Wind Tech Advances Quicker Than Fossil Energy Tech

Many fossil energy advocates who ignore the harmful global warming effects of burning oil and natural gas pretend like technological change will allow us to increase our use of these fuels forever. But the reality is that US oil reserves and production have fallen more than 15% and 20%, respectively, since the early 1990s. And at some point within the next decade or so a similar trend will likely constrain the natural gas market even though EIA estimates of its reserves have climbed ~50% since 1993. Over the same time period, the estimate of wind power potential has climbed more than 3.5 times what the Pacific Northwest Laboratory estimated in 1993. This shows that wind technology during the period has advanced much quicker than exploration and production technology for oil and natural gas. A major improvement comes from taller wind turbines today, since wind is stronger at 80 meters than at 50 meters above the ground.

The Biggest Changes

The main sources of growth for US wind power potential came in the Great Plains, which was already known to be the heart of our resource. Texas, long the largest wind power producing state, is now estimated to be the top state for wind potential after passing the Dakotas and Kansas. In fact, it is estimated that Texas can produce from wind 15X the amount of power it consumes from all electric sources today. Another twenty states can also produce so much wind power that they could become major exporters of this electricity to other states around the country. The estimate excluded wind potential in parks, urban areas and over water — so this is a major underestimate once you consider the offshore wind potential we have off the Atlantic and Pacific coasts. Even so, the 37,000 TWh per year (~365 quadrillion Btus) listed in their onshore wind power estimate is more energy than that contained in our oil and natural gas reserves combined.

Solar Energy Potential Even Larger

The estimate of solar energy potential is more than 100X that of wind power, at over 2,000 TW. So, the issue for renewable energy isn’t any lack of supply. The challenge is for us is to continue cost reductions for wind and solar to make them cheaper than their fossil energy competitors. The year 2010 could be a breakthrough period in that regard as prices for wind turbines and solar modules fall toward grid parity.

Renewables Dominance Will Take Over a Decade

Even when wind and solar are more economical, it will take some time for them to grow from their current base of ~2% of US electricity. Manufacturers of solar modules and wind turbines will have to ramp up global production capacity from current levels of ~10 GW and ~40 GW, respectively, to at least 50 GW each before these sources of electricity can take significant market share from natural gas, oil, and coal. And we will need to continue to improve energy storage capabilities and economics along with our development of a smart grid that can adjust to the intermittency of wind and sunshine for this transition to renewables to take place smoothly over the next 10-25 years.

Now we know there is plenty of renewable energy available to keep us warm, lighted, and wired throughout the 21st century once we have moved on from our dependence on fossil fuels. Let’s make 2010 a huge step in this monumental project!

Onwards in the Sustainable Energy Transition-

Dennis Markatos-Soriano

Global Growth Shines

The global wind power market also grew at an astounding rate — clocking a 37.5% growth rate in its annual market (37 GW vs. 27 GW in 2008). China’s annual growth became the biggest in the world at 13 GW, which makes sense due to their larger electricity demand growth. At the end of 2009, China became the 3rd largest wind energy producer after the US and Germany (35.1 GW, 25.8 GW, and 25.1 GW). China will become the 2nd biggest wind producer in 2010 and may challenge the US by 2011.

The global solar market didn’t grow as quickly due to the collapse of its top market of 2008 — Spain (~50% of the world market that year). But Germany rode to the rescue and extended its lead as the biggest solar power producer in the world (it may have passed 8 GW). Germans took advantage of a 40+% decrease in solar module prices and had record growth (becoming ~50% of the global market themselves).

In the US

As I wrote last year, wind was already replacing oil-fired electricity in 2008. In 2009, wind took some market share from the most polluting power source, coal. In the years ahead, wind and solar can provide for new electricity demand growth and then begin to take significant bites out of the market for the leading electricity sources, coal and natural gas.

At 35 GW, wind now produces ~2% of US electricity demand. At almost 2 GW, solar produces ~.1% of US electricity demand. Biomass and geothermal produce ~1.5% and hydro almost 7%. The big three power sources today are nuclear (~20%), natural gas (~23%), and coal (~45%). When you look at particular states, it is exciting to see that wind power already provides three states with more than 20% of their power needs (Wyoming, Iowa, and North Dakota). By 2023, wind could provide 20% of the whole country’s electricity and solar another 12.5% (based on growth rates of 17.6% per year for wind – half the recent rate – and 40.4% for solar – a slight pickup from the last few years).

