of voluntary procurement strategies are not impactful (Brander 2024, Langer, Brander et
al. 2024). However, this conclusion conflicts with perceptions among practitioners that
voluntary demand drives renewable energy deployment (Horwitz, Fratzscher et al. 2024,
O'Shaughnessy 2024), and is difficult to reconcile with basic observations of the voluntary
market. By any estimate, the voluntary market has pumped billions of dollars of additional
revenues on a cumulative basis into the renewable energy industry and underpins credible
renewable energy procurement commitments by some of the world's largest electricity users.
Economic theory would suggest that these revenues and long-term demand signals should
affect supply decisions in a competitive market context such as renewable energy development.

In this report, we aim to describe voluntary market impacts in terms of the estimated effects of
voluntary market functions (e.g., revenues, long-term demand signals) on the renewable energy
development industry in the aggregate. For simplicity, we refer to this approach as market-level
analysis. In contrast to prior research, market-level analysis ensures that market inputs (e.g.,

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Impacts of Voluntary Renewable Energy Demand on Deployment: A Market-Based Approach

revenues) are mapped to market outputs (e.g., deployment), as is consistent with economic
theory for behavior in competitive markets. The following section provides further background
on voluntary market impacts, existing research, and market-level analysis.

2. Background: Voluntary market and impact research

Renewable energy use (both voluntary and compliance) is legally tracked through market-based
instruments known as renewable energy certificates (RECs). RECs represent legal claims to the
clean energy attributes of renewable energy generation and are the legal basis for all renewable
energy use claims in the United States (Jones 2023, Harvard Law 2024). The purchase of
renewable energy, as substantiated by RECs, verifies that renewable energy was generated and
used, not that new renewable energy capacity was deployed (i.e., added to the grid). Voluntary
demand is only one of the many factors that drive renewable energy deployment. As a result, a
unit of voluntary demand cannot generally be mapped to an additional unit of renewable
energy generation on a 1:1 basis. Still, voluntary demand serves market functions that should
affect supply decisions in the competitive market context of renewable energy development.
This section explores those market functions, how previous research has estimated voluntary
market impacts, and our motivation for developing a new estimation approach.

2.1 Voluntary renewable energy market functions

Renewable energy developers face the challenge of proposing projects that can generate
enough expected revenues to offset initial investment and operating costs to yield long-term
profits. Forecasted profits allow developers to raise capital to cover the up-front construction
costs of new projects, typically through debt and equity financing. Public subsidies (e.g., tax
credits) and the long-term decline of solar and wind construction costs have improved project
financial viability (Wiser, Rand et al. 2021). However, lower costs do not necessarily equate to
greater profit, and renewable energy project development remains a competitive business with
tight financial margins (Christophers 2024). Despite decades of falling costs, renewable energy
developer profit margins have remained stable over the past decade and remain far lower than
the profit margins of fossil fuel companies (Elliott 2024).

In the competitive market context of renewable energy development, economic theory suggests
that supply decisions are affected by market signals such as price and long-term demand.
Voluntary demand is one of the many factors that affect those market signals and can influence
renewable energy development and investment decisions. Voluntary demand involves at least
three market functions that can drive development decisions:

• Revenues. Voluntary demand provides a revenue source for renewable energy projects.
Economic theory suggests that those revenues must affect renewable energy
development decisions in a competitive market context. However, a unit of voluntary
demand cannot be mapped to a unit of additional renewable energy supply on a 1:1
basis. Rather, voluntary market revenues affect the context in which renewable energy
development and investment decisions are made.

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Impacts of Voluntary Renewable Energy Demand on Deployment: A Market-Based Approach

• De-risking through long-term contracts. Future revenue streams are inherently
uncertain and investments in renewable energy projects are inherently risky. Project
developers seek to "de-risk" project finances as much as possible, primarily by fixing
revenues through long-term contracts (Beiter, Guillet et al. 2023). In 2023, long-term
contracts supported more than 90% of new off-site renewable energy capacity (Barbose
2024). Certain voluntary procurement strategies such as long-term power contracts and
long-term REC contracts can help developers de-risk their projects and obtain
investment.

• Long-term demand signals. Voluntary buyer commitments to procure renewable energy
can create signals that affect developer and investor expectations for future revenues.
Certainty around future demand can affect the long-term strategies of investors in ways
that are not necessarily captured in analysis of current revenues (Birch and Siebert
1976). Insofar as voluntary commitments enhance perceptions of stable long-term
demand, such commitments should facilitate project developer access to finance and
drive deployment.

2.2 Review of impact research to date

Economic theory suggests that the voluntary market functions outlined above—revenues, de-
risking, and long-term demand signals—affect the decisions of renewable energy developers
and investors, and thus ultimately affect deployment. Analyzing the impacts of voluntary
demand on renewable energy deployment could help inform voluntary buyer decisions and
frameworks that shape the voluntary market.

In a review of studies analyzing voluntary market impacts, Langer et al. (2024) found that
scholars have largely explored voluntary market impacts through financial modeling of
individual projects (i.e., project-level modeling) (Gillenwater 2008, Gillenwater 2013,
Gillenwater, Lu et al. 2014, Brander, Gillenwater et al. 2018) or through energy systems
modeling (i.e., system-level modeling) (Olson, Patel et al. 2024, Xu, Ricks et al. 2024). Langer et
al. note that studies have generally analyzed impact in terms of whether certain actions cause
outcomes that would not have occurred in counterfactual scenarios without those actions. We
will refer to this framework as counterfactual analysis, though the literature often uses the term
"additionally" to describe the same concept.

Project- and system-level modeling to date have yielded diverse conclusions about the impacts
of different voluntary market procurement strategies. For the purposes of this report, we
summarize two key conclusions and claims that have emerged from these analyses:

• Many studies conclude that REC revenues do not meaningfully drive renewable energy
project development decisions (Gillenwater 2008, Gillenwater 2013, Gillenwater, Lu et
al. 2014, Brander, Gillenwater et al. 2018), a conclusion that is often cited in the broader
discourse (O'Shaughnessy 2024). A core assertion in these conclusions is that REC prices
are lower than the volumetric prices of other revenue streams such as power or tax
credits. Scholars also note that investors may discount the value of future revenues
obtained from RECs sold through near-term market exchanges (as opposed to through

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Impacts of Voluntary Renewable Energy Demand on Deployment: A Market-Based Approach

long-term contracts). Under those assumptions, scholars argue, REC revenues do not
meaningfully drive renewable energy deployment.

• Recent system-level modeling suggests that voluntary long-term contracts do not add
renewable energy capacity beyond what would have otherwise occurred without that
voluntary demand (Xu, Ricks et al. 2024). The core assumption behind that conclusion is
that the voluntary market primarily supports projects that would have otherwise been
supported by other market activity, or that those projects displace projects that would
have otherwise been built.

A critical examination of these conclusions is outside the scope of this study (see O'Shaughnessy
and Sumner (2023) and O'Shaughnessy (2024) for a discussion of limitations of these
conclusions). For the purposes of this study, it suffices to acknowledge that project- and system-
level modeling are both useful but incomplete approaches for measuring and describing
voluntary market impacts. To further highlight the need for alternative methodologies, we
briefly discuss some of the key strengths and limitations of existing approaches.

