faq
The
Renewable Portfolio Standard
- Is it feasible to supply 20% of
US electricity with non-
hydro renewable sources by
2020?
- Can we afford to supply 20% of
electricity with non-hydro
renewable sources by
2020?
- Aren't renewable energy
technologies more expensive?
- Why not let customers who want
more renewable energy
pay the extra costs?
- Why not rely just on
incentive-based approaches, such as
tax credits?
- How does the RPS reduce renewable
energy costs?
- What are renewable energy credits
and why should credit
trading be used to meet an
RPS?
- Should hydropower qualify for the
RPS?
- Renewable sources like solar and
wind have variable
output. Would an RPS affect the reliability
of the energy
system?
- How would the RPS affect national
energy security?
- We've spent billions subsidizing
solar and wind and they
still aren't competitive. Is it time to
look elsewhere?
- Would we have to restructure the
electricity industry in
order to adopt an RPS?
- Why not rely just on emission
caps and trading programs
to meet environmental
goals?
Is it
feasible to supply 20% of US electricity with non-hydro
renewable
sources by 2020?
The United States is
blessed by an abundance of renewable
energy resources from the
sun, wind, and earth. The technical
potential of good wind areas,
covering only 6% of the lower 48
state land area, could
theoretically supply more than one and a
third times the total
current national demand for electricity. An
area 100 miles square
in Nevada could produce enough
electricity from the sun to meet
annual national demand. We
have large untapped geothermal and
biomass (energy crops and
plant waste) resources. Of course,
there are limits to how much
of this potential can be used
economically, because of
competing land uses, competing costs
from other energy
sources, and limits to the transmission system.
The important
question is how much it would cost to supply 20% of
our
electricity from renewable energy sources other
than
hydroelectric power.
Can we
afford to supply 20% of electricity with non-hydro
renewable
sources by 2020?
Recent studies
have shown that an RPS of 20% by 2020 is
easily affordable. A
June 2001 study by the US Energy
Information Administration
(EIA)-using very high estimates of
renewable energy costs-shows
that an RPS of 20% by 2020
would cost roughly the same as
business as usual through 2006
and only $2.8 billion or 0.7%
higher in 2010.1
By 2020, total
bills
would
be $580 million (0.1%) lower with a 20% RPS. With
ongoing natural
gas savings after 2020, an RPS would likely
produce net savings
for consumers. Because an RPS creates a
more diverse and
competitive market for energy supply, EIA
found that these market
forces would reduce natural gas prices
and bills, offsetting
small electricity price. Other studies, using
more realistic
assumptions developed by the Department of
Energy's
Interlaboratory Working Group, consisting of the five
national
energy research labs, have found that a 20% RPS, when
combined
with energy efficiency programs, could save
consumers billions of
dollars.2
Aren't renewable energy technologies more
expensive?
Renewable energy
has
made great strides in
reducing costs, thanks
to
research and
development and growth
in domestic and
global
capacity. The cost for
wind and solar
electricity
has come down by 80-
90% over the past
two
decades (Figure 2).3 The
Electric Power
Research
Institute projects that
the cost of
renewable
energy will continue fall
to levels that
are
competitive with
conventional energy
sources over the
next 5-
15 years.4
Why not let customers
who want
more
renewable energy pay the extra costs?
Buying "green power" can help stimulate the market
for
renewable energy. But renewable energy provides
environmental,
fuel diversity, national security, and economic
development
benefits to everyone, not just to those who
volunteer. Increasing renewable energy will reduce the risks to
the
economy posed by over-reliance on a single source of
new
power supplies, such as natural gas. A study by the
National
Renewable Energy Laboratory shows that by 2010
voluntary
programs could increase renewable energy generation
from 2%
of electricity sales today to less than 3% of
sales.5 As discussed
above, EIA
and others have shown that an RPS of 20% of sales
by 2020 would
be achievable and affordable if everyone shares
the cost. Surveys
show that a large majority believes that
everyone should share in
the costs of increasing renewable
energy. An RPS would create a
minimum national standard that
allows individuals who want to buy
more renewable energy to do
so.
Why not rely just on
incentive-based approaches, such as
tax
credits?
