6
Deployment of Renewable Electric Energy

Renewable energy technologies are poised to become an important component of the electricity supply mix. However, it is not a foregone conclusion that the United States will achieve and maintain a high rate of deployment of renewable electricity. The current financial situation (as of 2009) is impacting the renewables market at many levels, but the issues discussed in this chapter are nonetheless important for expanding the market for renewable electricity technologies. Renewables face challenges involving the deployment and commercialization of innovative technologies—the stages that follow technological innovation and development. These challenges include the risk of introducing new technologies into competitive markets; the investment in the long-term, market-enabling research and development activities needed to help move technologies along the learning curve; and the impact of policy measures that share the risk of product innovation and market transformation. The proverbial investment valley of death1 can prevent new technologies from advancing past the demonstration phase due to a lack of capital. Manufacturing capacity, policy, business and market innovation, and access to financing must coincide with technology innovations for the continued successful deployment of renewable sources of electricity.

As noted in Chapter 3, in many ways new renewable electricity technologies, and the thinking that will enable them, represent disruptive rather than

1

A stage after product development but before commercialization when the financial investment required to move a new technology to commercialization may exceed the ability of a new business to raise capital.



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6 Deployment of Renewable Electric Energy R enewable energy technologies are poised to become an important com- ponent of the electricity supply mix. However, it is not a foregone con- clusion that the United States will achieve and maintain a high rate of deployment of renewable electricity. The current financial situation (as of 2009) is impacting the renewables market at many levels, but the issues discussed in this chapter are nonetheless important for expanding the market for renew- able electricity technologies. Renewables face challenges involving the deploy- deploy- ment and commercialization of innovative technologies—the stages that follow technological innovation and development. These challenges include the risk of introducing new technologies into competitive markets; the investment in the long-term, market-enabling research and development activities needed to help move technologies along the learning curve; and the impact of policy measures that share the risk of product innovation and market transformation. The pro- verbial investment valley of death1 can prevent new technologies from advancing past the demonstration phase due to a lack of capital. Manufacturing capacity, policy, business and market innovation, and access to financing must coincide with technology innovations for the continued successful deployment of renew- able sources of electricity. As noted in Chapter 3, in many ways new renewable electricity technolo- gies, and the thinking that will enable them, represent disruptive rather than 1A stage after product development but before commercialization when the financial invest- ment required to move a new technology to commercialization may exceed the ability of a new business to raise capital. 

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Electricity from Renewable Resources  incremental changes in long-established industry sectors. Disruptive technologies have two important characteristics. First, they typically present different per- formance attributes—such as providing a carbon-free source of electricity—that, at least at the outset, are not valued by a majority of customers. Second, the performance attributes (e.g., costs) for disruptive technologies that customers do value can improve at such a rapid rate that the new technology can over- take established markets. Figure 6.1 shows how the performance of a disruptive technology that was once lagging that of an earlier established technology can improve at a faster rate. However, such performance improvements are specula- tive and are not preordained. In the case of renewable electricity technologies, on a conventional cost-of-energy basis traditional sources of electricity genera- tion initially outperform non-hydropower renewables. The attraction of tech- nologies that use renewable resources, together with government incentives, has been responsible for much of their market presence. However, owing to improvements in renewable technologies and cost increases for fossil fuels and nuclear power, renewables are gaining the ability to match the cost performance of traditional generating sources both in the wholesale power market and on the customer side of the meter. This chapter explores the logistical and market barriers to commercial- scale deployment of renewable electricity. Although individual renewable energy enewable technologies have unique developmental and economic characteristics, there are , common, non-technical challenges as well, including (1) constraints on capac- ity for larger-scale manufacturing and installation and limitations on the avail- ability of trained employees for manufacturing, installation, and maintenance; (2) integration of intermittent resources into the existing electricity infrastructure and market; (3) market requirements such as capacity for competing in price and performance with conventional lower-cost coal, nuclear, and natural-gas-fired power plants; and (4) risk and related issues, including business risk, cost issues, and unpredictability of and inconsistency in regulatory policies. Because of the robust regulatory and business activities related to wind and solar energy industries, many examples discussed in this chapter come from these sources. However, they are used to indicate deployment issues associated to some degree with other renewable sources of electricity.