2.2.1 Project-level modeling: Strengths and limitations

Project-level modeling is particularly useful for informing the project-level procurement
decisions of voluntary market intermediaries or voluntary buyers that directly engage with
specific projects. Market intermediaries could be utilities, competitive retail electricity suppliers,
REC marketers, or other parties that procure power and RECs from specific projects and resell
that renewable energy in retail products. Those intermediaries could use project-level analysis
to identify opportunities to maximize the project-level impacts of their procurement decisions.
Similarly, relatively large voluntary buyers that directly engage with specific projects (e.g.,
through power purchase agreements, or PPAs) could use project-level analysis to optimize their
decisions around which projects to support.

The key limitation of project-level modeling is that the approach treats the voluntary market as
a series of isolated transactions. Yet markets are highly complex systems that involve the
interactions of many actors with idiosyncratic goals. Due to that complexity, markets have
properties that cannot be observed in isolated transactions and only emerge from the
interactions of component parts (Harper and Lewis 2012). A simple example is the effect of
project-level profitability. In some cases, voluntary market revenues (e.g., REC revenues) may
increase the profits of projects that were already profitable. Project-level modelers have argued
that such revenues are not impactful, as they do not play decisive roles in project outcomes.
However, the aggregate profit margins of renewable energy development are relatively meager
(Elliott 2024). Revenues that increase profits for already-profitable projects may bolster the
overall viability of individual renewable energy developers or the industry in the aggregate.

More broadly, for developers, the existence of the voluntary market creates additional revenues
and transactional flexibility that facilitate the process of financing projects (Horwitz, Fratzscher
et al. 2024, O'Shaughnessy 2024). Project-level analysis can reach erroneous conclusions by
ignoring impacts that cannot be observed at the level of individual transactions.

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Impacts of Voluntary Renewable Energy Demand on Deployment: A Market-Based Approach
2.2.2 System-level modeling: Strengths and limitations

System-level analysis is particularly useful for academic research on the impacts of the
voluntary market on renewable energy deployment. System-level methodologies based on
counterfactual analysis will yield the closest approximation to the change in renewable energy
deployment that results from the voluntary market accounting for all relevant factors, such as
market displacement (Cannon, Gagnon et al. 2024). System-level analysis could ultimately
influence the procurement strategies of large buyers and inform the design of renewable energy
products for small buyers seeking to maximize impacts. System-level analysis can help buyers
identify procurement strategies that minimize the displacement of other market activity and
thus maximize the degree to which buyers fundamentally change renewable energy
deployment outcomes.

The key limitation of system-level modeling to date is the reliance on a counterfactual of
"market-driven" projects (Langer, Brander et al. 2024, Xu, Ricks et al. 2024) that does not, in our
view, usefully approximate reality. The concept of the counterfactual market has never been
precisely defined but appears to stand for market activity based on the sale of undifferentiated
energy rather than renewable energy as a premium green product, implying revenues from
wholesale power markets or contracts with regulated utilities outside of state clean energy
mandates. System-level modeling has been used to argue that voluntary demand (Langer,
Brander et al. 2024, Xu, Ricks et al. 2024) and compliance demand (Deschenes, Malloy et al.
2023, Feldman and Levinson 2023) have limited impacts on renewable energy deployment
relative to the counterfactual market. The conclusion that billions of dollars in REC revenues
from compliance and voluntary markets have limited impact is difficult to square with the highly
competitive, low-margin nature of renewable energy development. Further, while system-level
research assumes that "market-driven" projects are deployed (Langer, Brander et al. 2024),
proposed projects in the real world must still clear a gauntlet of deployment barriers such as
permitting challenges, interconnection delays, supply chain issues, financial market volatility,
and local opposition. Available evidence suggests that the counterfactual market has not played
a key role in renewable energy deployment to date. Developers and investors frequently avoid
exposure to undifferentiated power markets by seeking de-risked revenue streams such as long-
term power and REC contracts with voluntary buyers (Christophers 2024, Olson, Patel et al.
2024). In 2023, less than 10% of new off-site renewable energy project capacity came online
without some form of long-term contract in place (Barbose 2024). Projects may, to some
degree, obtain de-risked revenues through long-term contracts with wholesale electricity
suppliers such as utilities. Yet utility demand likely cannot replace voluntary demand in terms of
the pace and scale of enabled deployment (O'Shaughnessy 2024), and developers may prefer
contracts with voluntary buyers who are often more willing to accept investor-friendly
contractual terms (Christophers 2024). For these reasons, we argue that previous system-level
conclusions likely underestimate the impact of the voluntary market by overestimating
deployment supported in the counterfactual market.

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Impacts of Voluntary Renewable Energy Demand on Deployment: A Market-Based Approach
2.3 Study motivation: Market-level analysis

As noted in the preceding section, project- and system-level modeling have produced results
that suggest that certain types of voluntary procurement strategies do not meaningfully drive
the development of new renewable energy projects. These conclusions are internally consistent
in frameworks that analyze the voluntary market as a series of isolated transactions (project-
level modeling) or as an interchangeable component of energy systems (system-level modeling).
However, these conclusions contradict economic theory, which would suggest that development
decisions in a competitive market context cannot be immune to the revenues, de-risking, and
long-term demand signals provided by the voluntary market.

Our objective is to develop an alternative approach for exploring voluntary market impacts that
addresses some of the limitations of project- and system-level modeling. Our alternative is to
treat voluntary demand as a component of a broader competitive market of renewable energy
development. Within the boundaries of that competitive market, the voluntary market
functions defined in Section 2.1 (revenues, de-risking, long-term demand signals) necessarily
affect the revenue expectations and long-term strategies of renewable energy developers and
investors. We therefore estimate voluntary market impacts in terms of the expected effects of
voluntary market functions on the renewable energy development industry in the aggregate.
For simplicity, we refer to our approach as market-level analysis.

Market level analysis: An approach that estimates the impacts of the voluntary market on
renewable energy deployment in terms of the expected effects of voluntary market functions
(revenues, de risking through long term contracts, and long term demand signals) on the
renewable energy development industry in the aggregate. The approach ensures that
voluntary market inputs are mapped to renewable energy market outputs.

The core distinguishing feature of the market-level analytical framework is that market inputs
must result in market outputs. Under the framework, voluntary actions that create market
signals in the form of revenues, de-risking through long-term contracts, or long-term demand
signals must have some effect on renewable energy development in the aggregate. Such effects
are not necessarily perceptible at the level of individual projects, but economic theory suggests
that all market signals affect the supply decisions of the renewable energy development
industry in the long run. The analytical challenge in market-level analysis is to quantify the
relationship between voluntary market inputs and the market output of project development.
The approach we apply in this report is to quantify that relationship using assumptions around
the responsiveness of renewable energy supply to changes in revenues, also known as the price
elasticity of supply. Other potential methods could be applied in the future.

Market-level analysis is a causal framework; the approach does not assume a 1:1 attribution of
voluntary demand to renewable energy supply. However, unlike most prior voluntary market
impact models, that causal framework is not premised on counterfactual change or what is

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Impacts of Voluntary Renewable Energy Demand on Deployment: A Market-Based Approach

often termed "additionally" in the literature.1 Market-1 eve I analysis estimates the volume of
observed renewable energy deployed that is caused by observed voluntary market activity,
independently from what could have occurred in a counterfactual scenario. To illustrate this
distinction with a simple example, suppose a voluntary buyer signs a long-term power and REC
contract that enables a developer to obtain financing and build a project. In that example,
market-level analysis would assign impact to the voluntary buyer's action, as the observed
action causes the real-world project outcome. However, the project would not necessarily have
been built in a counterfactual without that buyer's action (e.g., the project could have obtained
a contract with a different buyer). For this reason, we speak in terms of how the voluntary
market "drives" renewable energy deployment, rather than in counterfactual terms about how
the market "adds" renewable energy capacity. We discuss the appropriate interpretation of our
results in Section 3.5.

