Three Reasons Why Renewable Energy Leaders Are Optimistic

Deep in the heart of Austin, Texas, at the Green Tech Media’s U.S. Power and Renewables Summit, the room was buzzing with optimism and enthusiasm as utility company executives, renewable energy developers, regulators, and financiers shared their research and experiences from different angles of the rapidly evolving renewable energy industry.

Here are 3 key takeaways from the conference :

1. Extensive investment in renewable energy is already underway, and the future is bright with massive advancements and investment into clean energy technology and policy innovation.

Wind and solar prices are historically low and there is optimism about future investments despite some uncertainty. Commonly discussed sources of uncertainty were President Trump’s pending decision on the solar International Trade Commission case, federal tax reform, proposed changes in federal regulations by the Department of Energy (DOE). As my colleague, Miles Farmer, discusses here, the DOE’s proposed rule to bail out nuclear and coal power plants has received little support, and many representatives from companies and regulators alike expressed their discontent with this proposal at the conference. 

There is considerable interest from corporations and utilities in powering their businesses using clean energy sources such as wind and solar. Forty-four cities and over 116 corporations have committed to goals to power their communities with 100% clean energy. This sends a clear signal to regulators and renewable energy companies that investing in renewable energy is already a priority across the country and will continue to be important over the next few decades.

Technological innovations and grid planning have helped spur increased investment in large scale wind. Research scientists described how large-scale wind power has become more efficient and cost effective as technology has improved. Proper transmission planning can complement the technological advances in efficiency. Taking inspiration from the Lone Star State, one scientist highlighted how wind comprised 20% of generating capacity in Texas’s electricity market (known as ERCOT) in 2016. Building out transmission lines to connect areas of high wind supply in North and West Texas to areas of high wind demand near Houston in the Competitive Renewable Energy Zones Process project was critical in making sure that the grid could support more wind energy. Scientists and regulators discussed how different electricity markets approach building transmission lines, and commented on how these planning choices may affect how much wind energy will be generated on a national scale for decades to come.

Utility executives and regulators explained that over the next few decades, utility companies will rely more and more on sources of generation such as wind, solar and storage, and natural gas that can be easily turned on and off to meet changes in demand (rather than more inflexible sources of generation like coal or nuclear that have dominated energy generation in the past). Technological innovations in wind and solar energy production have spurred growth in large facilities owned by utilities to provide renewable energy.

While the focus of the conference was on utility-scale power generation, distributed resources like rooftop solar, matter too. According to GTM, residential solar photovoltaic (PV) systems will provide savings to retail customers on their electricity bills in at least 38 states and Washington, D.C., by 2020.

2. Economic factors such as lower power purchase agreements (PPAs) have replaced state requirements as the key drivers of renewables procurement, but Renewable Portfolio Standards (RPS's) are still an important tool in pushing state-level policies.

According to GTM Research, RPS’s (which require a specific percentage of a state’s electricity mix to be generated from renewable resources) drove 85 percent of growth in 2014, but were a factor in only 24 percent of the 22 gigawatts (GW) of utility-scale solar that is currently in the pipeline to be built. As was highlighted in a panel discussion about what is driving down solar costs, RPS's are still a critical tool in pushing state-level policies and informing long-term energy market design questions. Even though they no longer are the key factor in pushing down the cost of renewables, RPS’s are still important because they send positive signals to renewable energy developers and investors, and help drive the regulatory processes needed to plan for a reliable and sustainable grid in the long term.

Procurement by utilities and corporations, retail procurement, and the Public Utility Regulatory Policies Act (PURPA) are the leading drivers of the U.S. utility-scale PV pipeline. PURPA, passed by Congress in 1978, broke up energy monopolies and allowed independent power producers to join the market. PURPA has become the largest driver of utility PV, and accounted for 43 percent of new projects in 2017.

Investment bank executives highlighted how lower Power Purchase Agreement (PPA) prices have been a major factor in financing renewable energy projects. Investment bankers expressed optimism about increased interest in investment by corporations in renewable energy and highlighted the Puget Pacific Northwest as a case study in successful cooperation between local utilities, corporations, and financiers. Consultants and analysts highlighted the many ways that corporations can benefit from the expertise of networks of other corporations interested in procuring renewable energy, and they described which contract structures were most appealing. Even without subsidies, solar power is more competitive on average than fossil fuel generation. According to analysis conducted by Lazard Ltd., the levelized cost of electricity (LCOE) of unsubsidized solar energy production at $53-$194 per megawatt-hour (MWh) is lower and therefore more competitive than the (LCOE) of several fossil fuel generators.

3. Energy storage, advances in information technology, and electric vehicle technologies are three areas that are ripe for technological and policy innovations.

Energy Storage

As renewable energy generation increases, the need to be able to store and deliver energy becomes even more critical. Regulation at the federal level could change market rules to ensure that energy storage resources (such as batteries and heatpumps) are eligible to participate fully in wholesale electricity markets.

The price of battery storage has decreased rapidly over the past five years. GTM predicts that lithium-ion battery prices will reach $150/kWh in the next five years. While storage is still relatively expensive currently, there have been examples such as Tuscon Electric Power’s recent solar and storage project that shows how quickly storage is becoming an economically feasible technology. There has been a surge of investment in storage globally. Overall, GTM forecasts that U.S. energy storage annual deployments will reach 2.5 gigawatts , or enough to power 1,875,000 homes by 2022.

Advances in information technology

Technology companies and clean energy advocates say it’s getting easier to control energy consumption and pay for energy electronically with the help of new technologies. For example, we can control how much we use and spend on energy in our homes and businesses with the touch of a button on a smartphone from almost anywhere in the world. Artificial intelligence algorithms also can create “smart devices” which can monitor their own electric load and turn on and off depending on prices of electricity or use. And Blockchain, a technology that would allow devices to share information such as how much energy they are using or the cost of electricity, also generated enthusiasm and interest among utility companies.

Electric Vehicles

As more electric vehicles enter the market, utilities are exploring pricing structures and infrastructure needed to support an increased demand for electricity to run them. Worldwide, there has been a push for electrification of cars, buses, and trains as costs decline. For example,a fleet of buses will be electrified in Shenzhen, China by the end of 2017. Within the U.S., utilities are implementing pilot projects to analyze the impacts of electric vehicles on the electric grid. If designed properly, policies that incentivize electrical vehicles can complement goals to increase renewable energy deployment while still ensuring that the grid is reliable and efficient.

What can we learn from this?

There is an undeniable interest from corporations, utilities, financiers, researchers, and regulators in accelerating large-scale renewable energy deployment and complementary technologies over the next few decades. While the industry is headed in the right direction, more action must be taken to achieve the scale of renewable energy at the pace that is needed to reduce U.S. greenhouse gas pollution and keep us on track to limit global warming to less than 2 degrees Celsius by 2050, as outlined in the NRDC’s Clean Energy Frontiers report.

About the Authors

Sneha Ayyagari

Schneider Sustainable Energy Fellow

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