Tag Archives: wind

Texas: Clean Power Powerhouse – 9/12/16

The Texas electricity market hit a milestone in Feburary when nearly half the power flowing onto the grid came from wind turbines demonstrating what a clean powerhouse the Lone Star state has become

Though it is still a leader in the oil and gas industry, a key player in hydraulic fracturing adoption, Texas has dominated in wind energy like no other. The state added more wind-based electric generation capacity than and all other states combined. It surpassed even California in total renewable energy generation added with its wind alone.

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Wind turbines accounted for 16% of the state’s electrical generating capacity as of April, but now Texas is anticipating a huge surge in solar power as well.


The fight over climate change and the necessity of clean power may still be going on, but Texas’s free-market-based electricity system doesn’t seem to be paying it any mind. Even state officials, who favor the hands-off approach, say wind and solar are set to play a major role in the state’s energy future even when federal subsidies begin to decline.

The road that took Texas to its current transformation was a free market-oriented deregulation. Deregulation cost many utilities their monopoly power over generation, transmission and retail sales of electricity, and introduced competitive auctions for wholesale power. The deregulation plan was signed by former President Bush, and included a government-imposed requirement to have at least 2,000 MW of renewable generating capacity by 2009.

Texas blew past that goal in 2005, as well as a new goal of 10,000 MW by 2025 set by then Gov. Perry; it passed the 2025 goal in 2011.

Texas officials ignored global warming when presenting the program. Instead, they framed it as a jobs producer and a means of getting more money flowing to rural counties. In the end, it did that much and more as Texas retail electricity prices have fallen the average U.S. price over time. The state now has more than 100,000 people working in renewable energy, according to the Texas Workforce Commission.


Yet, the change hasn’t come without some trouble. Early on, electric-system users spent billions to build transmission lines from windy West Texas to cities. There was also the problem of integrating a intermittent power supply when the grid requires a balance of supply and demand at all times. In addition, wind projects get hefty federal payouts for whatever they generate meaning that they can undercut the business model of fossil-fuel generators. Critics point out that the decommissioning fossil-fuel plants prematurely could lead to instability if infrastructure cannot keep up or if declines in subsidies have a greater negative impact than expected.

Federal subsidies are scheduled to shrink, but the falling costs of solar and wind technology have done as much, if not more for adoption rates. Solar costs are down 48% since 2010, according to the Solar Energy Industries Association. Those reductions are expected to continue consistently with technological advances and greater economics of scale.

Texas grid operator, ERCOT, expects explosive growth in solar with one analysis suggesting that the recent extension of the federal solar tax credit could lead to as much as 19,000 MW of solar capacity being built within 15 years. Texas could go from 10th place among states in solar capacity to second in the next five years, according to the Solar Energy Industries Association.

“The cost has come down to the point where people can really see the value,” said Cris Eugster, the chief operating officer for San Antonio’s utility, CPS Energy.


The Way the Offshore Wind Blows – 9/9/16

Workers are putting the finishing touches on the United States’ first offshore wind farm that will provide power to Block Island, a small island off the coast of Rhode Island.

Under a 20-year agreement with regional utility National Grid, the developer Deepwater Wind will receive about 24 cents per kilowatt hour for the power generated by the turbines, with guaranteed increases over time. The average Rhode Islander pays only about 18.69 cents, but Block Island is not connected to the mainland electricity grid. Without anyone willing to build a mainland connection, the islanders use a network of diesel generators susceptible to rolling blackouts as seen after a recent fire.

Block Island’s town council and residents association backed the project on promises that it would reduce reliance on diesel generators, combat climate change, and finally bring a mainland power connection, that will include fiber-optic cable to improve notoriously slow Internet speeds.

Though small compared to the 1500 MW goal of Denmark, the 30 MW project will provide enough energy to power about 17,000 homes. Its size was chosen mostly to avoid the fate of the Cape Wind project off Martha’s Vineyard, which withered under legal challenges and controversy. The project’s developers have expressed hope that a small success could set a path for more ambitious work. And they may soon see just that.