Market-level analysis, project-level modeling, and system-level modeling ask and answer
different questions and can all be usefully applied in different contexts (Table 1). Market-level
analysis assigns impact to the real-world actions that drive real-world deployment. As a result,
market-level analysis may be a particularly useful tool for relatively small voluntary buyers who
seek to understand how their participation in the voluntary market can drive renewable energy
deployment in the aggregate. Project- and system-level counterfactual modeling remain
important tools for certain buyers and in academic exercises in specific contexts.

Table 1. Three Approaches to the Measurement of Voluntary Market Impacts

Approach

Project

System

Market

How do voluntary market
actions affect the outcome
of an individual project?

How does the voluntary
market affect the capacity
deployed in an energy
system?

What is the renewable
energy development
market output that can be
expected from voluntary
market inputs?

Insights and Applications

Demonstrates how impacts
may vary across procurement
strategies and across individual
projects; can inform project-
level decisions to optimize
voluntary buyer decisions

Quantifies the impacts of the
voluntary market on projects,
accounting for the
displacement of other market
activity; particularly useful for
large buyers seeking to
maximize system-level change

Characterizes and quantifies
the aggregate impacts that
should be plausibly associated
with observed voluntary
market activity; informs the
marginal contributions of
individual actions to aggregate
market impacts

Limitations

Does not account for
impacts that only
emerge across multiple
transactions (see
Section 2.2.1)

Relies on a theoretically
constructed baseline
"market" that may
mischaracterize market
activity in the real world
(see Section 2.2.2)

Not suitable for analysis
of additionality

1 A third approach would be to estimate impact through statistical identification in empirical models. This approach has been
rarely applied in the literature and may not be a viable approach given the substantial methodological challenges of statistical
identification in this context (O'Shaughnessy and Sumner 2023).

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Impacts of Voluntary Renewable Energy Demand on Deployment: A Market-Based Approach

In the following section, we develop a market-level analysis by describing the effects of
voluntary demand on renewable energy supply in terms of four aggregate market metrics.

3. Voluntary market metric analysis

The following four sub-sections describe four categories of voluntary market metrics that inform
our market-level analysis. Each sub-section begins with a summary that defines the metric,
describes why the metric matters in theory, and summarizes the results. Methodological details
for the analyses in this section can be found in the Methodological Appendix. We present
results using the best available data. In certain cases, we focus on data from 2014 to 2023, both
to produce estimates that reflect a decade of voluntary market activity and to emphasize results
on more recent and reliable voluntary market data. In Section 3.5, we explore how the four
market-level metrics can help describe the impacts of the voluntary market on renewable
energy deployment.

3.1 Market size

What it is: Number of customers buying voluntary renewable energy and the total volume of
voluntary market sales (MWh).

Why it matters: Market size correlates with key mechanisms that drive project development,
such as voluntary market revenues and market signals for long term demand stability. The
size of the voluntary market should thus correlate with the market's overall impact on
renewable energy supplies.

Summary of results: In 2023, around 9.7 million customers procured around 319 million
MWh of renewable energy in the U.S. voluntary green power market. Voluntary market sales
accounted for around 44% of all U.S. non hydropower renewable energy generation in 2023.
Voluntary demand has consistently grown for over two decades.

All else equal, one would expect aggregate voluntary market functions (revenues, de-risking
through long-term contracts, and long-term demand signals) to scale with the size of the
voluntary market. More voluntary demand will thus generally equate to greater impacts on the
renewable energy industry and on deployment.

In 2023, about 9.7 million customers procured around 319 million MWh of voluntary renewable
energy (O'Shaughnessy, Jena et al. 2024).2 Those numbers suggest that the voluntary market
procured RECs equivalent to around 44% of all U.S. non-hydropower renewable energy
generation, and around 8% of all U.S. retail electricity sales. In the decade from 2014 to 2023,
about 1.7 billion MWh of renewable electricity was sold in the voluntary market. Annual data

2 These estimates are compiled by the National Renewable Energy Laboratory based on a mixture of survey data, data from
market intermediaries, and estimates from data compilers such as the U.S. Energy Information Administration. Market values
should be interpreted as point estimates based on the best available data.

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Impacts of Voluntary Renewable Energy Demand on Deployment: A Market-Based Approach
show that the U.S. voluntary renewable energy market has consistently grown over time (Figure

1).

TWh

400

300

200

100

0

Other renewable energy sales

2010

2012

2014

2016

2018

2020

2022

Figure 1. Voluntary renewable energy sales, 2010-2023. Based on data from O'Shaughnessy et al.
(2024).

Voluntary renewable energy demand and supply exhibit important regional variation (Figure 2).
Voluntary buyers are distributed throughout the United States, with leading sources of demand
concentrated in states with community choice aggregation (California, Massachusetts, New
York, Ohio), competitive retail electricity markets (e.g., Pennsylvania, Texas), and strong
participation in utility green pricing programs (e.g., Oregon, Washington). Voluntary renewable
energy supply, in contrast, is much more concentrated. Three states—Kansas, Oklahoma, and
Texas—account for more than half of voluntary renewable energy generation.

10

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Impacts of Voluntary Renewable Energy Demand on Deployment; A Market-Based Approach

Voluntary Market Demand Voluntary Market Supply

Figure 2. Distributions of voluntary market shares in terms of demand (left) and supply (right) by state
in 2023. Based on data from O'Shaughnessy et al. (2024).

The spatial distribution of voluntary renewable energy generation can help clarify the
relationship between voluntary market size and deployment impacts. A striking characteristic of
the spatial distribution illustrated in Figure 2 is the concentration of voluntary demand in states
without binding renewable energy mandates, commonly known as renewable portfolio
standards (RPS). About 72% of voluntary renewable energy procured in 2023 derived from 23
states without binding RPS (though generators in some of these states may be able to seil
renewable energy into adjacent states with RPS requirements). That correlation is not
coincidental. In RPS states, voluntary buyers compete with regulated electricity suppliers for
scarce REC supplies. Unlike voluntary buyers, regulated electricity suppliers are mandated to
procure RPS-compliant RECs at whatever price is required to achieve compliance.3 As a result,
REC prices are generally higher in RPS states, as regulated suppliers procure renewable energy
from generators with increasingly higher costs. That correlation is reinforced by the fact that
development costs are generally higher in regions with binding RPS requirements (e.g., the
Northeast) and lower in regions without binding RPS requirements (e.g., Oklahoma and Texas).
Regulated suppliers generally outbid voluntary buyers for scarce RECs in RPS states, suppressing
voluntary demand in those states or pushing voluntary buyers to procure RECs from other
regions. Further, voluntary buyers with facilities in RPS states may procure power from local
renewable energy generators but "swap" the RPS-compliant RECs for lower-priced RECs from
regions without binding RPS requirements. In non-RPS states, in contrast, competition for RECs
occurs primarily among voluntary buyers. As a result, voluntary REC demand can complement
compliance REC demand by filling in the gaps in non-RPS states.

