Despite Efforts To Trip It Up, New Energy Economy Remains On Sound Footing
PALM SPRINGS, CA – MAY 13: Giant wind turbines near the Interstate 10 freeway are powered by strong prevailing winds on May 13, 2008 near Palm Springs. A US government report released this week concludes that wind energy could generate 20 percent of the electricity produced in the US by 2030, as much as is currently provided by nuclear reactors. Although wind energy constitutes only about 1 percent of the electricity of the nation, wind energy is experiencing a growth spurt with an increase of 45 percent jump last year. The report envisions more than 75,000 new wind turbines, many of them bigger than those in use today, and many of them in offshore waters to increase production from the current 16,000 megawatts of power to 300,000 megawatts. The report does not predict that such growth will actually occur but rather that it is possible. (Photo by David McNew/Getty Images)
A decade into the New Energy Economy, the country is not turning back. Falling electricity costs and continually improving technologies mean that the prospects for both solar and wind energy continue to brighten at the expense of coal.
Innovation and competitive pricing are at the heart of the transformation, making renewable energy the hottest commodity when it comes to generating electricity. Indeed, its price is at least on par with more traditional sources of energy and causing some utilities to rethink their long-range business plans.
No doubt, coal-fired electricity is getting swept up by the change, having watched nearly 56,000 megawatts of its generators retire between 2007 and 2016, or a total of 531 plants — equating to a marketshare drop from 50% to 30%. President Trump may be working to reverse trend by repealing the Clean Power Plan to reduce CO2 emissions, trying to subsidize older coal plants and making it easier for coal companies to shed their coal waste. But the wave of market and technical changes mean that the fuel still faces an uphill battle.
Consumers, in point of fact, are driving the market. Their electricity prices have fallen by 3% since 2015, says Bloomberg New Energy Finance. And they are getting a cleaner product to boot as greenhouse gases have been plunging since 2005. Power companies are thus filling a need.
Take Duke Energy, which has substantially reduced its coal-fired generation and replaced it with modern combined-cycle natural gas as well as utility-scale solar and wind generation. Since 2007, it has invested more than $4 billion into its renewable portfolio: 2,300 megawatts of wind and 600 megawatts of solar.
“We are trying to get ahead of the curve,” says Steve Young, chief financial officer for Duke, in a interview with this writer. “We will need to decrease our carbon footprint over the long-term and we will need to work with our stakeholders to have this happen.”
Lowering the Boom
Wind energy now accounts for about 6% of the energy mix while solar power makes up 1%, according to the US Energy Information Administration. There are now 84,944 megawatts of installed wind capacity in the United States. That could surpass 100,000 in 2018. The intermittent nature of those fuels mean, however, that they must be firmed up with power sources that run around the clock, which reflects in their overall share of the power generation portfolio.
Advances, though, are in the offing: Utility-scale solar power has grown by 72% from 2010 to 2016, said the Energy Information Agency. That’s faster than any other source of fuel. Roughly, 27,000 megawatts of those larger solar plants now exist, which the energy agency expects to hit 30,000 in 2018. Over the next five years, the solar market will nearly triple in size, adds GTM Research.
On a practical level, the cost of wind and solar technologies has dramatically declined. Utility-scale solar power, for example, has fallen by half over five years. All told, about 60% of the electricity added to the grid in 2016 came from wind and solar energy. Wind energy is employing more than 100,000 workers in all 50 states while the solar industry is doing the same for more than 200,000 people.
While those trends might fluctuate, they will generally head in the same direction — one that has clear skies ahead for wind and solar. The tax bill just signed into law preserves the production tax credits for them, or the investment tax credit credit of 30%, whichever they prefer. Those incentives have encouraged billions in investment and at least $50 billion more is planned for the wind sector alone.
Some Headwinds
There are some obstacles ahead. In the case of the solar industry, the International Trade Commission recommended in October a tariff of on solar cells of about 30%, and a tariff on solar panels between 10% and 35%. Those duties would decline over a four year period. President Trump is the ultimate arbiter here and he has until January 12, 2018 to make his decision.
The president, of course, has said that he would not hesitate to tax imports as a way to preserve American manufacturing. But the Solar Energy Industries Association opposes such a move, saying that it will raise solar prices. That would then deter businesses and homeowners from putting panels on their roofs.
Even Duke Energy is warning against tariffs on solar panels, fearing that they could lead to higher domestic prices and a reduction in solar power projects. And if coupled with subsidies for coal fired power, other critics say that the general moves could start pulling the country in the other direction — away from the New Energy Economy and back into the previous century.
While there will be repercussions from any tariffs or subsidies, market forces are resilient. A story in Forbes by Energy Innovation said that the Public Service Co. of New Mexico generates 56% of its electricity from coal. But its 2017-2023 integrated resource plan says that it will phase-out coal by 2030 and replace that natural gas, wind and solar along with energy storage. Renewables would roughly triple there and make up about 36% of its electricity portfolio.
Ameren is doing the same and is investing $1 billion in wind and solar projects while also closing half of its coal fleet. Xcel Energy, meanwhile, has been on a quest to build out its wind and solar facilities, and is now plowing in $2.5 billion in such projects. They will be replacing coal plant, which now account for 46% of its Colorado power supply.
”We expect this tremendous growth in wind generation to provide great value to our customers, who will save money on energy costs,” Michael Moehn, president of Ameren Missouri said. “Because of significant advancement in technology, harnessing wind is less expensive than other forms of new generation.”
The New Energy Economy is under fire politically but a progressive tax code combined with consumer awareness will keep it viable. The best evidence of that is the American utility industry, which is duty-bound to serve its customers in the most reliable and cost effective manner it can — a sector that is clearly trending toward greener fuels and modern technologies.