COLUMN-U.S. state renewables push is waning: Gerard Wynn
(The author is a Reuters market analyst. The views expressed are his own.)
LONDON, June 19 (Reuters) - U.S. state-level targets show the remaining potential for renewable power in some states such as Illinois, within an overall picture of waning mandates.
The United States has no federal targets to install or generate renewable power, where demand is instead driven by states in the form of renewable portfolio standards (RPS).
These require utilities to ensure a minimum percentage of their electricity sales come from renewable power sources.
Federal tax credits have supported the state targets, by making technologies including wind and solar more competitive.
There are several doubts ahead.
First, the latest federal wind power tax credit expires at the end of this year.
Second, there are ongoing legal challenges to the state RPS mandates, on the basis that these are too costly for consumers.
And third, some RPS are over-supplied.
Notwithstanding, there is evidence that the mandates have worked so far, and in some states still signal strong future demand.
Some 29 out of 50 states plus Washington DC have introduced their own binding RPS. (See Chart 1)
An additional eight states have voluntary targets.
Regarding binding mandates, these range from 8.5 percent of power sales (Pennsylvania) to a third (California) by 2020, according to the Department of Energy's "Database of state incentives for renewables and efficiency" (DSIRE).
They appear to have motivated more renewable power.
More than 60 percent of the 44 GW of new, non-hydro power renewables from 1998-2010 occurred in states with RPS obligations, according to the Lawrence Berkeley National Laboratory (LBNL).
Some specify targets for particular technologies, termed set-aside, within the broader goals.
The majority of states are currently meeting their annual targets or are very close.
Chart 1: (page 5) http://goo.gl/bHcUu
Chart 2: (page 15) http://goo.gl/McY9j
As a policy, RPS mandates are waning.
The bulk of new enactments were in the late 1990s and mid 2000s, while the latest state to introduce a new RPS target was Kansas in 2009, according to the LBNL.
States have continued to hone and toughen existing mandates and these will drive some new capacity over the next two decades, but at far slower rates than seen over the past few years even after accounting for growth in non-RPS states.
A report from trade body U.S. Partnership for Renewable Energy Finance last year estimated that existing RPS would require an additional 3.25 GW per year through 2030.
"RPS programs will continue to make a valuable but limited contribution to deployment of new renewable generating capacity in the U.S.," it concluded.
Meanwhile, the LBNL in its 2011 review estimated that the mandates would drive about 4 GW annually in the United States through 2035.
The largest cumulative growth would be in California (an additional 27 GW), followed by Illinois (10 GW); and New Jersey (about 8 GW); while other states would add around 5 GW or less.
Solar-specific RPS targets would help drive 500-700 megawatts (MW) of new solar capacity annually, LBNL estimated.
The United States is far ahead of these.
It added 723 MW of solar power just in the first quarter this year, while last year it added 16.4 GW of wind and solar power.
That is a result of stop-start tax credits which have to led boom-bust cycles in wind, and generous federal incentives for solar against the backdrop of falls in the price of solar panels.
It raises the question of whether a near-term over-supply will see demand tail off in future, or whether renewable power is acquiring new momentum independent of the RPS as a result of increasing competitiveness.
Wind power installations will drop sharply this year after a rush of new projects to meet a tax credit deadline at the end of 2012, underlining how strong industry growth depends more on the tax credit than the RPS.
Ultimately the tax credit was extended, but only for new construction starting this year.
A solar investment tax credit (ITC) does not expire until the end of 2016.
There are signs that solar is increasingly cost-competitive in some states with the ITC, regardless of the RPS and other state-level incentives, according to a recent report by the trade body the Solar Energy Industries Association and GTM Research.
The report noted the eighth successive quarterly rise in new residential roof-top solar installations.
"In the residential market in particular ... installation growth can be sustained even in the absence of state-level incentives," it said.
The RPS is supplying the role of back-up for the U.S. renewable energy industry, rather than driving growth.
The exception is in certain states where ambitious mandates will still drive demand.
The Illinois RPS applies to larger utilities, or nearly a half of total electricity demand, and is heavily skewed towards wind, at up to three quarters of the annual requirement, DSIRE data show.
It requires a quarter of eligible electricity sales to be from renewable sources by 2025 (wind power 15 percent), rising from 7 percent in 2013 (wind power 4.2 percent).
Wind power presently accounts for 3.9 percent of the state's power generation, according to the American Wind Energy Association. (Chart 2)
National Renewable Energy Laboratory (NREL) wind resource data ranks Illinois 15th in the United States, with a potential for 250 GW, compared with 3.6 GW presently installed.
(Reporting by Gerard Wynn; editing by Jason Neely)