3 Some states allow regulated suppliers to pay fees in lieu of buying RECs, but those fees are typically priced in ways that
incentivize suppliers to bear higher REC prices than those typically observed in voluntary REC benchmark prices.

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Impacts of Voluntary Renewable Energy Demand on Deployment: A Market-Based Approach
3.2 Voluntary power and REC contracts

What it is: Renewable energy project capacity supported by long term power and REC
contracts with voluntary buyers.

Why it matters: Voluntary long term power and REC contracts de risk renewable energy
project revenues, facilitating project access to investment and ultimately driving deployment.

Summary of results: At least 230 voluntary buyers have signed long term contracts for
around 72 GW of solar and wind power. We estimate that operational projects will generate
around 137 million MWh of renewable power in 2024.

Most renewable energy projects depend on stable or "de-risked" revenues from long-term
contracts for power (Christophers 2024). Power buyers in these contracts are mostly utilities
and other retail electricity suppliers. However, voluntary demand for long-term power contracts
has grown rapidly over the past decade (Barbose 2024, O'Shaughnessy, Jena et al. 2024). Long-
term power contracts de-risk projected project revenues in ways that help projects obtain
investment (see Section 2.1). As a result, a near consensus among scholars is that voluntary
long-term contracts are impactful (Bj0rn, Lloyd et al. 2022).

Voluntary contractual procurement strategies include PPAs, utility-sleeved contracts, and long-
term "unbundled" REC contracts. In a PPA, a buyer signs a long-term contract to procure the
power and REC output of a project over a specified term, typically around 10 to 20 years. PPAs
come in two main varieties. In a "physical" PPA, the project sells output to the buyer at a
contractually determined rate. In a financial or "virtual" PPA, the project sells output into a
wholesale market and hedges those sales through a financial agreement with a buyer. The
project financial implications of physical and financial PPAs are largely the same: both contract
structures de-risk future power revenues. In both cases, the contracts must include project RECs
for buyers to make valid claims to renewable energy use. A utility-sleeved contract is essentially
a physical PPA where a utility acts as an intermediary between a project and the contractual
buyer. A long-term unbundled REC contract is a contract where the buyer only procures RECs
sold separately or "unbundled" from the underlying power with no contract for the power.
Unlike data on PPAs and utility-sleeved contracts, data on long-term unbundled REC contracts
were not available for this analysis.

The growth of PPAs and utility contracts serving voluntary demand is evident from multiple
sources. Here, we rely primarily on voluntary power contract data compiled by S&P Global (S&P
2024). The S&P data suggest that at least 230 voluntary buyers had signed long-term power
contracts in the United States for over 72 GW of solar or wind power by the end of 2024. That
estimate is comparable to a similar estimate from the Clean Energy Buyers Association that
voluntary buyers signed over 77 GW of long-term power contracts from 2014 through the end
of 2023. Until 2020, voluntary long-term contracts were primarily signed to procure wind
power, but there is a clear shift toward solar contracts in subsequent years (Figure 3). Based on

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Impacts of Voluntary Renewable Energy Demand on Deployment: A Market-Based Approach

state-level capacity factors for solar and wind, we estimate that voluntary contracted capacity
generated about 137 million MWh of renewable power in 2024.

GW Under15
Contract

10

0

Technology

| Solar
¦ Wind

uial

Pre-2010

2012	2016	2020

Year Project Came Online

Figure 3. New renewable energy capacity supported by voluntary PPAs. Based on data from S&P
(2024).

2024

The S&P data suggest that output from projects with voluntary long-term contracts grew from
about 5 million MWh before 2014 to 109 million MWh by the end of 2023, indicating that those
projects added around 104 million MWh over the course of the decade. Using different data,
O'Shaughnessy et al. (2024) estimate that around 148 million MWh of renewable energy was
procured through voluntary long-term contracts in 2023. For comparison, data from the U.S.
Energy Information Administration suggests that nationwide solar and wind output increased by
around 453 million MWh over the same time period (Figure 4). By these estimates, about 23%
of solar and wind output added to the grid over the past decade was supported by voluntary
long-term power contracts, and about 34% of all off-site renewable energy capacity brought
online in 2023 was supported by voluntary long-term power contracts.

13

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Impacts of Voluntary Renewable Energy Demand on Deployment: A Market-Based Approach

Wind Solar

TWh

400
300
200
100
0

2014 2016 2018 2020 2022 2014 2016 2018 2020 2022

Figure 4. Renewable energy output under voluntary long-term contracts. Based on data from S&P
(2024) and the U.S. Energy Information Administration.

3.3 Voluntary market revenues

What it is: Additional revenue streams for renewable energy projects from voluntary RECs
and voluntary long term power contracts.

Why it matters: Voluntary demand provides revenues for renewable energy projects
additional to other sources such as power sales. Economic theory indicates that those added
revenues affect renewable energy supplies in the competitive market context of project
development.

Summary of results: We estimate that $2.7 billion to $4.9 billion in voluntary REC revenues
accrued to renewable energy projects from 2014 to 2023, in addition to around $5 billion to
$9 billion in power revenues from projects under long term contracts with voluntary buyers.

Renewable energy developers and investors are profit-driven companies operating in a
competitive market environment. Economic theory suggests that voluntary market revenues
necessarily affect the decisions of renewable energy developers and investors. Voluntary market
revenues are primarily a function of voluntary demand and REC prices in the case of RECs
procured outside of long-term contracts. In the case of long-term contracts, voluntary market
revenues also, in most cases, include revenues determined through fixed power prices in long-
term voluntary power contracts (we explain in further depth in Section 3.3.2 why some power
revenues are not necessarily attributable to voluntary market demand). We develop separate
estimates of these two revenue streams in the following two sub-sections. All estimates are in
inflation-adjusted 2023 dollars.

Total output

Voluntary contracted output

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Impacts of Voluntary Renewable Energy Demand on Deployment: A Market-Based Approach
3.3.1 Voluntary REC revenues

Voluntary REC prices vary over time and space in response to trends in the supply of and
demand for RECs. There is no database that tracks REC prices across all individual REC
transactions. Instead, we must rely on market benchmarks such as average reported wholesale
REC prices. Market benchmark prices are imperfect reflections of real REC prices. One issue is
that benchmark prices exclude transactions where RECs are not separately monetized, such as
in long-term bundled power contracts where buyers pay a single price for power and RECs.
Further, benchmark average prices skew toward the prices of wind RECs, and especially the
prices of relatively low-priced wind RECs from Kansas, Oklahoma, and Texas. Average prices also
do not reflect variation in REC prices across markets, buyers, and transactions.

With those caveats in mind, Figure 5 illustrates benchmark prices from 2010 to 2024 for two
commonly reported price indices: 1) benchmark prices for wind RECs sold in the Western
Electricity Coordinating Council (WECC) interconnection; and 2) benchmark prices for "national"
wind and solar RECs, meaning wind RECs traded throughout the United States generated
primarily outside of RPS states. National REC benchmark prices hovered around $0.5 to $1.5 (in
nominal terms) for much of the past decade before jumping above $2 in 2021 and, at times,
above $4 in 2022. Available data suggests that REC benchmark prices have fallen below their
2022 peak but remain above pre-2021 levels. We estimate that the generation-weighted
average voluntary REC price across the full time period is in the range of $2.2 to $3.7 (see
Methodological Appendix).

