of domestic electricity supply by 2020. Accordingly, wind power will continue to grow rapidly if recent policy initiatives, including the PTC, continue into the future.
Though AEO 2009 suggests that biopower will play an expanding role in meeting future RPS targets (EIA, 2008a), the degree of competition with and recent mandates for use of liquid biofuels for providing transportation fuel—and, of course, the use of biomass for food, feed, and fiber—all limit the prospects for greater use of biomass in the electricity market.
Supply-side utility-based renewable-electricity technologies, such as concentrated solar power, wind, and biomass, must compete on a cost basis with other technologies for utility electricity generation. But the future of distributed renewables generation, such as from residential PV, will depend more on policy, on how costs compare to the retail price of power delivered to residential or other customers, on whether prices fully reflect variations in cost over the course of the day, and on whether the full costs of using fossil-fuel generation—particularly their externalities, such as CO2 emissions—are incorporated into prices.
Formulation of robust predictions about whether the price of electricity will meet or exceed the price required for renewable sources to be profitable and what their resulting level of penetration will be remain a difficult proposition. Furthermore, the profitability of renewables generation may be sensitive to investments in energy efficiency, especially if such efficiency improvements are sufficient to meet growth in demand for electricity or to lower the market-clearing price of electricity. If there are no changes in the financial operating environment for fossil fuels and other incumbent sources of electricity, then renewable electricity may be negatively impacted more than other electricity sources. However, renewable electricity is being driven at present by tax policies—in particular, the production tax credits—and by renewable portfolio standards.
The fact that renewable-energy sources have smaller environmental “footprints” than do fossil-fuel sources arguably provides the greatest impetus for making a transition. However, the use of renewables does not eliminate all environmental impacts, though the types and magnitudes differ substantially from those of fossil fuels and from one renewable technology to another.