Renewable Energy in Todays Power Markets

Blair Swezey
Principal Policy Advisor National Renewable Energy Laboratory Golden, Colorado

What Are Renewables?

Energy sources that are replenishable in nature on a regular and/or relatively short time frame.
o o o o o Hydropower Biomass Geothermal Wind Solar

Conversion systems employ a mix of traditional and non-traditional technologies. Generation can be base load, peaking, and as available.
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U.S. Power Supply Mix - 2003

Nuclear 19.9%

Natural Gas 16.4% Hydro 6.9%

Petrol/Other 3.5% Renewables 2.2%

Coal 51.2%
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Why Renewables?
Cleaner energy production Fixed, predictable costs Use of local or in-state resources Local economic benefits Waste reduction Can be deployed in various system sizes

A Brief History of Renewables Development

1980s to early 1990s
Energy Crisis spurs search for domestic energy alternatives Federal and state governments provide incentives for RE techs PURPA passed in 1978, high avoided costs (Under PURPA, more than 12,000 MW of non-utility-owned renewable power projects were interconnected to the grid) RD&D expenditures peak in 1981, then fall dramatically

Most of 1990s
Period of lower and stable energy prices discourages renewables Competition mantra works against interventionist energy policies Steady increase in RD&D expenditures; significant decrease in 1996

Late 1990s to Present

Natural gas price shocks cause reevaluation of generation mix States take lead in adopting renewables policies Initially to assure renewables a continued role in more competitive market; more recently to promote fuel diversity and economic development
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Current Drivers for Renewable Energy Development in the United States

Financial Incentives: Federal production tax credit for wind, investment tax credit for solar and geothermal, and accelerated depreciation, as well as state incentives, all help lower costs and spur development. Renewables Portfolio Standards: 16 states have enacted RPS or other RE purchase policies, which obligate suppliers to deliver a minimum level of RE. These states represent about 35% of total U.S. load. Renewable Energy Funds: 15 states have created funds to financially support development of renewable energy sources. Green Power Markets: Markets for voluntary purchases of green power have emerged: utility green pricing programs, competitive green power markets, and renewable energy certificates. Nearly 2,000 MW supported. Market Prices: Some forms of renewable energy, particularly with financial incentives, can compete today on cost alone (e.g., wind at ~2-4 cents/kWh). RE sources are being increasingly viewed as a price hedge. Policies can be and often are mutually supportive.
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Cost Trends for Renewable Power Technologies

40

Actual

Projected

30

Wind Geo

20

Bio STE PV

10

0 1980 1985 1990 1995 2000 2005 2010 2015 2020

Source: DOE/EPRI
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Cost Competitiveness of Selected Renewable Power Technologies

Wholesale Power Small Hydro Solar Photovoltaics Retail Power

Concentrating Solar Biomass Geothermal

Wind

10

20

30

40

50

Power Generation Costs in USD Cents/ kWh

8 Source: International Energy Agency

GE WIND 1.5 MW

Cost of Energy Trend for Wind

1979: 40 cents/kWh

2000: 4 - 6 cents/kWh Increased Turbine Size and Height R&D Advances Manufacturing Improvements
NSP 107 MW Lake Benton wind farm 4 cents/kWh (unsubsidized)

2004: 3 4.5 cents/kWh

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Installed Wind Capacity & Cost Trends

Cost of Energy and Cumulative Domestic Capacity

Cost of Energy (cents/kWh*)

60 50 40 30 20 10 0
1980 1984 1988 1992 1996 2000
*Year 2000 dollars

4000 3000 2000 1000 0 2004

Increased Turbine Size - R&D Advances - Manufacturing Improvements

Capacity (MW)
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100 90 80 70

6000 5000

World Growth Market

Total Installed Wind Capacity
40000 35000 30000

Capacity (MW)