The departments of Energy and Interior are planning a joint effort to support offshore wind farms over the next five years, according to a statement. The report accompanying the statement projected that increasing the scale of the industry would help offshore wind become competitive in some areas by 2025, with a cost of less than $100 a megawatt-hour. The plan is to add as much as 86,000 MW of wind power which, in turn, would support 160,000 jobs, reduce the amount of water consumed by U.S. power plants by 5%, and cut greenhouse gas emissions by 1.8%, the Energy Department said.

A dozen commercial offshore wind leases have already been signed off on by the federal government as the Obama administration pushes clean power in its final year. In Massachusetts, Gov. Charlie Baker signed a law requiring utilities to buy a combined 1,600 MW of offshore wind power in response to increasing interest in the power source. New York, Gov. Andrew M. Cuomo (D) has also announced a plan to have half the state’s power come from renewable energy sources by 2030, much of which could wind up coming from offshore wind.  Deepwater Wind, the company behind the Block Island project is already proposing 15-turbine wind farm off the eastern coast of Long Island as part of its long-term plan to supply parts of New York and Massachusetts.

Power Producers and Clean Energy p.II – 8/16/16

NRG Energy has seen difficult times: falling profitability during the energy glut, technical difficulties at its solar plants, poor results for residential solar and a electric vehicle charging network projects, and the replacement of a CEO that pushed ambitious clean power projects. Given how many energy companies have disappeared in the last five years, NRG’s troubles are not so unusual and are useful for explaining how tricky energy has gotten.

One part of the story is the boom in the United States natural gas production. The fracking of shale deposits revealed gas deposits of unbelievable size that could be accessed relatively cheaply and quickly, pulling down the price of all electricity. In turn, all of NRG’s projects from coal to renewables were less profitable. Investors lost faith in the company, NRG’s stock plummeted. Coal assets were hit especially hard as shown by devastating last half-decade for coal mining companies illustrated below, made only less profitable by new regulations on pollution that disproportionately affected coal power plants.

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But most energy companies have suffered in some way or another during the glut. NRG’s more interesting troubles come from its attempts to branch out into clean power that, unfortunately, coincided with the glut that hamstrung conventional revenue sources.

All power producers and utilities will eventually be required to make more electricity while emitting fewer greenhouse gases; they face a hard fact in that. However, NRG tried to change faster than most in the last decade under David Crane who began running the company in 2003 and began acting on environmental concerns in 2006. He called environmental protection a “moral imperative” as he made large investments in wind, solar, and electric-car charging stations, and promised massive carbon emissions cuts exceeding those pledged in the Paris Climate Talks of 2015.

Yet, now Mr. Crane is no longer leading NRG. After NRG stock plummeted 63%, he was let go in December of 2015. Investors tired of earnings calls dedicated to clean-power projects that seemed more like a distraction from the energy glut crisis than a path to the future and the NRG board named the COO, Mr. Gutierrez, as the new leader.

Strangely enough, Mr. Gutierrez is committed to a similar path as Mr. Crane. He led an NRG task force that recommended that the company adopt ambitious targets for emissions reduction and has recently recommitted to those goals. Though bending to investors on some projects that haven’t panned out yet, he seems ready to continue to tackle climate change as a serious threat to the company’s business model. Still managing carbon assets while also preparing for a time when solar and wind assets will dominate balance sheets, he has seen NRG shares rise 40% during his tenure.

Mr. Gutierrez has already backed away from residential solar and electric-vehicle charging projects, but NRG still provides solar installations to big companies and continues to spend hundreds of millions to acquire more solar and wind assets. Today, NRG generates about 9% of its electricity from renewable assets, or nine times what it generated from them when Obama first took office. Across the industry, a majority of power plants being built today use renewables, not fossil fuels.

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One day NRG will produce a majority of its power from renewables. Investors and board members will come around to accepting that fact the cheaper solar and wind power become. For now, Mr. Gutierrez has the unenviable position of satisfying today’s investors while planning for a greener future, readying more sustainable assets while burning more profitable fossil fuels. One day NRG will be the clean power company Mr. Crane wanted it to be, until then Mr. Gutierrez has his work cut out for him.

