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Increase Renewable Sources of Electricity

Any effort to meet growing demand and address environmental concerns with continued economic growth requires zero and near-zero emissions power generation to be developed and deployed. This is true not only in our country, but around the world. We require a predictable and durable fiscal regime to stimulate new investments in solar, wind, energy from-waste, and other renewable technologies. We must also invest in developing the required technologies needed to expand and transport new sources of commercially viable renewable energy.

Renewable sources of energy such as wind, solar, energy-from-waste, hydropower, geothermal, and biomass could play an increasingly important role in our nation’s energy supply as they continue to become more cost competitive with traditional energy sources. This is especially true for sources that can provide reliable baseload electricity.

Renewable electricity is enjoying robust growth, but at about 8–9% of our overall electricity production, it remains a very small component. Conventional hydropower provided about 6.0% of generation in 2007, biomass 1.3%, wind 0.8%, geothermal 0.4%, and solar less than 0.01%.

Hydropower is a proven, long-standing renewable resource. Wind, geothermal, and biomass power are increasingly competitive economically. Energy-from-waste is also proven and used worldwide as a source of clean, baseload power. Solar (both photovoltaic and concentrating solar power) will play a larger role if costs can be further reduced. The fastest growing source of electricity in the United States is wind power. In 2007, wind accounted for about 35% of new generating capacity, and the United States is now the largest producer of wind power in the world. EIA projects that in 2030 renewable power will account for a greater share of total electricity production, about 12–13%. By far the biggest increase is expected to come in wind production, which could rise nearly sixfold. However, even at such a pace, wind still will account for only about 2.4% of total electricity generation in 2030 (Figure 11). We can and should accelerate this pace.

Apart from cost, the assurance of adequate transmission capacity and the intermittency of generation must be addressed if renewable energy is to achieve its fullest potential. Sources like photovoltaic solar and wind are viable sources when the sun is shining or the wind is blowing and there is demand for their supply. A breakthrough in battery technology that would allow the affordable storage of electricity to balance the intermittent nature of most wind and solar sources could be transformative. At the same time, high voltage transmission lines are also needed to move the electricity produced from these sources beyond their service area to demand centers. Additionally, continuing advances in utilizing lower temperature geothermal resources would expand the scope and lower the cost of geothermal energy, potentially making it a baseload, nonintermittent producer of electricity. R&D to develop these technologies continues to be important in the effort to expand renewable energy.

Policies to promote the deployment of renewable energy continue to be important as well. Much of the growth of renewable energy has been inconsistent and intermittent because of uncertainties in the fiscal policy and regulatory environments. Tax credits have been instituted and then subsequently allowed to lapse. The renewable energy tax credits have expired in 2000, 2002, 2004, and are set to expire again at the end of 2008. These short “boom and bust” cycles have resulted in tremendous inefficiencies in capital formation, investment, component production, project finance, and project management that have limited the impact of renewable energy in the U.S. market, even as the costs for traditional energy sources have risen.

We need stability and predictability in the federal policies to promote renewable generation that has, to date, been absent. We should not however, subject the entire country to nationalized standards that penalize or favor some regions over others. We recommend that an eight-year renewable energy tax credit be enacted to allow long-term planning and investment to occur efficiently. Any such fiscal incentive benefiting one industry or sector must not come at the expense of raising taxes on another.

These credits must not exist in perpetuity; after eight years these credits should be phased out over the succeeding four years and then be eliminated entirely. After eight years, the eligible technologies must be able to survive commercially on their own economic and technological merit. If Congress judges the revenue impact of such an incentive to be too great, it should eliminate the inflation increases or otherwise reduce the amount of the tax credit rather than the duration of the window for eligible projects. The stability of the production tax credit is as important as its value—perhaps even more so.

Regulatory certainty is also imperative to ensure development of renewable energy projects in the United States. EPAct2005 directed the Department of the Interior’s Minerals Management Service (MMS) to issue regulations for the development of renewable energy projects on the OCS by May 2006. MMS has yet to issue final regulations, and must do so expeditiously and continue its interim policy of processing permit applications.