The US Energy Information Administration predicts US demand growth for electricity at a rate of 1% per year through 2035. I personally think that rate is higher than necessary as electricity demand growth has fallen every decade since the 1950s and it only grew .4% per year in the ’00s. Increased efficiency efforts can help electricity demand stay flat or even fall, as Google presents in its Clean Energy 2030 Plan.

Trends in Europe as a Glimpse at Our Future?

Europe installed over 10 GW of wind power capacity in 2009. The continent now gets ~9% of its electricity from wind and wind was the top source of of new electrical capacity at 39%. Solar power was third at 16% after natural gas which supplied 26%. Adding hydro and biomass, renewable energy provided 61% of new capacity. Meanwhile, coal is on the decline, as over 3 GW were decommissioned. The US can accomplish this same feat of most new demand coming from renewables in 2010 and beyond.

Price Curves Favorable for Wind & Solar

The prices of wind and solar should continue to drop in 2010, as opposed to an increase in the price of oil, natural gas, and coal. This trend should help maintain swift growth from these sources and make them the new energy titans within a few more years.

The Human Toll of Fossil Fuels

As I discussed a few months back, our addiction to fossil fuels has a serious human toll (on top of inducing global warming and hurting air quality). The tragic blast at a Connecticut power plant that killed at least five people today is a grim reminder of this. Our transition to an efficient reliance on renewable energy will help to reduce such accidents in the future.

Nuclear & “Clean Coal” Not a Near-term Remedy

While Obama has been trumpeting nuclear and “clean coal” as a necessary bridge to a renewable energy future that he thinks is decades away, renewables are actually better situated to provide for us. It takes ten years to commission and build a new nuclear power plant. And carbon sequestration coal is not market-ready yet. In contrast, wind and solar are growing quickly, proven technologies, and falling in cost. Here’s to further record growth for wind and solar in 2010 — finally putting to rest any doubts that they can lead us to a new climate-friendly energy future.

Onwards in the Sustainable Energy Transition-

Dennis Markatos-Soriano

The solarbuzz.com module price survey reported industrial solar prices dropped .9% for September to fall below 20 cents per kWh for the first time. It’s price is more than 7% below that of September 2008. With commercial and residential solar prices remaining just above 25 and 35 cents per kWh, respectively, solar remains more expensive than conventional electricity in most markets. But that may change within the next three years. 

Price moves in US & Europe similar

Solar module retail prices reached a new record low in September, falling 1.4% (6 euro cents) to 4.28 euros per watt. This price has finally dropped below the record low back in 2003-04 of ~$4.33 when the dollar was stronger. Prices in the US also fell 6 cents (1.3%) to reach $4.39 per watt. 

Current Retail Price Drops Only the Beginning

The fall in retail prices of ~9% for a single module over the last year is only the beginning. On the wholesale side, solar modules are projected to fall as much as 50% this Fall from the third quarter of 2008. That leaves another 40% of retail price drops for the months ahead just to catch up. And wholesale module prices are projected by many to fall a good deal further over the next several months. One analyst recently projected the massive overcapacity of supply beyond recessionary demand should lower wholesale prices another 40% from today’s levels in 2010. This would translate into a module price below $1 per watt. He went further to predict prices per watt to approach 50 cents in 2011 — which would easily mean grid parity within two years if he were right and solar producers could do so profitably. The same analyst predicted that as many as half of the ~200 current solar producers will go bankrupt due to this massive price dive. 

Consumers & Installers Will Reap Benefits

These lower prices should translate into huge savings for consumers and solar installers in the years ahead. Lower prices will drive greater demand and help wean the solar industry off of current governmental incentives. While the profits of solar producers from First Solar to Solarworld to China Sunergy will be squeezed, the price drop will allow the Solar Age to emerge in the 2010s as solar chargers for our laptops, cell phones, and other aspects of our daily lives will become second nature.

Onwards in the sustainable energy transition-

Dennis

These folks aim to foster a new image for the financial capital of our country. They aim to be leaders tackling climate change and empowering an energy revolution.

The American Council On Renewable Energy (ACORE) is convening a gathering of financial muscle for the second year, entitled the Renewable Energy Financial Forum (REFF). Last year, over 600 participants came to REFF Wall Street. This year, a similar number are filling the elegant Waldorf rooms to strategize a resurgence of renewable energy finance.

Even though markets continue to struggle, the conference started with positive energy this Tuesday morning. Leaders from finance are discussing how the negative trends of 2009 can make way for robust growth in 2010 – building on the positive news emerging such as bicycle sales and lower prices for solar.

