Monday, December 3, 2012

State Renewable Portfolio Standards Add 6,000 MW/Year To Grid Or Up To 40% Of New Capacity

When the first renewable energy standards were adopted by states about a decade ago, many thought the renewable energy industry would not be able to supply the capacity needed to meet them. Lots of talk ensued about the probability that the force majeure provisions of the standards would be triggered and that the standards would not be met.  In fact, the opposite has happened, with the industry more capacity required.

Though about 30 states have adopted a version of a renewable energy portfolio standard, and the cumulative capacity needed to meet them is about 6,000 megawatts (MW) per year, the renewable energy industry now can build easily at least 13,000 MW per year. Indeed, the wind industry alone can install 10,000 MW.  New renewable energy capacity has often amounted to 30% to 40% of all generation capacity built in America during recent years.

Two results of the scaling up of the renewable energy industry have been both good for consumers.  The substantial new capacity and electricity supply put downward pressure on electricity prices in wholesale power markets.  Slow growth in electricity demand, much lower natural gas prices, and renewable energy additions add up to power price bargains.

Another consequence of the scaling up of the renewable energy industry is that the price of renewable energy credits has collapsed in many markets.  That has been the case in Pennsylvania, where credits have sold for as little as 0.1 cents/kilowatt-hour.  Low credit prices reflect the fact that the renewable energy industry is building much more capacity than required by most state standards.

Indeed, a strength of renewable energy standards is that they create a market and let loose innovation and competition to meet the standard.  The private sector competes to build the projects.

The renewable energy industry has attracted huge private investment, creating hundreds of thousands of construction and other jobs, billions of kilowatt-hours of clean electricity every year, on top of low power prices.  That's what all the people working and investing in renewable energy have built so far.  And they have just started.

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