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Deployment of Renewable Electric Energy  Performance Improvement Required by Mainstream Market Performance Expected Trajectory of Performance Improvement Current Performance of Potentially Disruptive Technology Time FIGURE 6.1  Performance characteristics of a disruptive technology.  R 6.1 Source: Bowen and Christensen, 1995. DEPLOYMENT CAPACITY CONSIDERATIONS Capacity constraints, such as restricted supplies of basic raw material inputs, limitations on manufacturing capacity, competition for larger construction project management and equipment, and limited trained workforce, have the potential to derail large-scale deployment and integration of renewable electricity resources. Thus, to grow the renewable electricity market, which is increasingly driven by the private sector, will require continued and ramped up investment in order to deploy, operate, and maintain these technologies. Materials, Manufacturing, and Development Considerations Raw and Basic Materials Renewable energy technologies potentially can be restricted by a scarcity of key raw materials. A common example is solar photovoltaics (PV). Recent shortages of polycrystalline silicon have increased prices for PV modules, though these short-

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Electricity from Renewable Resources  ages were expected to ease by 2009 (Bradford, 2008). In addition, while silicon is relatively abundant, a scarcity of silver could limit use of traditional crystalline and polycrystalline silicon, as well as nano-silicon-based cells, in the long term. Likewise, limited availability of naturally occurring indium could restrict more efficient thin-film solar cell technologies using copper indium gallium selenide (CIGS). Solar cell raw material components and limiting material are summarized in Table 6.1, and global reserves for key materials are shown in Figure 6.2 (Feltrin and Freundlich, 2008). There are also issues related to global competition for such basic materials as steel and cement that hinder large-scale deployment of renewables and increase renewable energy development costs. Wind turbine manufacturers are particularly affected by these material shortages. Global competition for essential elements has, in recent years, driven up the costs of commodities and limited the materials available for wind energy projects. Table 6.2 projects the raw materials needed through 2030 to support the 20 percent wind scenario (DOE, 2008a), and Figure 6.3 shows the predicted near-term U.S. and global raw material usage for wind turbines. Global competition for these resources is not limited to renewables. It applies to all types of generation and to the construction sector generally. Longer- term goals are achievable, but the broader use of renewables will require a well- defined strategy for deployment. TABLE 6.1 Critical Limiting Raw Materials Needed for Fabrication of Solar Cells Solar Cell Limiting Material Usage Poly/c-Si Silver (Ag) n-electrode a-Si Indium (In) TCO substrate CdTe Tellurium (Te) Cell material CIGS Indium (In) Cell material Dye-sensitized Indium (In) TCO Tin (Sn) TCO Platinum (Pt) TCO Conductive MJC III-V Germanium (Ge) Substrate Gallium (Ga) GaAs substrate Conductive MJC III-V, lift-off Indium (In) Cell material Gold (Au) Electrode Note: CIGS, copper-indium-gallium-arsenide; TCO, transparent conductive oxide. Source: Adapted from material in Feltrin and Freundlich, 2008.