Figure 5. Annual averages for REC benchmark prices. See Methodological Appendix for details on
derivation.

Figure 6 depicts ranges of estimated annual voluntary REC revenues accruing to renewable
energy projects based on ranges of assumptions around REC prices, contractual terms, and

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Impacts of Voluntary Renewable Energy Demand on Deployment: A Market-Based Approach

transaction costs (see Methodological Appendix). In 2023, we estimate that around $870 million
to $1.4 billion in voluntary REC revenues accrued to renewable energy projects. Lenoir & Wilson
(2024) estimate that voluntary REC revenues could reach as high as $1.7 billion in 2024 and
grow to $7.6 billion by 2033.4 We estimate that cumulative REC revenues over the decade from
2014 to 2023 are in the range of $2.7 billion to $4.9 billion. The relatively large jump in
estimated REC revenues from 2020 to 2021 depicted in Figure 6 is attributable to the spike in
voluntary REC prices depicted in Figure 5. The upper-bound estimates from 2021 to 2023
assume that voluntary buyers did not alter their REC procurement practice in response to that
price spike. However, given that many voluntary buyers face fixed renewable energy
procurement budgets, it is likely that some buyers avoided those higher REC prices by changing
procurement strategies, such as by buying relatively lower-priced RECs generated in prior years
or by buying lower-priced RECs from large hydropower generators (Zemanek 2021). The lower-
bound estimates from 2021 to 2023 reflect that possibility by assuming that the higher prices
only applied to new REC demand while all pre-existing REC demand paid REC prices based on 5-
year rolling averages (see Methodological Appendix for further clarity).

Estimated Annual REC Revenues (2023$)

$1,420M

$350M $420M

$80M
$80M

$70 M
$70M

$210M $220M
S120M $230M

$120M $120M

$40 M

$70M

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Figure 6. Estimated annual voluntary REC revenues. See Methodological Appendix for details on
derivation.

The potential impacts of REC revenues could possibly be best understood in relative terms.
Figure 7 depicts average annual REC prices as shares of average annual PPA prices across distinct
regions (see Methodological Appendix for methodological details). The analysis is imperfect in
several ways, including that annual REC trading prices may not reflect the REC prices accruing to

4 The estimate by Lenoir & Wilson is based on estimated differences between total REC sales and compliance REC sales. That
estimate includes some procurement by retail electricity suppliers above their RPS requirements as a form of "voluntary"
procurement, though the authors of that estimate note that growth in voluntary REC revenues is driven largely by growing
corporate demand.

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Impacts of Voluntary Renewable Energy Demand on Deployment: A Market-Based Approach

projects with PPAs. However, the analysis generally suggests that REC revenues constitute
around 2-5% of power revenues until 2020 before increasing to 10-15% in recent years. Those
estimates generally agree with observations from interviewees in O'Shaughnessy (2024) that
RECs typically compose around 5-10% of project revenues. We estimate that the generation-
weighted average share of revenues across the full time period is 8-14% (see Methodological
Appendix). For reference, the median annual financial return for renewable energy developers
has hovered around 2% for the past decade (Elliott 2024), suggesting that REC revenues have a
meaningful impact on renewable energy developer finances.

Figure 7. Average annual REC prices as percentages of annual average wind PPA prices.

* The figure is cropped at 25% for visual clarity but note that benchmark WECC prices from 2021 to
2023 imply that RECs compose more than 25% of project revenues.

** Data only available for Electric Reliability Council of Texas (ERCOT)-specific prices beginning in 2018.

3.3.2 Contracted power revenues

With PPAs, voluntary buyers provide long-term power revenues in addition to REC revenues. We
estimate the volume of these power revenues as another way of describing the impacts of
voluntary demand on project development. The rationale for analyzing these revenues is that
the willingness of voluntary buyers to sign long-term power contracts is typically contingent on
the ability to access RECs via those contracts (Christophers 2024, O'Shaughnessy 2024). As a
result, the de-risked power revenues from these projects can be understood as an ancillary
benefit of the voluntary market. One key exception is PPAs with REC swaps, where the voluntary
buyer signs a long-term power contract with one project but procures RECs from a different
project, typically in a region with lower REC prices. Feedback from customers in the U.S.
Environmental Protection Agency's (EPA's) Green Power Partnership suggests that REC swaps
typically occur in cases of long-term contracts for solar projects in states with solar generation

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Impacts of Voluntary Renewable Energy Demand on Deployment: A Market-Based Approach

mandates, primarily limited to the northeastern United States (though participants in the
Partnership are not necessarily representative of all buyers of long-term contracts).

Figure 8 depicts a range of estimated annual revenues from voluntary PPAs from 2014 to 2023
(see Methodological Appendix for derivation details). The upper end of the range is based on
estimated power revenues from all long-term contracts signed by voluntary buyers, some of
which may reflect revenues from projects with REC swaps. The lower end of the range is limited
to revenues from Kansas, Nebraska, Oklahoma, and Texas, where relatively low REC prices
would suggest that REC swapping is minimal in long-term contracts. According to that range, we
estimate voluntary PPAs generated around $1.2 billion to $2.6 billion in power revenues in
2023, or around $4.7 billion to $9.5 billion over the full time period.

Figure 8. Estimated annual power revenues from voluntary PPAs signed from 2014-2023. See
Methodological Appendix for details.

3.4 Voluntary buyer public commitments

What it is: Public commitments by buyers to procure specified levels of renewable energy.

Why it matters: Voluntary buyer commitments signal long term demand stability. That
stability can improve developer and investor confidence, facilitate long term planning, and
ultimately increase investment and deployment in the long term.

Summary of results: Hundreds of companies have made credible long term commitments to
procure renewable energy, with most companies committing to procuring the equivalent of
100% of annual electricity use. By any estimate, these public commitments equate to future
demand for renewable energy supply on the order of dozens of gigawatts of capacity.

18

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Impacts of Voluntary Renewable Energy Demand on Deployment: A Market-Based Approach

Many large retail electricity buyers such as corporations, local governments, universities, and
nonprofit institutions have made public commitments to procure renewable energy. These
public commitments do not directly translate to increased renewable energy supply in the same
way as, say, signing long-term power contracts. However, public commitments could provide
long-term signals of stability in the demand for renewable energy. Perceptions of demand
stability are fundamental to investment decisions (Birch and Siebert 1976). Project developers
can confidently expand their business only with the knowledge that renewable energy demand
will be strong for the foreseeable future. Similarly, investors require stable long-term revenues
that ensure stable long-term financial returns. Public commitments could bolster perceptions of
market stability and create a more conducive environment for renewable energy development
and investment.

Renewable energy commitments can come in many forms. Here, we summarize data on public
renewable energy commitments in four venues: RE100, the Clean Energy Buyers Association,
EPA's Green Power Partnership, and the public commitments of data center operators. Note
that many buyers have made commitments across several of these venues, and the estimates
below should not be interpreted as additive.

