April 10, 2012
Renewable Sources of Power Survive, but in a Patchwork
JUST a few years ago, the future of renewable energy looked as bright and shiny as a white turbine blade coming out of the mold. The federal government was handing out money under thestimulus package, states were approving clean energy mandates, young companies were racing ahead with promising new technologies and big global developers were planting stakes for ambitious, utility-scale projects.
Now that picture has dimmed. The low price of natural gas has made renewable power less appealing to utilities and energy companies. The high price of gasoline — which has become an issue in the presidential campaign, as Republican candidates seek to use it against President Obama, has renewed calls to increase oil exploration and production at the expense of alternatives. State lawmakers are reconsidering requirements for utilities to buy green power. Surprisingly fierce competition from Chinese photovoltaic manufacturers has driven American ventures to the brink of bankruptcy and beyond.
And the problems of Solyndra, a would-be solar panel maker that collapsed despite receiving a $535 million federal loan guarantee, have given subsidies for green energy a bad name, which in turn has weakened interest from the private sector in financing it. A tax grant program important to the solar industry has already expired, while a tax credit favored by the wind industry is scheduled to end this year.
“Gas is wiping out every other technology in its path,” said David Crane, chief executive of NRG Energy, a developer that canceled the Bluewater wind park off the Delaware coast last year because it could not find an investment partner. “If renewables had gotten a couple more years of support from the federal government, it would be smooth sailing.”
Yet, though the waters ahead are choppy, with businesses laying off workers and shutting down, the prospects for renewables continue to grow. Major companies like General Electric, Dow Chemical and ConocoPhillips are developing or investing in new technologies. Many projects — some rushing to start in time to qualify for federal tax breaks before they disappear — are going forward.
And the Obama administration has been using some of its powers to promote clean energy, taking steps to open public lands and waters to private development of solar and wind power, while the Defense Department has been aggressively pursuing alternatives, both for its bases and for forces in the field. Late last year, for instance, SolarCity, a company based in San Mateo, Calif.,announced that Merrill Lynch was lending it up to $350 million to install enough panels to power 120,000 military homes.
Many business executives, policy analysts and investors say there is a robust future for domestic solar energy distributed in medium-size arrays and on commercial and residential rooftops, especially in markets with high electricity prices or strong mandates, like Hawaii, California and much of the Northeast.
The low cost of solar panels, whose average price dropped 50 percent last year, according to the Solar Energy Industries Association, has helped. So have new financing methods that allow owners to lease systems long term, cutting their current electricity costs with little or no upfront investment. Last year, about 1,855 megawatts of new photovoltaic capacity was installed, according to a report by the association, more than double the 887 megawatts of the year before.
Despite having lost the program that allowed developers to recoup 30 percent of their costs as a cash grant, the solar industry is still eligible through 2016 for a tax credit to be taken over five years, making its future seem in some ways more solid than that of the wind power industry, even though it far outstrips solar already.
“There’s a great environment for solar for the next four years, and wind potentially falls off a cliff at the end of 2012,” said John Ewen, head of investment banking at Ardour Capital, which focuses on energy, referring to a wind power production tax credit that has been in place since 1992 but is scheduled to expire at the end of this year. Part of the appeal of solar power as a long-term investment, he said, was that the sun’s cost as a fuel was predictable and essentially free.
“It’s clearly a better credit to bet on the sun coming up tomorrow than the price of natural gas,” he said.
Although wind has some of the same advantages, development faces a different set of challenges. Unlike solar power, which can operate efficiently on a small scale, wind projects often make economic sense only if they are huge, but they can end up generating electricity far from where it is needed, throwing up the political, logistical and parochial hurdles of streaming electrons across county and state lines.
Still, plans for enormous projects are beginning to move ahead. One such project, by Clean Line Energy, which develops high-voltage transmission lines, would create enough capacity to take 3,500 megawatts of wind power from Iowa, Minnesota, Nebraska and South Dakota to Illinois and states to the east.
With national energy policy bedeviled — and without a controlled market like China’s or the feed-in tariffs that have driven the use of renewables in Europe (to mixed results) — the United States is developing into a green-energy crazy quilt, a kind of regional patchwork driven by mandates.
“There’s a coalition of the willing here among states and regions that already have parts of these policies, and it does seem to be the U.S. tradition to have diverse, often-conflicting policies state by state,” said Daniel M. Kammen, a professor of energy, nuclear engineering and public policy at the University of California, Berkeley. “This is kind of a chaotic picture moving in the right direction.”
So New Jersey, which has a robust set of solar incentives and a relatively strong state mandate for clean power, has become the nation’s second-biggest solar market (after California) and the national leader in commercial rooftop photovoltaic installations. But in Georgia, where the main utility says it has the sole authority to sell electricity, small-scale solar power has not flourished because property owners must purchase systems themselves rather than lease them from companies like Sunrun for a monthly fee.
Hawaii has made itself into a multi-island energy laboratory, experimenting with everything it can, including wave, wind, solar and biomass sources. California is to start a carbon market in November. And New Mexico is expected to be home to Tres Amigas, a kind of electricity hub that is to connect three United States grids and integrate power from solar, wind and geothermalsources by 2014.
How all this plays out remains to be seen. “This industry is going through a transformation and elements of it are going to probably be fairly disruptive, but I think it’s kind of inevitable that a lot of these things are going to unfold,” said Theodore F. Craver, Jr., chief executive of Edison International, whose subsidiaries include electric power generators and Southern California Edison, one of the nation’s largest utilities. “Getting the timing right, figuring out exactly what direction some of these changes are going to take — of course that’s the big question.”
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