Power Producers and Clean Energy p.I – 8/15/16

Power producers are facing a difficult question: when and how to transition to cleaner fuels. In this article, I’ll be summarizing the basic issues companies are facing as they try to answer that question.

The electricity used by utilities, companies and individual homes comes from primarily coal and, more recently, natural gas. As a result, power production is the biggest source of greenhouse gas emissions in the United States, according to the Environmental Protection Agency (EPA). Now, as climate change concerns gain traction and alternative energy gets more affordable, the industry is feeling pressure from regulatory and economic forces to change their business practices.

The Obama administration’s Clean Power Plan is in limbo after the Supreme Court issued a stay on EPA enforcement of the CO2 regulation. The SCOTUS issued the stay without addressing the merits of the case before the passing of respected Associate Justice, Antonin Scalia, that left the court split evenly between conservative and liberal justices with the Senate unlikely to approve a replacement justice until after the presidential election in November. On the issue of energy, the candidates are almost nothing alike with the Democratic candidate, Clinton, promising to maintain Obama’s policies while the populist candidate, Trump, has pledged to dismantle everything. Though knowing 100% which candidate will win is impossible, murmurs of a Clinton landslide are growing louder and power companies appear ready to accept the writing on the wall.

Economic forces are following a much more predictable path. According to Bloomberg New Energy Finance (BNEF), solar panel costs have fallen relatively steadily since the 70’s with no signs of letting up. Wind power costs have also fallen substantially though at a slower pace.

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Prices for wind and solar power have plunged putting them in a position to compete with coal and natural gas on a cost basis.

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Competitiveness would still depend heavily on infrastructure, regulation, further technological improvements, and location, but solar and wind are looking like safer bets every year. Still, as many power producers have learned the hard way, the transition from coal to clean power has its own risks.

Many companies have made costly mistakes in their initial forays into clean power. From Solyndra to SunEdison, there are plenty of examples of investors getting burned by surprise technological changes, poor debt management, or some other issue. The next article will cover one power producer’s bad luck in its clean energy projects: NRG Energy.

Who’s Buying Green Power? – 7/22/16

Green power has only recently started to get competitive with conventional power on a cost basis so why are so many major organizations buying in already? According to the Bloomberg New Energy Finance database of more than 600 corporate power-purchase agreements (PPA), buyers range from the Pentagon and Google to Wal-Mart and Procter & Gamble with more companies buying more clean power each year.

Part of the explanation is that renewable power costs have been falling at relative large and consistent rates, and really are reaching competitive price levels in some areas. As illustrated in the BNEF graph below, PPA prices are only a fraction of what they once were for wind and solar with solar in particular seeing massive declines in price.

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Another BNEF graph shows that the trend is expected to continue thanks to the permanent technological improvements to solar cells that have brought down hard costs.

solar power

As a result of similar improvements in turbines, wind has already become competitive with conventional sources of energy in many places, particularly the Great Plains region. The Plains region includes part of Texas, a state where wind has done remarkably well even beating out natural gas for new electric generation capacity additions in 2015.

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Besides the underlying economics, there is a more subtle incentive driving adoption of clean power. A desire to appear “green” to an increasingly climate conscious society is tipping the scales in favor of investment in renewables; it is changing equations for decision making by adding in perceived goodwill to outweigh the added costs. The Pentagon is no exception to return on investment principles that ask it to get the most bang for its buck and clearly showing a progressive stance has some value to the Department of Defense, at least while a progressive president is in office.

Other big buyers of PPA contracts are the large companies you might expect. Google, Amazon, Microsoft, Apple and Facebook all make the list as the power hungry that can afford to pay a little extra for their power and need a lot of it, and it shouldn’t be surprising to see a lot of California ties on the list.

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The Great Plains dominate in wind but California is certainly the sunshine state when it comes to solar development.

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Record breaking investment in green power is happening at a time when the shale-gas revolution has sent conventional power prices plummeting. With short-term prices for natural gas so low and unlikely to rise much with the U.S. access to massive domestic deposits, decision makers must have a good reason for buying into alternative energy.