RE100 is a consortium of companies that have made public commitments to power their
operations entirely through renewable electricity. As of the end of 2024, RE100 comprised 403
companies with worldwide annual electricity use of 481 million MWh, or about 1.7% of global
electricity generation (RE100 2024). Figure 9 depicts the target years for 98 RE100 companies
headquartered in the United States. Most of those companies reported being at least halfway
toward 100% renewable electricity use as of 2022, with 15 companies having already achieved
100% renewable energy by 2022.

Number of
Companies

30

20

10

0

Target Progress (2022)

¦	100%

¦	50-100%

~	<50%

~	Did not report

I

I

~

Pre-
2020

2020

~

I

2025

2030 2035 2040 2050

100% Target Year

Figure 9.100% renewable energy target years for U.S.-headquartered companies in the RE100
partnership. Based on data from RE100 (2024).

19

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Impacts of Voluntary Renewable Energy Demand on Deployment: A Market-Based Approach

The Clean Energy Buyers Association is a U.S.-based consortium of large clean energy buyers.
The Association has set a target of achieving a 90% carbon-free U.S. electricity system by 2030
through voluntary renewable energy procurement. As of September 2024, the Association
comprised 420 members. As of the end of June 2024, Association members had collectively
signed contracts for 43 GW of operational capacity and had committed to procuring a total of
84 GW of capacity in the coming years (CEBA 2024).

The Green Power Partnership is a voluntary program led by EPA to encourage voluntary
renewable energy procurement. As of September 2024, the Green Power Partnership comprises
630 companies and 89 communities committed to best practices in voluntary renewable energy
procurement. Since its inception in 2001, members of the Green Power Partnership have
procured over 650 million MWh of voluntary renewable energy. At least 262 partners have
made public renewable energy procurement commitments (the Partnership does not require
partners to report commitments, and the number of commitments reflects a lower-bound
estimate of the number of commitments in the Partnership). Collectively, those commitments
reflect about 90 million MWh of annual electricity use, or about 102 million MWh when
including carbon-free (not necessarily renewable) commitments.

Finally, data center providers represent a large share of voluntary renewable energy
commitments (S&P 2024). In 2023, just five data center providers—Amazon, Apple, Google,
Meta, and Microsoft—accounted for over half of corporate renewable energy demand (Wilson
2023). All five of the key data center providers have made public commitments to procure 100%
renewable or carbon-free electricity. Those commitments ensure significant future investments
in renewable energy as more data centers are built. One analysis suggests that data centers
could add between 50 and 250 million MWh of new electricity demand between 2023 and 2030
(Aljbour and Wilson 2024). There are merited concerns about the emissions impacts of that
increased demand. Notwithstanding those concerns, the public commitments of the key data
center providers suggest that most or all that increased demand will either be powered by or
matched with renewable energy supply.

3.5 Market-level analysis

In this section, we aim to translate the market-level metrics from Sections 3.1-3.4 into causal
statements about the impacts of the voluntary market on renewable energy deployment.

Before proceeding, we reiterate that all methodologies for estimating voluntary market impacts,
including market-level analysis, have substantial limitations. We therefore provide ranges of
estimated impacts rather than point estimates to better reflect the uncertainty of the results.

To briefly summarize the preceding four sections, market-level metrics indicate that 1) voluntary
market sales have grown for over two decades, reaching about 319 million MWh in 2023,
representing about 44% of all U.S. non-hydropower renewable energy sales; 2) voluntary buyers
have collectively signed long-term contracts to procure energy from over 70 GW of renewable
energy capacity; 3) an estimated $3 billion to $5 billion of voluntary REC revenues accrued to
the U.S. renewable energy industry in the decade from 2014 to 2023, in addition to about $5

20

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Impacts of Voluntary Renewable Energy Demand on Deployment: A Market-Based Approach

billion to $10 billion in power sales to voluntary buyers with long-term power contracts; and 4)
hundreds of non-residential institutions, including some of the country's largest electricity
customers, have made credible public commitments to voluntarily procure renewable energy.
These market-level metrics provide some indication of the ways in which the voluntary market
affects the revenue expectations and long-term planning of renewable energy developers and
investors. The challenge in market-level analysis is to quantify those effects.

At a minimum, the voluntary market has provided a stable source of additional revenues for the
U.S. renewable energy industry. Our analysis in Section 3.3 suggests that renewable energy
generators sold around $2.7 billion to $4.9 billion worth of RECs to voluntary customers from
2014 to 2023. We estimate that voluntary REC revenues increased renewable energy project
market revenues by around 8-14% during that decade (for those projects that sold voluntary
RECs, see Methodological Appendix). The impacts of those revenues on renewable energy
supply depends on the price elasticity of renewable energy supply, i.e., how much a percent
change in price drives a change in the supply of renewable energy capacity. Only one study, to
our knowledge, attempts to estimate the price elasticity of renewable energy supply. Johnson
(2011) estimates supply elasticity to compliance REC prices of 2.7, meaning that a 1% increase
in prices drives a 2.7% increase in renewable energy supply. The assumption that renewable
energy supply is price elastic—i.e., a 1% increase in price drives at least a 1% increase in
supply— is consistent with the highly competitive nature of renewable energy development.
The assumption is further supported by the principle in economics that supply can more
effectively increase in response to long-term market signals (i.e., supply tends to be more elastic
in the long term). Consistent growth in voluntary demand and public voluntary buyer
commitments likely strengthens long-term developer confidence in voluntary demand, allowing
developers to more effectively factor voluntary market revenues into long-term strategies. We
therefore assume that the price elasticity of renewable energy supply is in the range of 2 to 3.
Assuming that voluntary REC revenues increased project revenues by around 8-14% in the
decade from 2014 to 2023 (see Methodological Appendix), our analysis suggests that voluntary
REC revenues drove around 17-43% of renewable energy deployment outside of RPS mandates
over that decade. Given that voluntary market sales comprised about 41% of all non-
hydropower renewable energy sales over the decade, these estimates suggest that voluntary
REC revenues drove around 7-18% of overall renewable energy deployment as an estimated
lower-bound range.

The preceding analysis provides a lower-bound estimate of the impacts of the voluntary market
on renewable energy deployment by focusing exclusively on voluntary REC revenues. A realistic
upper-bound estimate should account for all other plausible pathways through which voluntary
demand can drive renewable energy deployment. A key quantifiable pathway is voluntary REC
buyer demand for long-term power contracts. For the sake of developing an upper-bound
estimate, we assume that all sales through long-term contractual mechanisms (PPAs and utility
renewable contracts) represent incremental renewable energy sales contingent on voluntary

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Impacts of Voluntary Renewable Energy Demand on Deployment; A Market-Based Approach

market transactions,' That assumption is supported by the observations that 1) developers and
investors strongly prefer the de-risked revenues of long-term contracts over selling power
directly into wholesale markets (Christophers 2024), 2) project developers often prefer
contracts with voluntary buyers who are more willing to sign long-term contracts with favorable,
fixed-price terms for developers,6 and 3) most buyers would not be willing to sign long-term
power contracts in the absence of a voluntary renewable energy market (O'Shaughnessy 2024).
For all other procurement strategies, we apply the same assumptions described in the
preceding paragraph. An upper-bound estimate based on our analysis is that voluntary demand
drove around 43-60% of renewable energy deployment outside of RPS, or about 18-25% of ali
deployment (see Methodological Appendix for details).

Overall, this analysis suggests that the voluntary market drove around 260 million to 940 million
MWh of renewable energy generation from 2014 to 2023, or about 7-25% of all renewable
energy generated in the decade (Figure 10).