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Deployment of Renewable Electric Energy  10,000 2004 Production 1,000 World Reserves Million Kilograms 100 10 1 0.1 0.01 Ga In Cd Ge Te Se As Ru Sn Ag Au Pt FIGURE 6.2  Estimated (2004) annual production levels and world material reserves of  raw materials used in PV cell manufacturing. Note that because data are not available on  R 6.2 world reserves of germanium (Ge), the solid bar represents U.S. reserves and the dashed  lines represent a best guess about world reserves.  Source: Feltrin and Freundlich, 2008. Manufacturing and Development Wind Power Industry Developers face shortages of wind turbines due to continuing strong demand for wind power both in the United States and globally (AWEA, 2008). Wind turbine manufacturers are still in the process of making the capital investments neces- sary to increase their capacity to catch up with the growing demand. Projections have suggested that the mismatch between turbine supplies and wind developer demands would level out as soon as 2009 (EER, 2007). Meanwhile, manufactur- ers continue to play catch-up, with typical delays of 6 months or more from tur- bine order to delivery. Though lead times have lengthened due to the rapid growth in wind turbine installations, wind and solar PV projects have an advantage over traditional power plants because of their shorter time between purchase of the equipment and placing it on line (Bierden, 2007). Overall wind power project costs have increased due to recent increases in

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Electricity from Renewable Resources  TABLE 6.2 Yearly Raw Materials Required in 2030 to Meet Wind Turbine Demand in 20 Percent Wind Scenario (in units of thousands of metric tons) Permanent kWh/kga Year Magnet Concrete Steel 2006 65 0.03 1,614 110 2010 70 0.07 6,798 464 2015 75 0.96 16,150 1,188 2020 80 2.20 37,468 2,644 2025 85 2.10 35,180 2,544 2030 90 2.00 33,800 2,308 aProposed scenario for energy density improvement for wind turbine growth during the 2006–2030 period. Source: Adapted from material in Wiley, 2007. Materials Used Annually (Metric Tons—1,000 kilograms) 200,000 1,034,000 Towers Nacelles Rotors Turbine Total 180,000 U.S. 2001– 2005 160,000 Worldwide 2001– 2005 706,000 U.S. 2006– 2010 140,000 604,000 Worldwide 2006– 2010 120,000 407,000 255,000 100,000 80,000 159,000 60,000 40,000 20,000 0 Steel Concrete Steel Aluminum Copper Glass-Reinforced Plastic Permanent Magnetic Materials Steel Glass-Reinforced Plastic Wood Epoxy Steel Concrete Copper Glass-Reinforced Plastic Wood Epoxy Permanent Magnetic Materials Carbon-Fiber-Reinforced Plastic Aluminum Carbon-Fiber-Reinforced Plastic FIGURE 6.3  U.S. and worldwide wind turbine material usage.  Source: Ancona and McVeigh, 2001. R 6.3

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Deployment of Renewable Electric Energy  Glass-Reinforced Carbon Fiber Aluminum Copper Plastic Composite Adhesive Core 1.2 1.6 7.1 0.2 1.4 0.4 4.6 7.4 29.8 2.2 5.6 1.6 15.4 10.2 73.8 9.0 15.0 5.0 29.6 20.2 162.2 20.4 33.6 11.2 27.8 19.4 156.2 19.2 31.4 10.4 26.4 18.4 152.4 18.4 30.2 9.6 wind turbine prices (DOE, 2008b). Figure 6.4 shows the recent trend in turbine costs. These prices have increased due to increased costs for materials and energy inputs; component shortages; upscaling of turbine size and improvements in tur- bine design; declining value of the U.S. dollar; and attempts to increase profit- ability in the wind turbine manufacturing industry (DOE, 2008b). The increase in project costs as of year 2000 reversed the long-term decline in project costs, which includes the turbine as well as other balance of system components (Figure 6.5). The upturn in the price of turbines might, however, be partially offset by an increase in the kilowatt-hour output per kilowatt turbine capacity with the use of power electronics, variable-speed drives, and more stringent requirements of ride- through faults in utility system operation. The increased demand for wind turbines worldwide has expanded wind tur- bine manufacturing facilities in the United States. Though General Electric (GE) remains the dominant turbine manufacturer, other domestic and foreign manufac- turers have entered the market or expanded their operations (DOE, 2008b). Com- ponent manufacturers of blades, gearboxes, and other elements are spread across the United States (Sterzinger and Svrcek, 2004). However, lower wages have caused many manufacturers to locate factories overseas (DOE, 2008b). In general, the strong growth nationally and internationally has resulted in an expansion of all segments of the wind industry, including manufacturers, as well as parts of the industry related to installation and operations and maintenance. There have been changes in the wind power development sector of the indus- try (EER, 2007). Independent power producers (IPPs) have shown increased inter- est in wind power projects; IPPs develop a variety of electricity generation facili-