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EIA Projections on Energy Consumption – 7/19/16

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Source: U.S. Energy Information Administration, Monthly Energy Review

Petroleum, natural gas, and coal made up 81.5% of total U.S. energy consumption in 2015, their lowest share since surpassing hydropower more than a century ago. At their expense, non-hydro renewable energy consumption has expanded rapidly especially in the case of solar and wind, which have seen growth skyrocket the last few years.

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On the other end of the spectrum, U.S. coal consumption fell 13% in 2015 on competition from natural gas and renewables, as well as regulation on pollution that forced older plants to retire. The decline is only matched by one in 2009, the start of the Great Recession, and another in 2012, when coal use fell 12% below the level in the previous year. Coal consumption is expected to continue its decline, especially if the Clean Power Plan survives.

The EIA’s Reference case projects petroleum consumption will remain stable through 2040 as fuel economy improvements and other changes offset growth in population and travel. The EIA projections are conservative by design so those “other changes” do not include the possibility of truly disruptive technological changes such as mass market adoption of electric and/or self-driving vehicles. Expect a substantially revised projection in 2025 by which time most major automotive companies would have had their affordable electric car models, costing around $30,000 after incentives programs, released for about 5 years.

Nuclear and hydroelectric are expected to remain relatively flat in growth through 2040.

According to the EIA, energy consumption in the U.S. should increase greatly by 2040 as shown below (again the assumptions used by the EIA are conservative and all trends show should be taken with a grain of salt). That said cheap natural gas and renewable energy are expected to eat into much of coal’s current role in electricity generation in any imagined scenario.

Any politician promising a preservation or return of coal industry jobs is either ignorant of economic reality or stupid enough to lie and think it won’t backfire.

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Source: U.S. Energy Information Administration, Monthly Energy Review, Annual Energy Outlook 2016

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Source: EIA, International Energy Outlook 2016, International Energy Statistics, and Oxford Economics

Worldwide energy intensity decreased by about 30% between 1990 and 2015. The reduction has occurred in nearly all regions of the world, in both developed economies and emerging ones.

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Source: EIA, International Energy Outlook 2016, International Energy Statistics, and Oxford Economics

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Source: EIA, International Energy Outlook 2016, International Energy Statistics and Oxford Economics

Clean Energy Investment – 7/13/16

As the renewable energy industry gains momentum, big oil taking a hard look at clean energy investment.

With crude prices still at an extremely unprofitable level and unlikely to recover so long as shale-oil exerts its downward pressure, oil companies are beginning to look elsewhere for future growth. And funnily enough, they are looking at renewables. As the chart from Bloomberg New Energy Finance (BNEF) below shows, wind and solar growth projections have started looking mighty attractive to thanks to falling costs. Renewables outpaced even gas-fired plants as sources of new power added to U.S. electrical grids last year.

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According to the recently released seventh annual U.S. Clean Tech Leadership Index, which tracks and ranks the clean-energy and clean-tech activities of all 50 states and the 50 largest metro areas in the U.S, renewables have made tremendous gains in just the last few years.

Since 2010, the number of states with 10% in-state generation from non-hydro renewables rose from 1 to 14. The top three states Iowa (31%), South Dakota (25%), and Kansas (24%) derived most of that energy from wind power, but California has became the first state to generate 10% of its in-state electricity from solar power reflecting the significant decreases in costs the solar industry has seen and is expected to see in the future.

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Tax-equity investment in U.S. clean-energy projects is projected to exceed last year’s record $13.1 billion reaching as much as $14.8 billion in investment in 2016. After two key federal tax incentives for solar and wind projects, the ITC and the PTC, were granted an unexpected extension for an additional five years at the end of 2015, interest in clean energy investment increased dramatically.

Still, a few billion dollars in clean energy investment isn’t much compared to the the hundreds of billions the U.S. oil industry is worth and recent capital flows look like a way for oil companies to test the water for now.

Solar Power Set to Shake Up Energy Sector – 7/7/16

The most exciting renewable energy source for consumers and investors looking for a shake up in the energy sector should be solar power.

