Byย Bill Ritter, Jr.,ย Colorado Stateย University
Transforming U.S. energy systems away from coal and toward clean renewable energy was once a vision touted mainly by environmentalists. Now it is shared by marketย purists.
Today, renewable energy resources like wind and solar power are so affordable that theyโre driving coal production and coal-fired generation out of business. Lower-cost natural gas is helping,ย too.
I direct Colorado State Universityโs Center for the New Energy Economy, which works with states to facilitate the transition toward a clean energy economy. In my view, todayโs energy market reflects years of federal and state support for clean energy research, development andย deployment.
And, despite the Trump administrationโs support of coal, a recent survey of industry leaders shows that utilities are not changing their plansย significantly.
Transforming Energyย Markets
Over the past 24 years โ under Presidents Bill Clinton, George W. Bush and Barack Obama โ the United States made substantial investments to promote research, development and deployment of clean energyย technologies.
Federal agencies provided funding for research and development as well as tax incentives. States used renewable portfolio standards, which typically require that power providers supply an increasing percentage of renewable energy to their customers, to promote deployment of greenย energy.
This one-two punch led to innovations that have transformed U.S. energy markets. In the last eight years, utility-scale solar costs have declined by 86 percent and wind energy prices have fallen by 67ย percent.
Natural gas prices, which were highly volatile and often spiked in the early 2000s, have now stabilized at much more affordable levels. They are likely to remain so as production methods improve and sourcesย expand.
The Trump administration is resisting this trend, repealing the Obama administrationโs Clean Power Plan and proposing subsidies for coal-fired power plants. In doing so, it has also eliminated programs that were designed to help coal-dependent communities weather the energyย transition.
But these reversals can do little to change underlying market forces, which are driving innovation, closing coal plants and promoting investment in cleanย technologies.
Utilities Care About Cost, Predictability, and Economicย Returns
A recent survey by the trade publication Utility Dive found that electric power industry leaders expect significant growth in solar, wind, natural gas and energy storage. They also project significant decreases in coal- and oil-firedย generation.
Why is their outlook so divergent from whatโs happening in Washington, D.C.? The answer is a result of multiple market dynamics within the energyย industry.
- Markets favor low-cost energy. Currently natural gas, wind and solar are the lowest-cost resources available to produce electricity and are pushing out coal as a source ofย power.
- Markets emphasize the long view. As utilities look at aging coal plants that are providing decreasing value to their systems, they are making multi-decade and multi-billion-dollar decisions on investments in power plants and infrastructure to replace coal.
- Markets loathe uncertainty. The Trump administrationโs policy reversals and tweets are an unstable foundation upon which to build a corporateย strategy.
- Wall Street is helping utilities finance billions of dollars of investment. To ensure access to low-cost capital, they want to cite low-risk investments. Coal represents a high-risk investment from both a pollution and a resource standpoint. In 2016, 44 percent of the U.S. coal supply came from companies that had declared bankruptcy. The resource is simply too risky for investmentย markets.
- Utilities earn returns on investments in capital infrastructure. Investments in renewable resources are nearly all capital investment and represent the best return forย investors.
Integration and Technology Advances Supportย Renewables
There are, of course, renewable energy skeptics. Detractors argue that wind and sun are intermittent sources โ not reliable 24 hours a day as a resource that can be turned on and off in response to power marketย demands.
This is partially true: A single solar field only produces energy when the sun is shining, and a single wind farm only produces energy while the wind isย blowing.
But as these resources expand geographically, they create an integrated system of renewable generation that produces a consistent source ofย electricity.
States in New England, mid-Atlantic and the Midwest have integrated electricity systems run by independent system operators that deliver power over large geographic areas, enabling them to balance energy output across theirย territories.
Now the West, too, is starting to integrate into regional transmission systems powered largely by cleanย sources.
For example, in Colorado, Xcel Energy recently submitted a plan to regulators to replace coal generation with renewables and natural gas. This shift will bring its Colorado mix of power up to 55 percent renewable by 2026 while reducing associated emissions 60 percent below 2005 levels โ all without the EPAโs Clean Power Plan or a renewable mandate. Xcel is also finalizing plans to join the Southwest Power Pool, a transmission market that includes nine otherย states.
Further, advances in energy storage are decreasing the intermittency of renewable generation and offering utilities a buffer between energy demand and energyย supply.
With storage, utilities can deliver energy when the system needs it. They also can meet spikes in demand with energy from batteries, which reduces the need to build expensive generation that is needed only to meet peak powerย demand.
Innovation is also giving utilities and consumers new ways to manage their power needs. More energy-efficient buildings and appliances, and the ability to manage power requirements through an intelligent grid, will make it possible to do more with less electricity, lowering energy costs forย everyone.
I expect this dramatic transition to become more pronounced over the next 15 to 20 years. U.S. energy production and consumption will continue to evolve toward a cleaner, more stable and more intelligentย system.
This is good news for U.S. energy consumers and for efforts to protect our climate, environment and economy for futureย generations.
Bill Ritter, Jr.ย is Director of the Center for the New Energy Economy atย Colorado State Universityย andย served as the 41st Governor of Colorado from 2007 to 2011 and is a member of the Democraticย Party.ย
This article was originally published on The Conversation. Read the original article.
Main image: Block Island Wind, the first offshore wind energy project in the U.S., started operation in 2016. Credit:ย Ionna22, CC BY–SA
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