The first speaker was Undersecretary of Energy Kristina Johnson. She represented a goal-oriented DOE that is aggressively interested in tapping into the vast latent renewable resources throughout the US. She put forward goals for wind and solar power to make up 21% of US electricity in 2030 (15% and 6%, respectively). She also focused on the potential for hydropower to grow from its ~6.5% share by adding turbines to lakes that are currently solely for recreation and water supply.

International Energy Agency head, Nobuo Tanaka, called this renewable energy transition necessary to properly address the urgent climate crisis from business as usual energy consumption. He believes current US federal legislation to lower emissions 80+% by 2050 is in the range of what is needed to achieve a safe greenhouse gas concentration of 450 ppm (parts per million in the atmosphere).

The head of ACORE, Michael Eckhart, estimates that such DOE renewable energy growth goals will take $1 trillion in finance over the next two decades to come to fruition. That huge prospective capital flow is why we have standing room only filling the main ballroom. The panelists are hopeful that the current freeze in capital markets will recover by mid-2010. Cards are beings swapped, relationships are beginning, and these industry leaders have better information to lead their institutions to successful renewable energy deployment in the years ahead.

It will take a while for Wall Street to change its image from unchecked greed and rapacious industry. But gatherings like REFF can help empower an ethos of environmental stewardship and climate responsibility into the community.

I’ll keep you updated on how the conference develops over the next two days. Here’s hoping participants are able to figure out and share innovative financing methods that can continue to lower renewables’ cost and help these cleaner sources substitute dirty fossil fuels in our energy system.

Coal Use Projected to Fall ~5%

Building on the lower coal consumption trend of the first quarter, the EIA estimates coal demand to be ~5% lower in 2009. With oil and natural gas demand down ~3% and 2.2% (respectively), energy-related US carbon dioxide emissions are projected to fall ~3.5%.

Still room for lower emissions

I still see room for even these projections to be overestimates. Coal consumption could remain almost 10% below 2008 levels due to the huge supply of natural gas and the cutbacks in industrial production from the likes of GM and Chrysler. And oil demand projections are based on a significant increase from the first five months. I see more likelihood that oil demand remains low to leave 2009 consumption at 5% or more below last year.

Such consumption would send overall carbon emissions down more than 5% in 2009 and to less than 5% above 1990 levels. Since the Waxman-Markey ACESA sets targets based on 2005 emission levels, I will also express these emissions relative to 2005. By my estimates, 2009 emissions falling 5% would lower them to more than 8% below 2005 levels. It makes the Waxman-Markey goal of 17% below 2005 achievable by reducing emissions only .8% per year.

Bottom Line: US emissions are poised to fall dramatically in 2009, putting us in a good position to lower emissions significantly below 1990 levels in the 2010s. Based on the prospect of strong growth for wind, solar, and efficiency in the years ahead, emissions levels of 20-25% below 2005 in 2020 (~8-14% below 1990 levels) are achievable by lowering emissions at a reasonable rate of ~1.5% per year.

Let’s make it happen!

ACES Act caps US greenhouse gas emissions

The passed bill would establish a cap-and-trade system to achieve lower US emissions levels by allowing institutions to trade their emissions permits so that the most efficient reduction projects are executed. This market-based incentive is estimated to be cheaper than mandating all institutions to lower emissions the chosen percentage without regard to each institution’s costs. The cap, beginning in 2012, is set for 2020 emissions to equal 17% below 2005 (or ~4% below 1990) and then 2050 emissions at 83% below 2005 (~80% below 1990). The original bill draft called for 20% below 2005 by 2020 but was relaxed as a compromise to shore up support among legislators from coal states.

The sharp drop in emissions during 2008-09 already has emissions at 6% below 2005 levels, so 17% below seems unaggressive to me. I hope advances in solar, wind, and efficiency help persuade legislators to lower the cap at least back to 20% below 2005 during the bill’s continued development or after it becomes law.

Electricity Emissions Continuing to Plunge

The EIA just published its preliminary estimate for March electricity generation, and the numbers are even more climate-friendly than last month. The most notable change is the large substitution from coal to natural gas due to the recent lower prices for natural gas. Coal use fell 14.5% from March 2008 while natural gas consumption increased 5%. More good news for the climate were a 1.2% increase in hydroelectric power generation, a .3% increase for nuclear, and a 4.8% decrease for petroleum liquids.

Year-to-date, 2009 coal consumption for electricity is down a whopping 10.2% (much more than the EIA projection of ~2.5%, as I wrote last week would probably occur). Natural gas use for electricity has fallen .8%. US emissions could fall as much as 5% in 2009 (to 7.5% below 2005 levels) if current trends continue. But for now, I’ll stick with the more conservative projection that they will fall more than 3%.