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Electricity from Renewable Resources  2000 (2007 Dollars per Kilowatt) Turbine Transaction Price 1800 1600 1400 1200 1000 800 Orders <100 MW 600 Orders from 100 –300 MW 400 Orders >300 MW Polynomial Trend Line 200 0 Jan 97 Jan 98 Jan 99 Jan 00 Jan 01 Jan 02 Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Announcement Date FIGURE 6.4  Wind turbine prices over time.  Source: DOE, 2008b. R 6.4 4500 (2007 Dollars per Kilowatt) Individual Project Cost 4000 Installed Project Cost (227 on line projects totalling 12,998 MW) 3500 Average Project Cost 3000 Polynomial Trend Line 2500 2000 1500 1000 500 0 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Year FIGURE 6.5  Installed wind project costs over time.  Source: DOE, 2008b.  R 6.5 ties for the wholesale electricity market. IPPs have to compete against developers whose sole focus is the development of wind power projects (termed the pure play wind developers). Further, globalization has become a factor in the U.S. market, with developers from Europe initiating projects in the United States. Most of these European developers provide wind through long-term contracted sales to utili- ties, though they also sell to power markets. A variant is the purchase of Energy

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Deployment of Renewable Electric Energy  East, a New York state utility, by Iberdrola S.A., a Spanish energy company that develops wind power projects worldwide. As noted in Chapter 4, there also is a market for renewable energy credits (RECs) that can be sold separately from elec- tric power. Finally, some utilities are beginning to develop their own wind power projects instead of purchasing wind power through long-term contracts with wind developers. Solar PV Industry Like wind power, the large growth rate for solar PV, both within the United States and globally, has caused shortages in manufacturing capacity and raw materials. As with wind power, it has also resulted in increasing prices and changes within the industry. As noted in the section on raw materials, the primary cause for shortages in PV is a shortage in polycrystalline silicon. Originally, the primary use of polycrystalline silicon was for semiconductors in the electronic industry, with solar PV manufacturers using a small fraction of silicon production and even using silicon recycled from the electronics industry. Recently, the solar PV industry has become the largest consumer of polycrystalline silicon, bringing new entrants into the industry that include producers specifically oriented to the solar PV industry, and even solar PV manufacturers looking to become more integrated along the supply chain (Prometheus Institute, 2007). Despite these new entrants, there was still a shortage of polycrystalline silicon, which had driven up the price for solar silicon PV modules (Figure 6.6), though this shortage was expected to subside by 2009. Recent articles project 2009 to see this decrease in costs for solar PV, though the decline in price has been attributed to both increasing supplies and decreasing demands due to the global economic slowdown (Patel, 2009). Solar companies that are expected to perform well in the current solar PV market are generally those with stable silicon supplies (EIA, 2007). Conversely, companies that are thought to have insufficient or inflated silicon supplies have not done well in the market (Greentech Media, 2007). Another current positive market characteristic is less reliance on polycrystalline silicon. There is more com- petition among distinctively different technologies in the solar PV industry com- pared to the wind turbine market. As shown in Figure 6.6, shortages of polycrys- talline silicon have spurred increases in the thin-film solar PV technologies that do not require as much or any silicon. Figure 6.7 shows the impacts on shipments by U.S. manufacturers of this shift toward thin-film PV. The rapid growth and projected demand for solar PV have spurred increases

