States lag in wind, solar goals
This year is expected to produce the peak of renewable power development in the decade, said Sharon Reishus, a CERA senior director and former head of the Maine Public Service Commission. Developers are “madly building” to complete wind projects in case the federal production tax credit is not renewed at year’s end, said Reishus, who spoke at the summer meeting of the National Association of Regulatory Utility Commissioners here.
The analysis, conducted for clients, projects 14 gigawatts of renewable power will be added this year, but the total will drop to 5 GW in 2013, assuming federal renewable energy subsidies are not continued. However, in the firm’s scenario, renewable energy investment recovers to around 10 GW a year from 2018 to 2025, assuming there is a political compromise in Congress that permits one more round of federal renewable energy subsidies, Reishus said.
The state renewable energy targets for 2020 vary from 10 percent in some Midwestern states to 33 percent in California. Reishaus said her firm expects that California, New York, New England states and states in the PJM Interconnection grid in the mid-Atlantic and Great Lakes regions will fall short of their renewable goals.
The reasons vary, she said. PJM and New England, for example, are short of renewable resources, and PJM also faces hurdles in importing renewable energy from the Midwest. New York’s renewable power growth is also limited by power transmission congestion.
State renewable goals in the far West, Midwest, Texas and lower Mississippi regions are likely to be met, IHS CERA concluded, she said.
John Norris, a member of the Federal Energy Regulatory Commission and a former Iowa utility regulator, appealed to the NARUC audience to stay behind the renewable standards.
“How do we finish a good idea with the mounting pressure that is building?” he asked.
Bracing for a 2015 fight
Although the current economics of wind and solar power are undermined by low gas prices, Norris said he expects the costs of wind and solar power to continue their dramatic declines of the past decade. Likewise, gas prices will increase in time, narrowing the current price differential between gas and renewables.
Norris said the need for renewable power remains as urgent as ever, with its contribution to power supply diversity and environmental benefits. (It should not be sold politically as a job creator, however, he advised. While there can be a burst of short-term employment from renewable expansion, jobs are also lost when wind or solar replaces other fuels, he said.)
“Do we as policymakers stick to our guns, or do we say, ‘Let’s back off?’” Norris asked.
Many of the states and the District of Columbia have ramped up slowly toward their renewable energy targets, but the pace is scheduled to pick up substantially in 2015 and that is when opposition to the standards is likely to intensify, Reishus said.
“It’s going to be very challenging for a number of the states,” she said.
The IHS CERA study considered the possibility that some states will lower their renewable energy standards. “We do see a number of states that have bills in place to try to roll back the standards. So far, very few have made it to become a serious threat,” Reishus said.
But when state requirements accelerate, the costs of meeting renewable standards will rise, along with higher costs for other infrastructure needs, she said. Critics will step up opposition to the costs of fulfilling the renewable goals, she said.
Donna Nelson, chairwoman of the Public Utility Commission of Texas, said the commission is starting to get push-back from legislators, asking, “‘Why are you doing this when natural gas is $2′” [per thousand cubic feet] — the lowest level in more than a decade — she said.
What if you build it, and it doesn’t come?
When the state legislators approved a massive expansion of the state’s transmission network in 2005 to bring wind power from western counties eastward to Texas population centers, it was “one of those field of dreams” scenarios, she said: “If you build transmission, the generation will come.” Now, it is looking like wind development will fall short of original expectations, she said.
The low output of wind power during the worst of Texas’ summer heat wave last year has also led to rethinking of the renewable goals, she said. “The only way you can make renewables work is with storage,” Nelson said — capturing wind energy when it is strongest in off-peak periods.
“I think that is a very real issue, and I think it is exacerbated by the economy,” Nelson said of the price gap between renewables and gas. “It’s the biggest issue we struggle with.”
“How far can you push this before people say, ‘Enough, the bills are getting too high’?” said New Hampshire Commissioner Michael Harrington.
But other commissioners defended the renewable standards. Short-term cost comparisons between renewable and conventional energy sources are not fair unless the total economic and social costs of both are considered, said Arizona Commissioner Paul Newman.
“Coal isn’t really 4 cents” per kilowatt-hour, he said. “This isn’t toilet paper. … We need to know the real externality numbers.”