Key Assumptions

Estimated Deployment
Impact (2014-2023)

939 million MWh

Upper-Bound Estimates

Voluntary long-term contracts drive
the deployment of new projects,
voluntary REC revenues influence
development and investment
decisions

669 million MWh
671 million MWh

Estimated Relative
Impacts

60% of renewable energy deployed
outside of state renewable portfolio
standards (RPS);

25% of all renewable energy deployed

43% outside of RPS;
18% of all renewable energy

Lower-Bound Estimates

Based only on influence of voluntary
REC revenues

263 million MWh 4 17% outside of RPS;

7% of all renewable energy

Figure 10. Estimated range of market-level impacts on renewable energy deployment (2014-2023).

To reiterate points established in Section 2, these estimates are not based on counterfactual
analysis, meaning that the estimates do not necessarily reflect how much renewable energy

5 Some scholars conceptually separate the impacts of long-term power contracts from the impacts of voluntary REC demand by
arguing that it is the power contract rather than the REC contract that drives project impact (Bj0rn et al. 2022). However, as
noted in Section 3.2, most voluntary buyers are only willing to sign long-term power contracts for renewable energy, meaning
that the long-term power revenues are contingent on voluntary REC demand (Christophers 2024; O'Shaughnessy 2024).
0 The S&P power contract data support that narrative. Based on physical PPA contractual data (similar data were unavailable for
virtual PPAs) for 1,004 solar and wind projects, the S&P data suggest that about 73% of contracts with voluntary buyers use
fixed prices, compared to 56% of contracts with retail electricity suppliers.

22

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Impacts of Voluntary Renewable Energy Demand on Deployment: A Market-Based Approach

was added relative to a counterfactual scenario without the voluntary market. Developers could
have adapted in different ways to leverage different revenue sources in a counterfactual
scenario without the voluntary renewable energy market. As a result, at least some of the
deployment that we estimate was driven by the voluntary market could have otherwise been
driven by some other factor. Nonetheless, as discussed in Section 2.2.2, the highly competitive,
low-margin nature of renewable energy development suggests that voluntary demand reflects a
largely additional driver of renewable energy deployment that would not be easily replaced in a
counterfactual world without a voluntary renewable energy market.

4. Conclusion

In this report, we develop an approach to estimating voluntary market impacts on renewable
energy development based on market principles. We estimate voluntary market impacts in
terms of the expected effects of voluntary market functions (revenues, de-risking through long-
term contracts, and long-term demand signals) on the renewable energy development industry
in the aggregate. We implement a market-level analysis built around four market-level metrics:

• Voluntary market sales have grown for over two decades, reaching about 319 million
MWh in 2023, representing about 44% of all U.S. non-hydropower renewable energy
sales.

• Voluntary buyers have collectively signed long-term contracts to procure energy from
over 70 GW of renewable energy capacity.

• An estimated $3 billion to $5 billion of voluntary REC revenues accrued to the U.S.
renewable energy industry in the decade from 2014 to 2023, in addition to about $5
billion to $10 billion in power sales to voluntary buyers with long-term power contracts.

• Hundreds of non-residential institutions, including some of the country's largest
electricity customers, have made credible public commitments to voluntarily procure
renewable energy.

We submit that these metrics render implausible claims that the voluntary market is
categorically not impactful. Arguments that voluntary demand is not impactful imply that the
expectations and calculations of developers and investors are unaffected by 1) more than two
decades of consistent growth in voluntary demand; 2) the emergence of corporate demand as a
key source of demand for long-term power contracts; 3) an infusion of billions of dollars of REC
and contracted power revenues into the industry; and 4) credible, public renewable energy
procurement commitments of many of the world's largest corporations.

Based on the market-level metrics, we estimate that the voluntary market drove around 260
million to 940 million MWh of renewable energy generation in the decade from 2014 to 2023,
equating to around 17-60% of renewable energy generated outside of RPS mandates, or about
7-25% of all renewable energy generated in the decade. Those relatively wide ranges reflect the
uncertainty underlying the analysis. However, by any measure, the exercise suggests that the
voluntary market has played and will continue to play a quantitatively meaningful role in the
renewable energy transition.

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Impacts of Voluntary Renewable Energy Demand on Deployment: A Market-Based Approach

We conclude by suggesting that the development and implementation of multiple
methodologies can help describe voluntary market impacts from multiple perspectives. Like
other methods to estimate voluntary market impacts, the market-level analysis presented in this
report is a useful but limited methodology. Project-level modeling can help inform the project-
level decisions of voluntary buyers and market intermediaries. System-level modeling can
inform voluntary buyer decisions or market frameworks where counterfactual change (i.e.,
additionality) is a key criterion. Market-1 eve I analysis helps describe how voluntary demand can
drive renewable energy deployment in the aggregate. Future research can explore new
methods for analyzing voluntary market impacts that can help inform the decisions of voluntary
buyers and maximize the real-world impacts of voluntary renewable energy demand.

Acknowledgements

This report was made possible by support from EPA's Green Power Partnership. The author, who
worked as a subcontractor to Eastern Research Group, Inc. (ERG), is solely responsible for the
content of this report.

The author would like to thank the following individuals and organizations for improving this
report through peer review: Galen Barbose (Lawrence Berkeley National Laboratory), Drew
Beyer (Rocky Mountain Institute), Ed Holt (Ed Holt & Associates), Sushmita Jena (National
Renewable Energy Laboratory), Todd Jones (Center for Resource Solutions), Jenny Sumner
(National Renewable Energy Laboratory), Markus Walther (Clean Energy Buyers Association),
Ryan Wiser (Lawrence Berkeley National Laboratory), and one anonymous peer reviewer. The
author attempted to address all comments from these peer reviewers, but notes that the report
does not necessarily reflect their views. The author would like to thank Elizabeth Sanker (ERG)
for copyediting the draft report, as well as EPA's Matt Clouse, James Critchfield, Cindy Jacobs,
and Imran Lalani and ERG's Anthony Amato for their input and feedback. The author is an
independent consultant; a list of the author's clients is available at www.cleankws.com.

Methodological Appendix

REC revenue analysis

We compile REC price data from the Lawrence Berkeley Lab (Wiser, Bolinger et al. 2022) and
S&P (2024). The Berkeley Lab data include REC benchmark prices from 2010 to 2021 (the
Berkeley Lab estimates are based on data compiled by Marex Spectron) and the S&P data
provide REC benchmark prices from 2021 to 2024. From those two sources, we compile annual
benchmark prices for national voluntary RECs and WECC RECs as depicted in Figure 7. We also
compile annual average prices for RECs in RPS states. We based RPS state REC prices on
averages of market benchmarks excluding benchmarks labeled as "RPS" and excluding solar
RECs (which tend to trade at substantially higher prices in RPS states). We convert nominal REC
prices into 2023 dollars based on consumer price index inflation factors.