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Electricity from Renewable Resources 0 3500 6 Thin Film Average Module Selling Price (2006 Dollars per Watt) Crystalline Silicon 3000 Photovoltaic Cell Module Production (Megawatts) 5 Average Module Price (2006$/W) 2500 4 2000 3 1500 2 1000 1 500 0 0 2000 2001 2002 2003 2004 2005 2006 2007 Year FIGURE 6.6  Global PV module production 2000–2007 and average module price during  the same timeframe.  R 6.6 Source: Courtesy of Paula Mints, Principal Analyst, Navigant Consulting PV Services  Program. in both PV prices and demand for manufacturers to increase their manufacturing capacities. PV manufacturing in the United States is dominated by First Solar of Arizona, which has responded to market demand by expanding manufacturing capacity in Ohio and Germany, and it has announced additional capacity expan- sion in Malaysia (Prometheus Institute, 2007). Together, this expanded capacity is expected to bring First Solar’s total manufacturing capacity to more than 1 GW/yr by the end of 2009. This capacity expansion substantially increased income for this company in 2008 (Greentech Media, 2008). By 2010, SunPower and Solar- World are expected to add an additional 984 MW of capacity.

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Deployment of Renewable Electric Energy  100 2000 1997 1999 90 1998 2002 2003 2004 2001 80 Percent Market Share 2005 70 2006 60 Crystalline Silicon Thin Film 50 40 2006 2005 30 20 2001 2004 2003 2002 1998 1997 10 1999 2000 0 FIGURE 6.7  Crystalline silicon shipment and thin-film shipment market shares in the  United States, 1997–2006.  R 6.7 Source: EIA, 2007. The largest customer category for PV modules/cells has shifted from whole- sale distributors to installers (EIA, 2007), reflecting the recent trend toward large commercial PV installations, such as those at Wal-Mart and the Google headquar- ters in California. The commercial sector was the largest market for PV in 2006 and grew more than 100 percent from 2005 (EIA, 2007). Additionally, some PV manufacturers have begun to enter the installation business to become more fully integrated along the PV supply chain (Greentech Media, 2007). Box 6.1 provides some background on the history and characteristics of the market for solar PV. Workforce Requirements Direct Requirements Another limiting variable to the large-scale manufacturing and deployment of new renewable electricity systems is the need for a trained and capable workforce that grows as market demand grows. Educating this workforce requires the develop- ment of high-quality training infrastructures that include accredited institutions, skill testing, and certification. Table 6.3 shows the direct jobs and economic activ- ity in the renewable electricity industry for 2006 (ASES, 2007). The renewable energy industry in the United States opened 450,000 jobs in 2006 (ASES, 2007). Meeting a renewable energy portfolio standard of 20 percent by 2020 is projected to require an additional 185,000 jobs related to renewable

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Electricity from Renewable Resources 0 • The volume-based, average rate per customer class model for consump- tion favors baseload generation capacity and fails to create incentives for resources like photovoltaics that generate electricity on or near peak. • Net metering schemes that do not assign full retail value to generation occurring behind-the-meter may not encourage distributed generation. • Transmission capacity reservation and shortfall charges that drive high availability for dispatchable resources (such as natural gas turbines) can effectively preclude cost-effective deployment of intermittent resources. • Rate structures driven by efforts to encourage all-requirements loads and customers in order to build demand for capital investments often penalize partial-requirements loads coupled with self-generation. Renewed interest in demand-response and interruptible loads may require reexamination of rate-making fundamentals. There is a chicken-and-egg problem associated with rates. Most often in the United States, rates are calculated based on extrapolation from a historical test year of experience, and adjudicated in contested rate cases. While the general con- structs of rate making are well understood, there are variations in all the jurisdic- tions with authority to impose them. These jurisdictions are primarily states and the federal government, but also include municipal governments, electric coopera- tive boards, and multistate electric reliability and transmission authorities. Because there has been relatively little experience in the United States with large-scale deployment of renewable electricity (above the scale where significant impacts are experienced), there is relatively little actual data on which to construct fair and non-discriminatory rates. Any period of expansion in the amount of renewable electricity will therefore be accompanied by risk related to how the rate structure treats renewables. Policy and Regulatory Risk The relationships among markets to policy and regulation can be contributory, supportive, symbiotic, and parasitic. This is true for the electricity market as well as all sectors of the economy. All participants in the electricity market seem to agree that policy and regulation can have a profound impact on energy markets and that predictability and sustainability are highly valued. Electricity markets operate within a web of interlocking, overlapping, and sometimes conflicting pol-

