EIA Projections Renewables Momentum – 6/27/16

According to the March edition of the U.S. EIA “Electric Power Monthly”, utility-scale electrical generation (EG) from renewable sources hit an all-time high of 17% of total generation in the first quarter of 2016, up from about 14% a year ago.

Solar EG accounted for 1.01% of total EG (up from 0.72%). Utility-scale solar thermal and photovoltaics EG grew by 31.4% to make up 0.69% of total electrical output, while distributed solar photovoltaics EG increased by 35.2%.

Wind EG rose 32.8% and now makes up 6.23% of total generation (up from 4.46%).

Nuclear EG registered growth of 1%.

Natural gas EG increased by 6.7%.

Coal EG fell by 24.2%.

Biomass EG declined 1.4%.

Geothermal EG declined 1.6%.

The better than expected performance of renewables is being reflected in projections for renewable electricity capacity from the EIA’s most recent Annual Energy Outlook (AEO), which are significantly higher than the projections in AEO2015.

New EIA basecase

The increased confidence in renewable energy growth stems from the appearance of both the Consolidated Appropriations Act and the Clean Power Plan (CPP), reductions in technology costs, and some positive changes in state policies on renewables.

The Consolidated Appropriations Act extended two major tax credits for wind and solar projects: the investment tax credit (ITC), a 30% tax credit for the cost to develop solar energy projects, and the production tax credit (PTC), a 2.3 cent per kilowatthour (kWh) tax credit for the first 10 years of production of wind farms. Both tax credits were extended five years according to the schedule shown below.

tax credits

The Clean Power Plan is also expected to have an impact on renewable electricity generating capacity, especially between 2022 and 2030, when the aforementioned tax credits begin to expire. The CPP is expected to boost renewables at the expense of coal as utilities prepare for the regulation of CO2 emissions to begin in earnest.

An EIA review of cost and performance characteristics of electricity generating technologies also found that capital costs for wind and solar technologies fallen relative to other technologies.

In addition, targets for renewable portfolio standards (RPS) are rising in a number of states such as Hawaii, and Vermont.

As seen at the top of this post, most of the renewable growth in the AEO projections comes from wind and solar.

Wind capacity is expected to continue growing through 2022, only slowing when the tax credits expire. Adoption of the technology will also be hampered, unless regional grids are upgraded, by the concentration of favorable wind resources in only a few regions of the country. Similarly, estimates have solar capacity in the utility sector growing, but at a slower rate as the ITC fades out. The effect is much less pronounced for distributed solar.

wind and solar

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