Here’s to swift passage of climate legislation to ensure emissions continue falling during our economic recovery in the 2010s.

Onwards in the Sustainable Energy Transition-

The Details

The EIA expects oil consumption to fall 3% in the US to a little more than 18.8 million barrels per day. Most of the reduced demand is projected to come from lower use of distillates (mainly diesel) and jet fuel. For coal, the EIA predicts consumption to fall ~2.6% based on much lower industrial and coke plant demand and a substitution to natural gas for electricity generation. Even after taking up some slack from coal, natural gas consumption is expected to fall 1.9% (.1% further than estimated in April). Adding all these decreases together produces emissions that are 3% lower than in 2008.

Room for Further Reductions

I see room for emissions to fall even further than 3% as petroleum demand is currently more than 5% below last year (not just 3%) and substitution from coal to natural gas may drive a huge drop in coal demand of 4+% (compared to their ~2.6% estimate).

Some Background on Natural Gas Substitution of Coal

The report included a supplement on coal-to-natural gas substitution which helped me understand the situation more clearly. Since natural gas power plants are more efficient (less heat needed per kWh generated), natural gas prices that are higher than coal prices by 33% or less are often competitive. While most coal demand is guaranteed through long-term contracts, as much as 10-20% of some regional electricity markets can switch from spot market coal to spot market natural gas purchases. A natural gas price of $4 per MMBtu is more economical than a coal price of $3.25 per MMBtu in many efficient combined cycle natural gas plants.

Bottom Line: US greenhouse gas emissions from energy are now predicted by the EIA to decline faster than the swift fall of 2008. For us to continue this trend in 2010 and beyond, we must base our economic recovery on efficiency and renewable energy deployment (through federal climate legislation and a Renewable Electricity Standard).

I’ll keep you updated as progress is made-

Prices Today Require Government Incentives

Solarbuzz.com estimates that May 2009 solar PV prices equal 36.88 cents, 26.68 cents, and 20.78 cents per kWh for residential, commercial, and industrial electricity, respectively. Thus, only the state of Hawaii (with its 25+ cents per kWh average has an electricity market where solar can compete with little supportive policy this year. But PI projects solar module prices to fall 25% in 2009, 19% in 2010, and more than 10% in both 2011 and 2012. This would translate into a locked-in price for solar electricity of around 20 cents, 15 cents, and 12 cents per kWh (assuming that installation costs would also fall, though around half the module price drop pace).

2012 Grid Parity in Almost Half the US

Huge electricity markets such as California, Texas, Florida, and New York will join Hawaii by 2012 as long as electricity prices keep rising (I use a price rise of 3.5% per year – much less than the 4.8% per year increase over the last eight years). Since there is state and federal policy supporting solar through the mid-2010s, private consumers already benefit from cost-effective solar in many of these states (Why else would Wal-Mart be deploying it?). And thanks to falling prices for solar, the amount of government support per kilowatt can be lowered as it becomes many times more effective at deploying solar.

Even if electricity prices only rise 1% per year (thanks to effective efficiency and low-cost wind power deployment), solar grid parity is poised to arrive during the mid-2010s.

A New Notion of Grid Parity

Since solar has a locked-in price due to a marginal cost close to zero as you harvest the free sun, grid parity is not when the price of solar is equal to the price of conventional fuels. I am saying that it is instead when the price of solar is equal to the expected price of conventional fuels halfway through the life of the panels. So grid parity in 2012 based on a price of 20 cents per kWh means that I expect the price of electricity in a given market will be at least 20 cents in 2024.

Why Should Fossil Fuel-Powered Electricity Prices Rise

A rising price for oil beyond $100 per barrel is likely due to the rising marginal cost of production. Such an increase would pressure natural gas prices to double back above $9 per MBtu and weigh bullishly on electricity prices. Along with the cost of carbon dioxide finally being internalized into the cost of burning fossil fuels, solar power’s relative price is set to collapse.

Bottom Line: This time of sustainable energy transition is an exciting period to be around for. Solar panels today are like cell phones in 1999. In just a few years, they will be ubiquitous. Passage of federal climate legislation is a crucial step we need to take soon, and then we can all reap the rewards from leading a low-carbon energy future — green jobs, energy security, lower electricity bills (while prices per kWh may rise, efficiency sends the per capita bill down), cleaner air, and a more stable climate.

I’ll keep you up-to-date as solar reaches grid parity in market after market like a set of slow-moving dominoes.