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Deployment of Renewable Electric Energy  icy prescriptions and legal and regulatory structures.12 The key risks engendered by this pervasive regime relate to the degree to which one can expect that future policies will conform to reasonable expectations. For example, uncertainty sur- rounding the renewal of federal production tax credit policy for renewables carries a potential impact for the renewables industry in the billions of dollars. Regula- tion is the tool for implementing policy in the electric industry, even when that implementation involves relaxation of regulation. As the United States Supreme Court has held, when business is “affected with the public interest,” such regula- tion is proper (Munn v. State of Illinois, 94 US 113 [1876]). There are few indus- tries so affected with the public interest as that of electricity. Renewable electricity will always be fundamentally affected by wider regu- latory and policy conditions existing in electricity markets for several reasons. First, of course, is the ubiquity of electric service in the United States. Second, the dominant industry model is one based on spreading of costs through franchised service via regulated utilities. Even when some degree of competitive market struc- ture exists as it does in much of the electricity sector today, the industry remains highly regulated. Third, the most significant environmental attributes of electricity are also spread broadly through energy security and reducing greenhouse gases. Indeed, greenhouse gas emissions are part of a global budget of atmospheric gases. Finally, the technologies and businesses of renewable electricity are young and relatively immature. Development of renewables depends on research and develop- ment, as well as special subsidies and manipulation of the existing markets, for renewables to succeed against well-established incumbents that enjoy embedded subsidies of their own. Electricity Sector Regulation Regulators and policy makers in the electricity sector are often uncertain about how to deal with new market entrants, new technologies, and new product and service models. Charged with protecting the general public interest, regulators, and policy makers often approach innovation with caution, and on an ad hoc basis. Regulation and policy designed for incumbent industries may not be well suited to emerging technologies and businesses, but efficient alternatives are not often apparent. New market entrants often face risk due to lack of clarity and 12The various incentives for renewable energy are catalogued by the Database of State Incen- tives for Renewables and Efficiency (DSIRE), available at www.dsireusa.org.

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Electricity from Renewable Resources  specificity; newcomers must spend proportionally more time and money to engage with the regulatory systems than well-known incumbents. Large-scale deployment of renewable electricity will add a new dimension to this uncertainty. For example, relatively simple and clear regulatory and manage- ment solutions exist for wind penetration rates of 1 percent or 2 percent, but the need for potentially expensive regulatory changes and ancillary services may occur as system penetration rates reach 10 percent to 20 percent and higher. Moreover, effective response to system-scale issues requires comprehensive reviews and solu- tions. Regulatory processes, such as integrated resource planning, rate cases, and broad revisions of transmission system pricing regimes, place heavy demands on scarce regulatory resources. Climate Regulation Climate change regulation and policy are emerging in many local and regional jurisdictions around the United States. Many other countries have also imple- mented climate regulations. Indeed, increasing attention and concern about the potential for global climate change is having impacts on business decision mak- ing and risk evaluation, especially companies operating in the power sector and energy-intensive industries. Renewable energy industries should benefit greatly from comprehensive and effective regulation to reduce or avoid greenhouse gas emissions. Greenhouse gas regulation will likely affect the relative costs of renew- able electricity and non-renewable fossil-fuel and nuclear power options and spur more rapid technology improvement in renewables. However, there are risks. Greenhouse gas regulation is itself a new thing, and changes and inconsistencies are inevitable. Because this regulation will have a direct impact on the costs and market opportunities for both incumbent and emerging technologies, the degree of orderliness and predictability of changes in regulations constitutes a significant risk factor for large-scale deployment of renewables. Lash and Wellington (2007) categorize business risks associated with the public and regulatory climate change concerns as follows: • Regulatory risk. Rates and direct regulation of emissions. • Supply chain risk. Higher component and energy costs as suppliers pass along increasing carbon-related costs to their customers. • Product and technology risk. Ability to identify new market opportuni- ties for climate-friendly products and services.

