IS SHALE GAS A THREAT TO RENEWABLES? AN EMPIRICAL STUDY ON THE IMPACT OF SHALE GAS ON THE PRICES OF SOLAR RENEWABLE ENERGY CREDITS IN THE UNITED STATES

Abstract

One of the most important developments for the American economy for the past decade has been making extracting of shale gas economically and technologically feasible. Contrary to the expectation that shale gas will deter investments in renewable energy by increasing the price gap between fossil fuels and renewables, the current discussion shows that the discovery of shale gas, in fact, has a positive effect on the price of Solar Renewable Energy Certificates (SREC) due to the Renewable Portfolio Standard in some state which requires a particular percentage of the energy generated by electricity utilities to come from renewable sources. The current empirical analysis finds that shale gas and the SREC prices are negatively correlated in all states with SREC markets in the PJM region, meaning that the increase in the supply of fossil fuels leads to the increase in price Although this paper does not propose a profound investigation on the SREC market, the data shows statistically significant results for most states. In addition, a model of a potential energy entrepreneur is proposed. Testing the model, reaffirmed that investments in renewable energy are still expected to be profitable in the future.