Yes `encodeSpaces` is handled within `renderSelectOptions`. The end objective is however to be able to directly use this feature through a `dropDownList` or `listBox`. 
```
echo Html::dropDownList($name, $value, ['encodeSpaces'=>false]);
```
Note: nothing extra needs to be passed or set for the already existing functionality - this is defaulted to replace spaces to `&nbsp;`. 

Only when `encodeSpaces` is to be set to false the above code needs to be called.