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Deployment of Renewable Electric Energy  • Litigation risk. Threat of lawsuits against companies that generate sig- nificant carbon. • Reputational risk. Public, or consumer, perception on the role of the company as a steward of the environment. • Physical risk. Risk posed by climate change as droughts, floods, and storms become more frequent and more severe. These risks and benefits are summarized in Box 6.4. Deployment of renewable energy technologies can help electricity generators mitigate climate-change-related risks through reduced risk exposure, direct reductions in greenhouse gas emis- sions, improved ability to take advantage of climate policy incentives, reduced resource use, and improved perception of corporate social responsibility (Pater, 2006). Environmental Policy As discussed in Chapter 5, renewable electricity deployment is particularly site specific, whether for resource availability or access to infrastructure. The permit- ting process is intended to consider the local impacts on the land, water, and air that occur during the installation and operation of these technologies. As a result, local, state, and national governmental policies and regulations affecting the sit- ing of generation and associated facilities will have a major impact on renewable energy deployment. The range of local, state, and national regulations confront- ing development also grows, and the risk of variability and inconsistency likewise increases as the scale of renewable energy deployment grows. FINDINGS Shown in bold below are the most critical elements of the panel’s findings, based on its examination of issues related to the deployment of renewable electricity into the U.S. electricity supply. Policy, technology, and capital are all critical for the deployment of renew- able electricity. In addition to enhanced technological capabilities, adequate manufacturing capacity, predictable policy conditions, acceptable financial risks, and access to capital are all needed to greatly accelerate the deployment of renew- able electricity. Improvements in the relative position of renewable electricity will

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Electricity from Renewable Resources  BOX 6.4  Risks and Benefits for Renewable Electricity Generation Under Climate Regulation Risk management • Hedge against fuel-price volatility • Hedge against grid outages • Get ahead in the futures markets • Prepare for regulatory change • Reduce insurance premiums • Reduce future risks of climate change Emissions reduction • Generate emissions reduction credits/offsets • Reduce fees for emissions • Avoid remediation costs Policy initiatives • Production tax credit, accelerated depreciation, property tax break • Preferential loan treatment • Renewables portfolio standard • Renewable energy certificates • System benefit funds • Rebates, feed-in tariffs, net metering • Sales-tax exemption • Local R&D incentives • Other financial incentives Reduced resource use • Reduce water use and consumption • Reduce energy use Corporate social responsibility • Improve stakeholder relations • Satisfy socially responsible investing portfolio criteria Societal economic benefits • Rural revitalization, jobs, economic development • Avoided environmental costs of fuel extraction/transport • Avoided costs of transmission and distribution infrastructure expansion require consistent and long-term commitments from policy makers and the public. Investments and market-facing research that focuses on market needs as opposed to technology needs are also required to enable business growth and market transformations. Successful technology deployment in emerging energy sectors such as renew-