25000 20000 15000 10000 5000 0

1. Germany: 14,000 MW 2. United States: 6,374 MW 3. Spain: 5,780 MW 4. Denmark: 3,094 MW 5. India: 1,900 MW World total 2003: 37,220 MW

Source: WindPower Monthly

19 82 19 83 19 84 19 85 19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03

United States

Europe

Rest of World
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Best Research-Cell Efficiencies

36 32 28 Efficiency (%) 24 20 16 12
Masushita

Multijunction Concentrators Three-junction (2-terminal, monolithic) Two-junction (2-terminal, monolithic) Crystalline Si Cells Single crystal Multicrystalline Thin Si Thin Film Technologies Cu(In,Ga)Se2 CdTe Amorphous Si:H (stabilized) Emerging PV Westing- ARCO Dye cells house Organic cells
(various technologies)
Boeing Kodak Boeing University RCA of Maine RCA RCA RCA RCA No. Carolina State University Kodak

Spectrolab Spectrolab Japan Energy NREL NREL

NREL/ Spectrolab

Spire Spire Stanford UNSW Georgia Tech University So. Florida ARCO Boeing Boeing UNSW

UNSW

UNSW

UNSW NREL Cu(In,Ga)Se2 14x concentration UNSW NREL NREL NREL NREL AstroPower United Solar NREL

Sharp

Georgia Tech

Varian

NREL Euro-CIS

Solarex

AMETEK Monosolar Boeing RCA AstroPower Solarex University of Lausanne Kodak UCSB Photon Energy United Solar

8 4 0 1975
RCA

University of Lausanne

Groningen Siemens Princeton Cambridge University University Linz Linz Berkeley

1980

1985

1990

1995

2000

2005
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PV Manufacturing R&D Cost/Capacity

(DOE/U.S. Industry Partnership)

Actual

Projected

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PV Module Production Experience (or Learning) Curve

100.0

1976

PV Module Price (2002$/Wp)

10.0

2002

1.0

80% Learning Curve: Module price decreases by 20% for every doubling of cumulative production

90%
75 GW

80% 70%

0.1 0 1 10 100 1,000 10,000 100,000 1,000,000

Cumulative Production (MWp)

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World PV Cell/Module Production (MW)

800
744.1

700 600 500 400 300 200

125.8 201.3 154.9 77.6 88.6 57.9 60.1 69.4 55.4 33.6 40.2 46.5 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Source: PV News, March 2004
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561.8

Rest of world Europe Japan U.S.

287.7

390.5

100 0

Shift in Mainstream PV Applications

1995 (71.5 MW)
Consumer Indoor 5%

2002 (388 MW)

Consumer Indoor 2% Remote Industrial 17%

GridConnected 13%

Remote Industrial 35% Consumer Power 13% GridConnected 58% Remote Habitation 19%

Remote Habitation 34%

Consumer Power 4%

Data source: Strategies Unlimited

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Some Other Factors

Net metering and non-discriminatory interconnection rules for customer-owned renewables systems. Transmission capabilities to tap more remote resources. Addressing intermittency of some RE technologies but not a major issue until intermittents become a significant fraction of the generation mix. Consumer education needed for voluntary green power markets to be more successful.

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Platts National Forecast for Renewable Power Generation

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EIA Projected Renewable Electricity Generation

200

By Energy Source, 2010, 2020, and 2025 (billion kilowatthours)

Geothermal

150

Solar thermal Photovoltaic Wind

100

Biomass

50

MSW

0 2001 2010 2020 2025

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Concluding Remarks
RE technologies are likely to continue historical improvement in cost and performance from a combination of RD&D and increased market deployment. In the absence of a more aggressive federal approach to deployment, state policies will continue to lead the way. RPS and SBC policies establish minimum public support levels for renewables supply or investments. Green pricing programs allow customers to support higher levels of renewables development through voluntary purchases. Financial incentives compliment other policy approaches by lowering production costs. Combinations of policies are likely to achieve the best outcomes.
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