REC benchmark prices reflect wholesale prices, i.e., prices before the addition of any markups
charged by market intermediaries for REC resales to end-use customers. At least some revenues

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Impacts of Voluntary Renewable Energy Demand on Deployment: A Market-Based Approach

for RECs sold outside of long-term contracts must be diverted to various transaction costs
involved in selling RECs, such as broker and certification fees. Claims that transaction costs
offset significant portions of REC revenues (Gillenwater 2008, Brander, Gillenwater et al. 2018,
Langer, Brander et al. 2024) have not been substantiated with empirical evidence and such
claims are incompatible with the competitive nature of the renewable energy development
industry (O'Shaughnessy 2024). Evidence from other comparable contexts (e.g., mutual funds,
investment services, mortgages) suggests that transaction costs such as broker fees are typically
on the order of 1-5% of prices (Blume 1993, Livingston and O'Neal 1996, Ferrell 2011, Ambrose
and Conklin 2014). Gillenwater (2008) states that REC certification and brokerage fees
separately range from 3-5%, i.e., the two fees together would amount to 6-10% of REC
revenues. We use that range to assume that 6-10% of revenues for RECs procured outside of
long-term contracts are spent on transaction costs across the scenarios described in Table A.l.

Finally, we require assumptions about how to map annual REC benchmark prices to annual REC
sales. That mapping is not straightforward, given that RECs retired in one year may reflect
transactions through long-term contracts with prices fixed in a prior year. In the case of PPAs,
we assume that REC prices are fixed at market benchmark prices in the years that projects came
online. In the case of unbundled RECs, data from the EPA's Green Power Partnership suggest
that only about 20% of unbundled REC transactions occur through contracts of greater than one
year, representing around 15% of unbundled REC sales. Based on that data, we make the
simplifying assumption that all unbundled RECs sell at the benchmark prices of the same year as
the sale.

As depicted in Figure 5, REC prices spiked in 2021 and have remained relatively high through
2023. Given that some voluntary buyers face fixed budgets for renewable energy procurement,
it is likely that at least some buyers changed their procurement strategies to avoid these higher
prices. For instance, some buyers may have switched from buying Green-e certified RECs that
tend to sell at slightly higher prices to buying non-certified RECs (Green-e is the largest REC
certification program in the United States; the program certifies RECs that meet various
standards). We attempt to account for these possible changes in procurement strategies in our
lower-bound estimates of REC revenues. We assume that only "new" demand for RECs procured
outside of long-term contracts from 2021 to 2023 directly faces the higher benchmark REC
prices from 2021 to 2023 (i.e., only the incremental demand above 2020). We assume that
"existing" demand faces an REC price based on the average of the prior five years (including the
year of the purchase).

To estimate a plausible range of REC revenues, we develop lower- and upper-bound estimates
as described in Table A.l.

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Impacts of Voluntary Renewable Energy Demand on Deployment: A Market-Based Approach

Table A.l. REC Price Assumptions

Assumption

REC price year: RECs procured
outside of long-term contracts

REC price year: long-term
contracts

REC price basis

Assumed transaction costs for
RECs procured outside of long-
term contracts

Lower Bound Scenario

REC prices are assumed to
reflect market REC prices in the
year of the transaction. For
2021-2023, incremental
demand (i.e., above 2020 levels)
faces current-year benchmark
prices, while existing demand
(i.e., 2020 level) faces a 5-year
average REC price.

REC prices are assumed to be
fixed in the year the project
came online.

WECC benchmark in WECC
states, national benchmark in
all other states.

10% of market benchmark
prices.

Upper Bound Scenario

REC prices are assumed to
reflect market REC prices in the
year of the transaction.

REC prices are assumed to be
fixed in the year the project
came online.

WECC benchmark in WECC
states, state average price in
RPS states (excluding solar RECs
and benchmarks specifically
designated as RPS), national
benchmark in all other states.

6% of market benchmark prices.

PPA revenue analysis

The Lawrence Berkeley Lab compiles annual PPA price data for wind power projects (Wiser,
Millstein et al. 2024) and solar power projects (Seel, Mulvaney Kemp et al. 2024). We used
those data to compile annual average voluntary PPA prices based on 1) the regional breakdown
of voluntary PPA demand and 2) the generation shares of voluntary wind and solar projects. We
estimated the confidence intervals depicted in Figure 8 based on standard deviations in
reported project-level prices.

Elasticity analysis

Based on the REC and PPA revenues derived as explained in the prior sections, we estimate that
demand-weighted average voluntary REC price is in the range of $2.2 to $3.7 from 2014 to
2023. We estimate that the demand-weighted average PPA price for projects supported by
voluntary RECs—accounting for the regional distribution of voluntary demand—was about
$25.8. Together, these estimates imply that voluntary REC revenues increased market-based
project revenues (i.e., excluding non-market revenues such as production tax credits) by around
8.4-14.4%. The impact of that revenue increase on renewable energy supply depends on the
price elasticity of renewable energy supply. Only one study, to our knowledge, attempts to
estimate the price elasticity of renewable energy supply. Johnson (2011) estimates supply
elasticity to compliance REC prices of 2.7, meaning that a 1% increase in prices drives a 2.7%
increase in renewable energy supply. Based on that estimate, we assume that the price

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Impacts of Voluntary Renewable Energy Demand on Deployment: A Market-Based Approach

elasticity of renewable energy supply is in the range of 2 to 3. Applying the lower-bound
elasticity to the lower-bound REC revenue increase yields 2*8.4%=16.8%, while applying the
upper-bound elasticity to the upper-bound REC revenue increase yields 3*14.4%=43.2%. These
calculations are the basis for our lower-bound estimated range that voluntary demand drove
around 17-43% of the deployment of renewable energy projects outside of RPS (i.e., projects
that were not supported by compliance REC revenues).

The upper-bound estimated range follows the same process applied only to RECs procured
outside of long-term contracts. For uncontracted RECs, we estimate a demand-weighted
average REC price in the range of $1.7 to $3.4 from 2014 to 2023, implying a 6.7-13.3% increase
in market-based project revenues. Applying the same price elasticity assumptions described
above yields an estimated increase in renewable energy supply from projects supported by
uncontracted RECs in the range of 13.5-39.8%. For the upper-bound range, we assume that all
sales supported by voluntary long-term contracts were additional. From 2014 to 2023, total
voluntary market sales were 1,558 million MWh, of which 530 million MWh were contracted
RECs and 1,028 million MWh were uncontracted. Applying the estimated impact of
uncontracted RECs (13.5-39.8%) implies renewable energy supply of (13.5-39.8%)*1,028=138-
408 million MWh. Adding those sales to the 530 million MWh of contracted sales implies total
renewable energy supplies of 669 million to 939 million MWh, or about a 43-60% increase.

The estimated demand-weighted average REC price ($2.2 to $3.7) in the decade from 2014 to
2023 is considerably higher than historical REC benchmark prices prior to 2021. That
discrepancy is primarily because the average is weighted toward years with greater demand,
meaning that the higher prices from 2021 to 2023 play a proportionally larger role in the
weighted average (the discrepancy is also partly explained by converting from nominal to 2023
dollars). From 2014 to 2020, we estimate that the demand-weighted average voluntary REC
price was in the range of $0.9 to $1.6. Many studies that conclude that voluntary RECs are not
impactful are based on financial analyses with REC prices in that lower range. However, even at
that lower range of REC prices, a market-level perspective suggests that the potential impacts of
RECs are not negligible. REC prices in the range of $0.9 to $1.6 imply a 3.6-6.3% increase in
market-based project prices (based on demand-weighted average PPA prices). Applying a price
elasticity of supply range of 2 to 3 implies that those added revenues increase renewable
energy supply outside of RPS by around 7-19%.

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