Renewable energy consumption increased in the US by 8% between 2008 and 2009, according to the US Energy Information Administration (EIA).
But the boom time for US renewables is under attack on multiple fronts. Laws to curb emissions, which would have provided regulatory certainty for the clean energy industry, failed to pass through Congress last year. High oil prices at a steady US$100 a barrel are usually a boom to renewables, but new US gas reserves are estimated to last 100 years.
The ‘great recession’ has squeezed financing, and turned investors away from ‘green gold’. And even President Barack Obama’s Clean Energy Standard (CES) has threatened the pace of renewable deployment by placing wind and solar alongside nuclear and clean coal.
Republican Cuts
Republicans took control of the House of Congress in the mid-term elections last November, partly thanks to campaign funds from fossil fuel corporations such as Koch Industries and ExxonMobil who together donated US$3.2 million. Since then, Republicans have sought to roll back 40 years of environmental laws.
The ‘Grand Old Party’, it seems, was happy enough to allow the Environmental Protection Agency (EPA) to clean up the air that Americans breathe and the water they drink. But when it came to the smokestacks at coal-fired power stations across the country, they proposed to ban the EPA’s authority to control industrial CO2 and to cut its budget by US$3 billion.
Republicans proposed US$61bn cuts in total. But not all Federal agencies’ budgets were cut equally: A US$31m reduction on fossil fuel research paled by comparison to cuts of US$899m in energy efficiency and renewable energy research.
Eileen Claussen, President of the Pew Center for Climate Research, says the Republican budget proposals were part of a wider political agenda: “The newly elected majority in the House has taken an axe to EPA regulations and clean-energy related programs at the Department of Energy. In the House there is a very strong libertarian bent which doesn’t like regulation and thinks Government programs are not helpful to the market.”
Claussen says that even if the budget proposals were passed by the Democrat- led Senate it would be subject to presidential veto, but Obama may be pushed to compromise in the face of a US$14.6 trillion national deficit. Kathy Sierra, a Senior Fellow in the Global Economy and Development program at the Brookings Institute in Washington, says that the Republican rebuttal of the EPA’s authority is harming the renewables industry: “There’s no signal of what the eventual price of carbon is going to be – whether that’s through cap and trade, a tax or regulation. That’s holding back some investors.”
A compromise agreement now looks more likely which would delay EPA regulation of greenhouse gases from stationary sources for two years – a move first proposed by Jay Rockefeller, a Democrat from West Virginia, which produces 93% of its electricity from coal.
Nationwide, coal-fired power stations supply 54% of US electricity, and the EPA’s regulations were expected to switch off power from fossil fuel plants.
But delays announced this March to the EPA’s mandatory reporting regulations for emitters of more than 75,000 tons of CO2 a year will further postpone the shutdown.
The North American Electric Reliability Corporation estimated last year that EPA regulations could result in the retirement of 19% of fossil fuel-fired capacity in the United States by 2018, equivalent to 80 GW of electricity.
Michael Wara, an Assistant Professor at the program on energy and sustainable development at Stanford University, says that this ‘Doomsday scenario’ for coal-fired plants would open up market share to renewable-generated electricity, but lack of demand because of the recession is still a problem.
He says: “The shut-down of coal-fired plants is an important part of the story for renewables – it’s about creating the space for new wind farms to enter. But they are trying to build renewable power in the absence of growing demand for electricity.”
A Renewable Energy Standard (RES) would have mandated utilities to buy a minimum amount of electricity from renewable sources at a federally set level. After hopes of an RES were killed off with the failure of climate legislation last year, the renewables industry remains focused on the states as they control their own energy market and can voluntarily set their own Renewable Portfolio Standards (RPS).
Unbalanced Growth
But this piecemeal approach has resulted in unbalanced growth. California has introduced the US’s most aggressive RPS of 33% electricity from renewables by 2020 for example; while Utah has adopted non-binding goals of 20% by 2025 and 21 states have no RPS.
Wara says: “In the US, the states have the lion’s share of the power in the electricity regulatory context and they jealously guard it. That creates enormous problems in renewables because it means you can’t necessarily build projects where the capacity is greatest without building transmission lines.
“Wyoming, for example, would like to sell us their wind power, but we can’t transport the power across Utah because if we buy the wind from Wyoming we won’t buy the coal power from Utah.”
However, Sierra says that the advantage of the RPS is that it is market driven, and not subject to partisan bias.
She says: “I was recently out in Nevada which has an RPS of 20% by 2015. They are trying to work out how to be a bigger player in renewables, particularly geothermal. But Nevada is a very conservative state, they’re not going to say we’re doing this for climate change, they’re doing it as a diversification of their economy.”
The Clean Energy Standard
Barack Obama has sown seeds of further uncertainty with his Clean Energy Standard. Renewable energy advocates cheered during his state of the union address in January when he said that 80% of US electricity should come from clean energy sources by 2035. But the cheers died down when he lumped traditional renewables alongside natural gas, nuclear and clean coal.
Wara says: “It’s not clear that the CES will move the ball. If you include nuclear and gas, then that means we’re already very nearly complying with the standard. When you factor in all the state RPS mandates, we already are. It’s not clear that the standard represents additional ambition.”
Christine Tezak, a Senior Energy and Environment Policy Adviser at market analysts Robert W Baird, says that the CES has been met with a mixed response in the renewable industry: “Some have said ‘put nukes in there, put clean coal in there, because we’re bringing our costs down faster, we’ll come to market faster, and in a foot race against those industries we’d like the chance to run’. And on the other side of the coin you have renewable energy advocates who say the CES would have to be an incredibly aggressive target for us to support it.”
Tezak says that the prospects of passing a CES any time soon are slim: “When you look at the great scheme of what Washington is dealing with, shenanigans on financial reform, the kerfuffle around healthcare reform, and the budget. There’s stuff that’s crowding the energy agenda off the proverbial stove.”
Fracking Shale Gas
But perhaps the greatest threat to renewables has come from advances in gas extraction, or ‘fracking’ technology, which last year prompted the EIA to double forecasts of recoverable shale gas to 827 trillion ft3.
Tezak says: “Cheap natural gas from shale is the bane of the renewable energy industry. Pure market signals indicate that we should build gas plants. We’re also coming off the largest two-year sequential demand drop since the shut down of the WWII industrial complex. The recovery in electric demand is extraordinarily slow and a lot of what is being eyed for retirement through EPA regulations will be substituted with natural gas.”
She also warns that some utilities had reported over-compliance of their RPS targets after wind-generated capacity increased by 61% between 2007 and 2008 and by 28% between 2008 and 2009.
“We’ve wound up with deployments but not all of them are contracted. Imagine if you’re a new developer competing with someone who has already got turbines spinning. If you signed contracts to cover your projected demand in 2008 and demand has dropped since then, you’re not going to be out shopping for new renewable resources. You’re compliant. In fact you may be over-compliant.”
But a switch from coal to gas could present a new opportunity for renewables, Tezak says. “The nice thing is that gas can facilitate the integration of renewable energy because fast response gas can help manage intermittency.”
About:
Felicity Carus previously worked on the environment desk at the UK’s Guardian newspaper. She covers renewable technology and clean energy policy and finance out of San Francisco, CA.
Renewable Energy Focus U.S., March/April 2011