Production tax credits are vital for leveling the
tax playing field
with fuel-intensive technologies that pay lower
property taxes
and can deduct fuel expenses, but do not
necessarily overcome
other critical market barriers. In order to
ensure the tax credits
are effective, there needs to be a policy
that creates a market
for the technologies. For example, the
production tax credit for
wind has produced most new wind
capacity in states that also
have a state RPS. (The tax credits
also need to be extended for
a long enough period for investors
to rely on, expanded to
include other renewable resources, and
available to public power
and rural electric cooperatives.) The
RPS creates a market for
renewable technologies that are
commercially viable or close to
viable and helps reduce their
costs (see below). Other
complementary policies, including net
metering and other
financial incentives, are also needed to
encourage the
development of higher cost renewable emerging
technologies
with significant long term potential such as
customer-sited solar
photovoltaics.
How does the RPS reduce renewable
energy costs?
The RPS is the best policy to ensure we meet
resource diversity
and environmental goals at the lowest cost. By
stimulating a
long-term market for renewable energy, the RPS
reduces the
investment risk associated with building renewable
facilities. Lower investment risk promotes cost-effective financing
of new
projects. Increasing the deployment of renewable
technologies
reduces manufacturing, installation, maintenance,
and other
costs over the long term. At the same time, competition
among
a variety of renewable sources to meet the RPS also helps
drive
renewable energy prices down. Using renewable energy
credits
(see below) creates additional savings.
What are renewable energy credits
and why should credit
trading be used to meet an
RPS?
A system of tradable
renewable energy credits (RECs) provides
electricity generators
with a simple and flexible means for
achieving renewable energy
targets. One REC is created for
every unit of renewable
electricity generated. Renewable energy
generators earn RECs and
then sell them to those who need
them to meet the RPS
requirements. A national RPS with RECs
trading will reduce the
cost of renewable energy technologies by creating a national market
for the most cost-effective renewable energy sources. This approach
is very similar to the successful credit-trading program established
for sulfur dioxide emissions under the Clean Air
Act.
Should hydropower qualify for the
RPS?
Hydropower is a mature technology, as it
comprises
approximately 10% of our nation's current supply of
electricity.
It is often the least expensive generation
available, and existing
hydro facilities generally do not need
the support of an RPS to
continue operating. There are also only
limited opportunities for
environmentally sensitive expansion of
hydropower generation.
Some proposed approaches would allow
incremental
hydroelectric generation at existing dams to qualify
for an RPS.
Renewable sources like solar and
wind have variable
output. Would an RPS affect the reliability of
the energy
system?
The electric system is designed to handle unexpected
swings in
energy supply and demand, such as significant changes
in
consumer demand or even the failure of a large power plant
or
transmission line. There are several areas in Europe,
including
Spain, Germany, and Denmark, where wind power
already
supplies over 20% of the electricity with no adverse
effects on
the reliability of the system. Several important
renewable energy sources, such as geothermal, biomass, and landfill
gas systems
can operate around the clock. Studies by the EIA and
the Union
of Concerned Scientists show these renewable plants
would
generate over half of the nation's non-hydro renewable
energy
under the 20% RPS in 2020. Renewable energy can increase
the
reliability of the overall system, by diversifying our
resource base and using supplies that are not vulnerable to periodic
shortages
or other supply interruptions. Solar energy is also
generally most
plentiful when it is most needed-when
air-conditioners are
causing high electricity demand.
How would the RPS affect
national energy security?
Much of the US energy system-power plants, dams,
refineries,
pipelines, tankers, and the electricity transmission
grid-presents
significant safety and security risks. Renewable
energy facilities
are small, geographically dispersed, and do not
require
transporting or storing radioactive or combustible
materials.
Increasing renewable energy would reduce the number
of
vulnerable facilities over time. Renewable energy can also
reduce
the need to expand imports of liquefied natural gas (LNG).
LNG
imports from non-NAFTA countries, including OPEC
members-
Algeria, Indonesia, Iran, Nigeria and Qatar-are
projected to grow
from less than 1% of gas supply today to up to
12% by 2010.
Renewable fuels can also displace oil. Among the
experts calling
for a federal RPS to increase energy security are
James Woolsey,
former head of the CIA, Robert McFarland, former
national
security advisor to President Reagan, and Admiral
Thomas
Moorer, former head of the Joint Chiefs of
Staff.
We've spent billions subsidizing
solar and wind and they
still aren't competitive. Is it time to
look elsewhere?