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Deployment of Renewable Electric Energy  able electricity depends on sustained government policies, both at the project and at the program level, and continued progress requires stable and orderly govern- ment participation. Uncertainty created when policies cycle on and off, as has been the case with the federal production tax credit, can hamper the develop- ment of new projects and reduce the number of market participants. Significant increases in renewable electricity generation will also be contingent on concomi- tant improvements in several areas, including the size and training of the work- force; the capabilities of the transmission and distribution grids; and the frame- work and regulations under which the systems are operated. As with other energy resources, the material deployment of renewable electricity will necessitate large and ongoing infusions of capital. However, renewable energy requires a greater allocation of capital than do the conventional fossil-based energy technologies to manufacturing and infrastructure requirements. Integration of the intermittent characteristics of wind and solar power into the electricity system is critical for large-scale deployment of renewable electricity. Advanced storage technologies will play an important role in supporting the wide- spread deployment of intermittent renewable electric power above approximately 20 percent of electricity generation, although electricity storage is not necessary below 20 percent. Storage tied to renewable resources has three distinct purposes: (1) to increase the flexibility of the resources in providing power when the sun is not shining or the wind is not blowing, (2) to allow the use of energy on peak when its value is greatest, and (3) to facilitate increased use of the transmission line(s) that connect the resource to the grid. The last is particularly relevant if the resource is located far from the load centers or if the system output does not match peak load times well, as is often the case with wind power. However, wind power’s development is occurring long before widespread storage will be economi- cal. Although storage is not required for continued expansion of wind power, the inability to maximize the use of transmission corridors built to move wind resources to load centers represents an inefficient deployment of resources. Several parties are currently exploring the co-location of natural-gas-fired generation and other types of electricity generation with wind power generation to bridge this gap between storage technology and asset utilization. The co-siting of conventional dispatchable generation sources (such as natural-gas-fired combustion turbines or combined cycle plants) with renewable resources could serve as an interim mecha- nism to increase the value of renewable electric power until advanced storage technologies are technically feasible and economically attractive. The location of such natural-gas-fired generation could be at or near the wind resource, or at an

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Electricity from Renewable Resources  appropriate site within the control area. Another possibility is the co-siting of two (or more) renewable resources, such as wind and solar resources, which might on average interact synergistically with respect to their temporal patterns of power generation and needs for transmission capacity. Finally, it is important to note that the deployment needs and impacts from renewable electricity deployment are not evenly distributed regionally. Develop- ment of solar and wind power resources has been growing at an average annual rate of 20 percent and higher over the past decade. Overall electricity demand is forecasted to continue to grow at just under 1 percent annually until 2030, with the southeastern and southwestern regions of the United States expected to see most of this growth. Although some of this growth may correspond to areas where renewable resources are available, some of it will not, indicating the pos- sible need for increases in electricity transmission capacity. REFERENCES Ancona, D., and J. McVeigh. 2001. Wind Turbine—Materials and Manufacturing Fact Sheet. Princeton Energy Resources International. Prepared for Office of Industrial Technologies, U.S. Department of Energy. Washington, D.C. Archer, C.L., and M.Z. Jacobson. 2007. Supplying baseload power and reducing transmis- sion requirements by interconnecting wind farms. Journal of Applied Meteorology and Climatology 46:1701-1717. ASES (American Solar Energy Society). 2007. Renewable Energy and Energy Efficiency: Economic Drivers for the 21st Century. R. Bezdek, principal investigator, Management Information Services, Inc. Washington, D.C. AWEA (American Wind Energy Association). 2008. Wind Power Outlook 2008. Washington, D.C. Bierden, P. 2007. The process of developing wind power generators. Presentation at the second meeting of the Panel on Electricity from Renewable Resources, December 6, 2007. Washington, D.C. Black & Veatch. 2008. Renewable Energy Transmission Initiative RETI Phase 1BResource Report. RETI-1000-2008-003-F. Prepared for RETI Stakeholder Steering Committee, Renewable Energy Transmission Initiative (RETI), Sacramento, Calif. Bowen, J.L., and C.M. Christensen. 1995. Disruptive technologies, catching the wave. Harvard Business Review 73(1):43-53.

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