Wind Power Could Win if U.S. Requires Renewable Power
By Bill Eggertson
© Environment News Service (ENS) 1999
WASHINGTON, DC, December 17, 1999 (ENS) - Wind energy could multiply its contribution to the United States electricity supply 18 times by the year 2020, if the federal government adopts a Renewable Portfolio Standard (RPS) that has no cap and no expiration date.
The U.S. Department of Energy defines the RPS as a requirement that all electricity sellers must cover a percentage of their electricity sales with generation from non-hydroelectric renewable sources such as wind, solar, biomass or geothermal energy.
RPS is viewed as a key method of stimulating the development of renewable energy in the increasingly competitive U.S. power market.
Several states have legislated a minimum annual share of sales from renewables. The Clinton administration has introduced a bill that would require 7.5 percent of all U.S. electricity to come from green sources by 2010, and to remain at that level until 2015 when the law would expire.
Owners of qualifying wind, geothermal, solar thermal, photovoltaic and biomass generating facilities would receive a credit for each kilowatt-hour generated. The credit under the proposed federal plan would be 1.5¢/kWh.
In its "Annual Energy Outlook 2000," released today by the U.S. Energy Information Administration (EIA), the Department of Energy predicts the result if the Renewable Portfolio Standard did not have a cap on the credit or if the law were extended to 2020, instead of 2015.
A Renewable Portfolio Standard would stimulate additional generation and capacity from renewable energy sources, but the DOE analysis suggests that "the price cap and sunset provisions could prevent the 7.5 percent target share from being achieved" because it would reduce the average economic value of the proposed RPS credit.
The early incentive "would need to compensate for the higher costs of renewable energy facilities over their full productive life," meaning that the average premium of green power would have to fall "well below" 1.5¢/kWh if significant additional amounts of new renewable capacity were to be built as a result of the federal measure, the DOE analysis says.
With no Renewable Portfolio Standard, the study says 6.6 gigawatts (GW) of new renewable capacity would be installed by 2010, and 3.6 GW more by 2020.
Renewables would generate three percent of U.S. electricity in 2010 and in 2020 without a Renewable Portfolio Standard while, with a Renewable Portfolio Standard with cap and sunset provision, renewables would reach 3.9 percent in 2010 and then decline to 3.4 percent by 2020.
"Removing the 2015 sunset provision encourages additional increases in renewable generation and capacity, especially in the later years of the projections," the forecast explains.
Without a cap or sunset provision, a Renewable Portfolio Standard would result in more than 30 GW of new wind capacity, nine gigawatts of biomass and five gigawatts of new geothermal capacity by 2020.
Total U.S. wind capacity would reach nearly 36 gigawatts, almost 18 times the capacity that existed in 1998. "Even in this case, however, solar technologies remain too costly for additional penetration into central station generation markets," the report says.
The impact on electricity prices is forecast to be relatively small. "Although new renewable facilities are more expensive to build and operate than new gas-fired facilities, the RPS credit system would spread the incremental costs of new renewable facilities across all electricity sales," the Energy Department report explains.
Electricity prices by 2020 under any Renewable Portfolio Standard scenario would be only 1.4 percent above a situation of business as usual, and the scheme would have small impact on U.S. carbon emissions, the study found.
"The key result of this analysis is that, except in the RPS case with no price cap and no sunset provision, the share of electricity sales generated from qualifying renewables is likely to fall short of the 7.5 percent target," it concludes.
The report says that the economic value of a limited and temporary renewables credit "is not large enough to overcome the cost advantage of fossil fuel technologies, especially new natural-gas-fired turbine and combined-cycle plants."
The costs of new renewable plants are expected to continue to decline, but the cost and performance of fossil technologies also are projected to improve.
A credit of 1.5¢/kWh for production from wind and biomass facilities expired in June, but the amount of new capacity from a recent extension of the tax credit will be higher than the forecast for a Renewable Portfolio Standard with both a cap and a sunset provision.
Extending the tax incentive until 2020 would create a 46 percent jump in wind capacity, and carbon emissions would be two million tons lower than otherwise expected.