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Inward Investment Guides

The News About Renewables

Using renewable resources for electricity generation is a cost-effective way of ensuring a reliable energy supply and achieving customer satisfaction.

Sue Kleeman (Apr/May 08)
What a difference a decade makes. Ten years ago bigger was better - whether it was "clean" coal or a natural gas generating plant. But demand for natural gas put pressure on prices and tightened supplies. Clean coal technology was expensive. The economics of big generation changed. While U.S. generating capacity still consists mainly of large plants powered by natural gas, coal, and nuclear fuels, the Department of Energy (DOE) calculates that about 10 percent of our electricity now comes from renewable resources. Most of it is in the form of large hydropower plants, but about 3 percent is coming from wind, biomass, solar, and other renewable technologies. That 3 percent is getting a lot of attention these days because it is growing - fast.

 Improved renewable technologies are part of the reason. There are smaller "low head" hydro plants with fewer environmental impacts. Plants burning biomass and trash, including landfill gas, are used throughout the country. Wind energy is growing the most, with huge turbines lined up in fields generating 5 MW or more. Solar technologies have expanded; some now capture solar heat as well as light, increasing efficiency and enabling solar energy to be stored. Beyond these "conventional" renewable technologies there are the emerging technologies of photovoltaics (solar cells that absorb sunlight to produce electricity), ocean gradient, tidal power, geothermal, and fuel cells.

The demand for renewables is growing despite capital costs that are typically twice the cost of conventional resources: $800-$1,000/kW compared to $400-$500/kW. But with fuel costs rising and improvements in renewable technologies, renewables can compete with conventional resources on a kWh basis. For example, wind generation cost a whopping 40 cents/kWh in 1980; 20 years later, thanks to increased turbine sizes and other advances, it can be purchased for as little as 4 cents/kWh.

Smaller, renewable generation plants have much to recommend them. Many produce no air or water emissions. Utilities also are looking at renewables to help insure adequate electric supply and maintain price stability. There is no fuel price variability or concerns about supply availability. These resources are often quick to build; for example, many wind installations can be up and running in six months. Another benefit of some renewable programs has been economic development; most renewables are home-grown so energy dollars stay at home.

Another reason for the surge in renewable energy supply is consumer demand. Customers and state and local governments are demanding green power for environmental and energy security reasons. This demand had been measured and addressed through the use of green pricing programs. Customers are willing to pay a premium for green power.

According to the National Renewable Energy Laboratory's (NREL) green power network, "Although renewable energy development has traditionally been limited by cost considerations, customer choice allows consumer preferences for cleaner energy sources to be reflected in market transactions. In survey after survey, customers have expressed a preference and willingness to pay more, if necessary, for cleaner energy sources."

These preferences can be expressed three ways, through green pricing, green power marketing, and renewable energy certificates. Green pricing lets utility customers support investment in renewables by paying a premium to cover the extra cost of renewable generation. Currently more than 750 utilities of all types offer a green pricing option. Selling renewable energy into competitive wholesale markets is called green power marketing; this is occurring in about 20 states. Even if customers have no access to green power through their utility or a competitive marketer, they can purchase renewable energy certificates (RECs or green tags), in essence buying the environmental attributes of renewable resources.

Green pricing programs can be instituted either by the state or a utility. For example, the CleanPower Choice Program from the New Jersey Board of Public Utilities' Office of Clean Energy is a statewide program that allows customers to choose renewable energy sources for electric generation - solar, wind, small hydro, and landfill gas. The program is part of a larger initiative, the New Jersey Clean Energy Program. The N.J. Clean Energy Program is administered by the New Jersey Clean Energy Council. The Council has members from government and industry, including utilities operating in the state such as PSE&G, which support the goals of a stronger economy, less pollution, and less dependence on foreign sources of energy. Customers sign up with a CleanPower marketer and pay a little extra per kWh for electricity produced by wind or a wind/other renewable combination.

While there are many renewable technologies, there are also many ways to integrate them into utility energy programs. Renewable energy is being employed by both wholesale and retail companies; by large generating entities operating in multiple states; as well as by small municipal utilities and by power producers in all parts of the country. The following examples are just a sample of the many different ways renewable energy resources are being developed and used.

It's all about wind.
According to DOE, apart from hydropower, wind power is the most frequent source of renewable generation in the United States. About 30 states generate some wind power, and today the total U.S. wind capacity is about 17,000 MW - enough to generate electricity for about five million households.

Wind power is making economic sense for utilities of all sizes. The Nebraska Public Power District (NPPD) is Nebraska's largest electric utility, serving about one million people through its wholesale and retail operations. NPPD became interested in wind power when it evaluated all forms of renewable resources feasible in Nebraska with the intent of producing 5 percent of its energy from renewable resources, if economically viable.

In 2005, 36 wind turbines with 130-foot blades were constructed across the Sandhills, six miles south of Ainsworth, Nebraska. Called the Ainsworth Wind Energy Facility, its capacity is 60 MW. The output is used for NPPD customers, but also sold to utilities as far away as Florida. Last summer, NPPD invited developers of wind projects to submit more proposals. Dave Rich, NPPD's renewable energy manager sees even more wind energy in NPPD's future: "NPPD has longer-term goals of incorporating more wind-powered generation into our portfolio down the road."

XCEL Energy - which operates as an energy company in eight different Midwest and Southwest states including Colorado, Minnesota, Wisconsin, and Texas - is as committed to wind power as NPPD. XCEL has always had hydro plants - currently it operates 28 plants totaling 500 MW - but it became interested in wind in 1980. The American Wind Energy Association claims that XCEL is today the largest single U.S. wind provider with about 1,500 MW of capacity.

XCEL offers a program to its customers in Minnesota, Colorado, and New Mexico called Windsource, ranked by NREL as the second-largest green pricing program in the nation. The program lets customers purchase up to 100 percent of their generation from wind resources, at an incremental cost of about $14 per month. XCEL has committed to buying or building sufficient capacity to generate the wind energy needed to meet program demand.

XCEL is also working with NREL on wind-to-battery projects that take intermittent wind-generated electricity and store it for use when the wind isn't blowing. Efficient storage has been one big stumbling block to expanding wind and other intermittent resource generation.


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