Huge Renewables Expansion Coming

Renewable energy may be enduring a slump in some segments this year, but the long-term outlook remains bullish, according to one recent analysis.

The Q4 Volume ICF Integrated Energy Outlook from ICF International was the subject of a recent webinar that covered all the power generation resources and power markets. The focus here is primarily on the renewables sector.

Of course, the backdrop for all power market projections are uncertainties on how one views natural gas prices or whether CO2 will be regulated over the longer term, said John Blaney, a managing director at ICF International.

But with regulations of other pollutants and the aging of existing plants, "What we're seeing is that 60 gigawatts of coal capacity will retire by 2018," he said. One implication for coal and renewable is that unconventional gas will grow from 38 percent of the total in 2009 to over 60 percent in 2030.

Renewable energy will prosper in this context, even with the current pressures involving government policies and the lack of carbon controls, ICF believes.

"We're continuing to expect renewable capacity to grow rapidly in the near term, but it slows briefly after the incentives expire. Despite the recent market volatility - the huge buildup in 2009 and the slowdown in 2010 -- we project that the U.S. will install just over 51 gigawatts of renewables between 2011 and 2016 and 86 gigawatts between 2017 and 2030," he said.

In a year with strong federal support, 2009, wind added 10 gigawatts by itself.

Federal support was sustained over the short run, with last-minute support in the tax bill. Even then, many incentives for wind, solar and geothermal energy are due to sunset over the next few years.

"The expiration of the federal incentives will lead to diminished capacity additions in the window between late 2010 and 2020 after the incentives expire and before the CO2 prices and natural gas prices are high enough to support renewable on their own," Blaney added.

Renewable energy is expected to become more competitive as prices overall tend to rise and a carbon policy is eventually introduced.

The impact will vary by region, particularly if capacity is able to keep up with the demands of state renewable portfolio standards (RPS).

"A similar pattern in seen in New England and the PJM Interconnection, with renewable prices rising over the next decade or so," he said. "But after the build-out occurs and CO2 prices rise and gas prices increase somewhat, the incremental revenues that renewable need to be economic decline, so renewable energy credit prices (REC) will decline accordingly."

Not so in California, which is already short of its RPS targets. California utilities will see REC prices start quite strongly, but once that build-out happens, they will decline. "However, after those prices decline around 2015, you'll see that additional renewable requirements which are quite extensive will lead to recovery," he concluded.

All told, that seems like a pretty active two decades for clean energy, despite the current uncertainty.