Even Without EPA’s Clean Power Plan, ‘The Future Is Bright For Wind And Solar’

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The future for U.S. renewables is very bright with or without the EPA’s carbon pollution standards for existing power plants, a new analysis finds.

Last month, I reported on a study that found the future for U.S. renewable energy is very bright because of the combination of the EPA’s Clean Power Plan (CPP) and the budget deal extending key solar and wind tax credits (the ITC and PTC). That study by the Rhodium Group found that the boost to renewables from those two policies together is large enough to wipe out the natural gas renaissance that had been recently brought on by cheap shale gas.

CPP game-changer

Absent the budget deal, compliance with EPA’s Clean Power Plan would have largely been met by natural gas generation replacing coal (chart on left). But thanks to the extension of renewable energy tax credits, gas will play a far more limited role, and renewables will replace coal (chart on right).

But now the Supreme Court has issued a “stay” on the CPP, delaying it for the foreseeable future. So Rhodium examined what happens to renewables in the no-CPP case. Let me note it is still very possible if not likely that the CPP will ultimately be enacted, especially given the recent passing of conservative Supreme Court justice Antonin Scalia, historically a reliable anti-environmental vote.

In fact, it’s not clear the CPP is even needed to achieve the coal plant retirements required for the U.S. to achieve its part of the Paris climate deal, a 26 to 28 percent reduction in carbon pollution by 2025 versus 2005 levels.

But the Rhodium analysis is worth examining because it appears to be the first of its kind and because some in the media are already misreporting its basic conclusion. For instance, Politico’s “Morning Energy” blasts the headline “WITHOUT CLEAN POWER PLAN, ITC AND PTC ARE BRIDGES TO NOWHERE” and begins “Up to 50 gigawatts of wind and solar installations might not happen if courts ultimately overturn the Clean Power Plan, the Rhodium Group said in a report released today.”

No and no. The report itself concludes, “in all but the low gas price case, the future is bright for wind and solar.” It’s true that without the CPP, there might be up to 50 gigawatts less renewable capacity than Rhodium previously forecasted. But, more importantly, it’s also true that in the most probable of Rhodium’s new scenarios (low gas prices AND low renewable prices), there are actually 20 gigawatts more renewables without the CPP than Rhodium forecast last month with the CPP!

Let’s run through their key findings, since they have sort of buried the lede under a dizzying array of charts and scenarios — and since they have fixed what appears to be a flaw in their original analysis.

Let’s start with Rhodium’s projection of utility-scale wind and solar capacity additions — note the scale on the left hand side is for annual additions and on the right hand side for cumulative additions:


What this chart shows is a projection that with just the tax extenders, utility scale solar and wind would grow some 90 gigawatts, but with the extenders and CPP, they would grow 140 gigawatts. The difference is the 50 gigawatts Politico mentioned.

But there are several reasons why these numbers are almost certainly wrong, and Rhodium immediately discusses one of them — they are based on projections by the Energy Information Administration’s (EIA) in its most recent Annual Energy Outlook (AEO), projections that have been consistently wrong in the past:

The projections above for renewable energy growth in the US if the CPP gets struck down use energy cost assumptions from EIA’s 2015 AEO. If wind and solar costs fall faster than expected, or natural gas prices come in lower than expected, the outcome could be considerably different.

Rhodium notes that “The renewable technology costs in AEO2015 are higher than a number of recent industry and national lab estimates.” Since my days at the U.S. Department of Energy in the mid-1990s, the EIA has consistently overestimated the future costs of renewable energy and thus underestimated (lowballed) the future success of renewables in the marketplace. Even so, the EIA has made little headway in fixing this problem.

In a 2015 analysis “Annual Energy Outlook 2015: EIA Consistently Lowballs Renewables,” the Union of Concerned Scientists details EIA’s ongoing failings. “EIA consistently uses cost estimates that are way higher than real-world data show — including data from the government’s own national laboratories,” explains UCS. That was the same exact problem they had two decades ago.

When I was at DOE, the natural gas advocates would also routinely point out that EIA’s price projections for gas were inevitably wrong. Obviously a lot of experts didn’t anticipate the collapse in natural gas prices of the last few years, but as Rhodium notes, “The natural gas price assumptions in AEO2015 are also higher than what we are currently seeing in the market” — by 30 percent!

So Rhodium redid their analysis using more reality-based prices and price projections. Here is what they found:


Compared to the old analysis (extenders only, blue), we see vastly more renewables in the cases where current and future solar and wind prices are closer to reality than the EIA ever gets. In the case that I suspect is the most likely to pan out — where both renewables and natural gas have a lower price than EIA projects (orange) — Rhodium estimates that the U.S. will build a whopping 163 gigawatts of renewables in the next ten years. That is over 20 more than Rhodium originally estimated (using EIA cost numbers) for utility-scale renewable energy growth with the tax extenders and the CPP.

Moreover, as Rhodium itself notes in its conclusion, their findings are almost certain to be pessimistic for renewables, because despite the stay, “at least 15 states are proceeding with SIP development anyway”:

The policies these states ultimately put in place will influence renewables deployment and could amplify the impact of the tax extenders beyond what we show in this note. With this in mind, our scenarios bookend the possible range of impacts that could be expected and show that, in all but the low gas price case, the future is bright for wind and solar.

Renewable energy will do even better if the CPP is ultimately found legal by the courts — or, even if it isn’t, if it is replaced by some other climate policy (like a revenue-neutral carbon tax) by the mid-2020s. Also, Rhodium’s entire analysis is only for utility-scale wind and solar additions. It omits the large and growing non-utility rooftop solar additions.

Moreover, the recent Supreme Court decision supporting the use of “demand response” coupled with the remarkable ongoing drops in battery costs will greatly benefit renewable energy projects in the years to come.

Bottom line: The future for renewables is very bright even without the EPA’s Clean Power Plan — and even brighter still with it.