SNL Energy Spring 2011 Report: Tracking Projects and Progress in U.S. Renewable Portolfio Standards

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The attached report summarizes the leading states in terms of RPS contribution, highlighting key policy aspects and technologies relied upon to meet the standard. REC market implementation and monitoring is also discussed briefly, as well as an update on proposed federal renewable energy standards.

Executive Summary:

Despite a tough investment environment over the last two years, development momentum has driven a continued increase in production from renewable energy, making solid progress toward state-mandated renewable energy goals. Where SNL Energy in 2009 estimated renewable contribution at 5.3% of electricity sales in states with mandatory Renewable Portfolio Standards (RPS), new facilities have pushed this percentage contribution up to 6.6% since that time. Part of this growth is attributable to flat-to-declining electricity sales in many RPS
states since 2007. A return to historic sales growth would put greater pressure on current RPS targets.

Since 2009 three states (District of Columbia, Hawaii, and Vermont) have adopted standards, while congressional debate regarding a federal standard has languished. SNL Energy
also finds that sufficient project activity exists to more than meet RPS goals in every state, although bringing these projects to market will depend on supportive project economics and continued encouragement from federal and state policymakers.

Twenty-nine of the 50 states (and the District of Columbia) have a mandatory RPS. Of eligible generation applied to these standards, wind and hydroelectricity (“hydro”) are the most prominent renewable resources. Planned renewable energy investments over the next 10 years,
is cumulatively 198,194 MW. Planned renewable investment in wind is 63.1% of this cumulative amount. Over the same period 14.5% is in hydro, while 22.4% is comprised of solar PV and solar, biomass, anaerobic digesters (landfill gas) biofuel, geothermal, and several lesser
impacting renewable and alternative energy technologies.

The significance of wind and hydro within RPS as a long-term investment cannot be underestimated. In the nine states highlighted in this paper that have the greatest amount of planned renewable energy investments in the U.S., six states have extensive planned renewable generation in wind and hydro. Overall, construction of renewable projects slowed significantly in the wake of the 2008 financial crisis and subsequent recession. In many
cases, the Production Tax Credit (PTC) associated with renewable energy facilities became less attractive in the face of operating losses due to low power prices, a financial gap that was only partly offset by Section 1603 cash grants enacted as part of the federal stimulus package.
These headwinds notwithstanding, project activity appears sufficient to keep pace with RPS goals. Between now and 2012, SNL Energy estimates interim RPS targets (i.e., targets either stated or inferred from RPS endpoint goals) at 7.4% of electricity sales. The 1.1% gap between
current generation shares and the target equates to about 25 TWh of electricity, or 10-15 GW of renewable generation. With 7 GW currently under construction for 2011, we see a continuation of a modest gap to RPS targets. However, completion rates appear adequate to keep pace with RPS goals. Underneath this aggregate estimate, some states are lagging substantially while other states have over-delivered in terms of renewables development. State policies regarding use of out-of-state renewable generation, creation of Renewable Energy Credit (REC) markets, and opt-out provisions will further influence how renewable energy expands.

The attached report summarizes the leading states in terms of RPS contribution, highlighting key policy aspects and technologies relied upon to meet the standard. REC market implementation and monitoring is also discussed briefly, as well as an update on proposed federal renewable
energy standards.

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Christina Twomey