Onwards-

Upscaling a Successful State Policy

For years now, Renewable Electricity Portfolio Standards (most often abbreviated RPS) have helped develop strong markets for wind, solar and other renewable power. As I discussed yesterday, these standards vary according to each state’s renewable resource from 12.5% to 45% by 2015-2020. RPS policy was critical to the development of the tremendous wind market in Texas and the solar markets of California and New Jersey. At the press conference held this morning, panelists from AWEA Executive Director Denise Bode to GE Energy’s VP of Renewables Vic Abate all called for federal leaders to set an RES that would ensure US leadership in renewable innovation: 25% by 2025.

EIA Report Shows RES Lowers Electricity Prices in Resource-Rich Regions

Panelist Don Furman, AWEA President and a leader at Iberdrola, called the opposition of a RES ill-informed. The opposition often says a national RES will raise energy prices. He cited a recent US Energy Information Administration (EIA) report that shows prices of natural gas would actually decrease due to the lower demand for the fuel. The report also projects electricity prices falling in many regions, with only slight increases elsewhere.

Michael Polsky, CEO of wind developer Invenergy, went further, saying the opposition has little credibility. Polsky gave a historical view of such opposition, declaring they used to allege renewables don’t work. With wind at more than 25 GW, they now admit it works. But they shifted their message to its too expensive. But wind turbine prices are already competitive with conventional sources, especially once pollutants such as carbon dioxide are taken into account.

Wind Power Costs

In fact, wind power is approaching $1.50 per watt and could fall toward $1 per watt if the industry has policy support to further mature and increase its efficiency. White-hot global demand for turbines since 2005 and the rise in the price of steel sent prices up a bit the past three years (similar to solar prices). But now costs are falling again and supply seems to have caught up with demand.

Future US Market Could Be 15-20 GW

GE’s Abate and enXco’s Jim Walker see the US market continuing to buildout in 2010 after a slowdown in 2009. In fact, they see market growth to 15-20 GW per year within a few years, as long as supportive federal policy continues. If they are right, we may be able to surpass China’s recent 2020 wind goal of 100 GW.

Such a market would translate into hundreds of thousands of clean energy jobs manufacturing, deploying, and operating turbines. AWEA’s Bode sees wind powering the American economy forward to recovery.

Bottom line: Significant momentum remains for renewable energy, especially cost-competitive wind power, to grow tremendously in the years ahead despite a recession-induced slowdown in 2009. The wind industry appreciates the federal government backing that enabled outstanding growth over the past few years. And they see this year as the perfect opportunity to set in motion a steady, long-term support to achieve energy security through a federal RES.

Onwards in the Sustainable Energy Transition-

Denmark offshore, photo by Jim Hodson of Greenpeace

SET’s home state of New York is moving to become a leader in offshore wind power. Both the New York Power Authority (NYPA) and the Long Island Power Authority (LIPA) have offshore wind farms they are pursuing. The NYPA project would be the first major freshwater wind farm in the world. And the LIPA project could end up as the biggest proposed offshore wind farm in the US.

New York Needs to Accelerate its Renewable Deployment

New York has one of the highest renewable shares of electricity at ~21.5%, largely due to the hydroelectric plant at Niagara Falls (only Washington and Oregon currently have higher renewable shares, also mainly due to hydro). New York aims to get 45% of its electricity from renewables by 2015, a goal that will take tremendous deployment to achieve. In fact, renewable capacity of ~10 GW is necessary to reach 45% at current generation levels. Achieving such a high capacity by 2015 would translate into average annual deployment of 1.5 GW.

As I wrote a few weeks ago, NY recently became one of only eight states with over 1 GW of wind power capacity. All of the existing wind capacity in NY and the rest of the country is land-based. Now, state leaders have their sites on offshore wind helping NY reach several GW capacity by 2015.

First Freshwater Wind Farm

NYPA aims to build the first freshwater wind farm in the world. On Earth Day, they announced a Request For Expressions of Interest (RFEI) which will be followed by a Request For Proposals (RFP) from wind developers. Siting and construction will take time, but it’s great the process is in motion. I will share the MW capacity proposed as progress is revealed.

First US Offshore Wind Farm

Europe has had offshore wind farms since the 1990s. LIPA seeks to finally commission the first American one a few miles into the Atlantic Ocean. Initial capacity proposed is 350 MW with potential for a second phase to achieve 700 MW.

Sustainable Energy Transition Takes Time and Effort

Freeing NY from the need to burn coal (~12.5%) and oil (~10%) for electricity is not a quick and easy process. It will take solar and wind deployments more than double recent growth. Its nice to see NYPA and LIPA taking concrete steps to take advantage of the steady, powerful winds offshore.

Here’s to more progress in the months ahead-