Few people wouldn’t get excited if you told them they could get electricity without relying on a costly and insecure power grid, and no one would deny wanting cheaper, cleaner electricity. Put those together and you’d have an idea worth billions that would improve the quality of life of most if not everyone in the world. Fortunately, solar power has the first part of that equation squared away and is fast approaching the second.

Though wind is currently cheaper than solar in most regions, planned investments have $3.4 trillion for solar and $3.1 trillion for wind through 2040 because the cost of solar power is expected to decline faster and further than even wind power. Wind power for reference sports an impressive 19% price decline for every doubling of capacity. Those declines for both resources are permanent since they’re technological improvements instead of the unexpected, temporary price shocks that tend to send fossil fuel companies and/or their consumers reeling.

solar power

At current rates, Bloomberg New Energy Finance forecasts that wind and solar will be the cheapest forms of producing electricity in most of the world by the 2030s. This estimate is more or less consistent with the projections put forth by the Energy Information Agency that have wind beating all forms of coal generation and solar closing in rapidly by 2020.

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According to David Crane, former CEO of NRG Energy, solar and other renewables will find their biggest challenge in convincing utilities to abandon the status quo. Currently, utilities base their business models on fossil fuels that require an extensive and centralized power grid. Since consumers have no viable substitute for the electricity the utilities provide, utilities have had predictable revenue streams that have sustained them for decades. The uncertainty associated with disruptive technologies like wind and solar is understandably met with skepticism, especially when rooftop solar is already starting to eat into revenues.

That’s not to say that utilities aren’t interested in renewable power. The writing is clearly on the wall for fossil fuels and some companies are ready to start looking to the future. The new Renewable Energy Buyers Alliance (REBA), for example, is a coalition of more than 60 major companies looking to buy large amounts of affordable, renewable power from local grids. So long as green power brings the other kind of green, utilities are going to learn to adapt like any other good businesses faced with new technology; they’ll learn to live differently or lose out to those who do.

Bloomberg New Energy Finance New Report – 7/6/16

new forecast by Bloomberg New Energy Finance (BNEF) looking at global power markets for the next 25 years has peak fossil fuel use coming sooner than expected, and not because we’re running out of coal and gas. Alternative energy sources, electric cars, and battery storage are far lower on their expected cost curves than anyone predicted and the effects are starting to show. Analysts appear ready to start believing that a shift in power markets is underway that could fundamentally  change the energy industry in as little as a decade.

peak fossil

A price collapse in fossil fuel markets – caused by the glut of cheap natural gas unlocked via fracking – has already destroyed the value of the U.S. coal industry. With the largest coal company in America, Peabody Energy, declaring bankruptcy and the coal industry as a whole losing over 90% of its value in the last few years, it is clear that coal’s heyday is over.

Though natural gas played a significant role in toppling coal, the decline costs of wind and solar have muted expectations for natural gas’s future. The relatively steep and steady declines in the cost of wind and solar power are just much more appealing to investors than gas’s more conventional path. Gas will never reach the same level of global dominance as coal because decision makers are favoring renewables as the best bet when looking at investing in energy assets, which typically have lifetimes measured in decades, according to BNEF. Some evidence of this fact can be seen in the expected $2.1 trillion in fossil fuels investments through 2040 being dwarfed by $3.4 trillion for solar and $3.1 trillion for wind for the same time frame.

With current cost projects, analysts with BNEF expect that building new wind farms and solar fields will be cheaper in some regions than running the existing coal and gas generators by 2027. That’s not to say that people will be tripping over themselves to throw up turbines and panels; however, new capacity will be overwhelmingly renewable energy from now on with fossil fuel burning plants serving as back up generators.

solar to dominate

The marginal cost of the electricity from solar and wind projects is essentially zero compared to coal and gas plants. And when electricity is essentially free per watt from clean power but not from fossil fuels that pay operating costs in fuel, it is clear which source will be idled. The peak use of fossil fuels will come simply because it takes far longer to make back the money it take to construct fossil fuel burning plants when they’re being idled and anyone could tell you that time wasted is money wasted.

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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