sources remains small. Though continued technological advances are critical, economic, political, and deployment-related factors and public acceptance also are key factors in determining the contribution of renewable electricity. Meeting the opportunity that renewables offer to improve the environment and energy and economic security will require a huge scale-up in deployment and increased costs over current fossil-fuel generating technologies. Additional requirements include the capacity to more efficiently manufacture and deploy equipment for the generation of electricity from renewables and policies that have a positive impact on the competitiveness of renewables and the ease of integration of renewables into the electricity markets.
Box 1.1 outlines a history of major policy milestones for renewables. Martinot et al. (2005) separate the history of non-hydropower renewables policy into three distinctive phases. In response to the oil crisis and price shocks in the late 1970s, significant federal research funding was directed toward development of multiple alternative sources of energy and toward renewable resources in particular. The PURPA era was inaugurated with the passage of the Public Utility Regulatory Policies Act (PURPA) of 1978, which required public utilities to purchase power from qualifying renewable and combined heat and power facilities. In addition, state tax incentives, such as those offered in California and Colorado, provided further impetus to increase the use of renewables.
A period of stagnation followed the late 1970s. Progress in the development of renewables slowed as energy prices declined. Financial incentives were cut, and the electric power sector entered a period of restructuring. The mid-1980s saw a decrease in real prices for natural gas (Figure 1.1), which spurred considerable growth in the development of natural-gas-fired electricity generation plants. In addition, the annual growth in electricity demand slowed from an average of 6 percent during the 1960s and 1970s to less than 3 percent in the 1980s (EIA, 2008a). This drop reduced the price for renewables paid under PURPA. Martinot et al. (2005) note that this period lasted from about 1990 to 1997, and only a very small amount of non-hydroelectric renewables development occurred during that period.