As discussed above, DOE investments in R&D and
state and
federal incentives have reduced the cost of renewable
energy
generation as much as 80-90%. But renewable
energy
technologies still do not compete on a level playing field
with
conventional energy sources. Federal subsidies for
renewable
energy have been and continue to be much less than
government subsidies for the fossil fuel and nuclear
power
industries.8 A recent study by the
Renewable Energy Policy
Project showed that between 1943 and
1999, the nuclear
industry received over $145 billion in federal
subsidies vs. $4.4
billion for solar energy and $1.3 billion for
wind energy.9 Another
study by the
non-partisan Congressional Joint Committee on
Taxation projected
that the oil and gas industries would receive
an estimated $11
billion in tax breaks and loopholes that
subsidize exploration
and production activities between 1999 and
2003.10 Legislation passed by the
House of Representatives in
2001 (H.R. 4) would authorize as much
as $38 billion over ten
years in new and expanded subsidies for
the oil, coal, gas, and
nuclear power industries.
Would we have to restructure the
electricity industry in
order to adopt an RPS?
No. An RPS is compatible with both a regulated
or restructured
industry. Iowa, Minnesota, and Wisconsin adopted
renewable
energy requirements outside of restructuring. Nevada
adopted a
small RPS during restructuring, but greatly expanded it
later. Eight other states, including Texas, have enacted an RPS
during
restructuring.
Why not rely just on emission
caps and trading programs to
meet environmental
goals?
Emission cap and trading programs are critical for
reducing
harmful pollution from power plants. But they do not
necessarily
help new technologies that provide long-term benefits
overcome
market barriers. An EIA study found that a 20% RPS
would
reduce the cost to consumers of meeting
four-pollutant
reductions from power plants by $4.5 billion in
2010 and $31
billion in 2020 compared to meeting the emission
reductions
without an RPS.11 By providing additional
alternatives to
switching from coal to natural gas, renewable
energy sources
restrain price increases in natural gas to power
plants and other
users.
References
1 Energy Information
Administration, Analysis of Strategies for Reducing
Multiple
Emissions from Electric Power Plants: Sulfur Dioxide,
Nitrogen
Oxides, Carbon Dioxide, and Mercury and a Renewable
Portfolio Standard, SR/OIAF/2001-03, June 2001.
http://www.eia.doe.gov/oiaf/servicerpt/epp/pdf/sroiaf(2001)03.pdf
2 For more detail, see UCS Fact Sheet:
"EIA Study: National Renewable
Energy Standard of 20% is Easily
Affordable. /clean_energy/renewable_energy/page.cfm?pageID=45
3 U.S. Department of Energy National
Laboratory Directors, Technology
Opportunities to Reduce U.S.
Greenhouse Gas Emissions, October 1997.
http://www.ornl.gov/climate_change
4 Electric Power Research Institute and the
US Department of Energy,
Renewable Energy Technology
Characterizations, EPRI-TR-109496, December
1997. http://www.eren.doe.gov/power/techchar.html
5 Lawrence Berkeley National Laboratory
and National Renewable Energy
Laboratory, Forecasting Growth of
Green Power Markets in the United States,
NREL/TP-620-30101,
LBNL-48611, October, 2001.
http://www.eren.doe.gov/greenpower/pdf/30101.pdf
6 Energy Information Administration,
ibid.
7 Union of Concerned
Scientists, Clean Energy Blueprint: A Smarter National
Energy
Policy for Today and the Future, October
2001. /clean_energy/renewable_energy/page.cfm?pageID=44l
8 Doug Koplow and John Dernbach,
"Federal Fossil Fuel Subsidies And
Greenhouse Gas Emissions: A
Case Study of Increasing Transparency for
Fiscal Policy," Annual
Review of Energy and Environment, 2001. 26:361-89.
http://energy.annualreviews.org/cgi/content/full/26/1/361?
ijkey=2zGcFva7fLEMA&keytype=ref&siteid=arjournals
9 Goldberg, Marshall, Federal Energy
Subsidies: Not All Technologies are
Created Equal, Renewable
Energy Policy Project, July 2000,
http://www.repp.org/articles/resRpt11/subsidies.pdf.
10 Joint Committee on Taxation,
Estimates of Federal Tax Expenditures for
Fiscal Years 1999-2003,
1998.
11 Energy Information
Administration, ibid.
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