CHICAGO, June 19, 2003 -- Dramatic improvements in performance, as well as government incentives, have resulted in reduced costs that are quickly making renewable energy technologies competitive with traditional forms of electricity generation, according to a study released Thursday by Navigant Consulting Inc.
The study, "The Changing Face of Renewable Energy," conducted on behalf of a group of United States and Canadian energy and utility companies, found that the cost of electricity from wind and photovoltaics is now one-tenth of what it was just 20 years ago.
As a result of this progress, the study forecasts the use of renewable energy technologies will more than double over the next 10 years in the United States and Canada, with wind and biomass comprising some 85 percent of that new capacity.
This progress comes at a time when both the United States and Canada are growing increasingly dependent on natural gas-fueled power generation. While natural gas remains the fuel of choice for most new power plants, potential gas price increases and volatility raise concerns. While coal-fueled power generation offers price stability, it is generally not the preferred choice for new power plants by most utilities in North America.
"With wind and biomass technologies becoming economically competitive with conventional options, renewable energy is no longer simply the noble thing to do," said study leader Lisa Frantzis, Director, Renewable & Distributed Energy at Navigant Consulting. "Renewable energy is becoming an essential part of a diversified energy supply portfolio."
"Having a viable renewable component to our generation portfolio is now a necessity," said Eric Markell, Senior Vice President of Energy Resources, Puget Sound Energy, one of the companies participating in the study. "There really is no alternative because natural gas appears to be on a year-long price spiral and it is now difficult or impossible to permit and build new hydro, nuclear or even coal-fueled generating facilities."
The study examined a broad range of issues critical to the energy industry, including:
* How to integrate intermittent renewable energy, such as wind, into the power grid;
* Which successful business models have been implemented to compete in this transforming market;
* How to design a renewable portfolio standard; and,
* The expected impact of a whole new class of market mechanisms, including renewable energy certificate trading and emission allowances.
The study reviewed 13 renewable energy technologies and two enabling technologies, including onshore and offshore wind, photovoltaics, concentrating solar power, hydro, biomass, geothermal, and wave, plus others, in addition to storage and inverter technologies.
"Wind will lead in terms of new renewable energy additions over the next 10 years," said Frantzis. "We expect to see additions of more than 1,000-1,500 megawatts per year for onshore wind in the United States and Canada in that timeframe-- equivalent to the output of more than one nuclear power plant. Offshore wind will begin to see applications, and we will see a variety of cost-effective applications for biomass, including landfill gas, co-firing with coal and eventually, gasification."
The study also reviewed government support for renewable energy technologies, and found that ongoing government support and commitment to long-term incentives, along with other support mechanisms, was needed to ensure market development.
"The study really drives home the importance of Renewable Energy Certificates as a key factor in making the economics work for project owners of renewable energy technologies," said Jeff Anthony, Manager of Alternative Energy Programs, We Energies. "These certificates represent environmental attributes and other benefits associated with renewable energy, and can be sold separately from the energy as a brand new, marketable commodity."
Bruce Boland, Senior Vice President Customer Solutions at Ontario Power Generation, noted, "Effective government policies will be critical to the development of a viable green energy market, but we also see a growing role for customers who will help drive the green energy market based on their concerns for environmental performance, reputation and price. This will be particularly important given the recent ratification of the Kyoto Protocol by Canada."
The study also recommends adopting standardized interconnection policies and the upgrade of regional transmission systems to support renewable development in resource-rich areas.
"This study offers clear evidence that renewable energy technology has come a long way and will play an important role in the energy industry," said Herjinder Hawkins, Manager, Renewable Energy & Technologies, Salt River Project, a study participant. "The more competitive renewable energy becomes, the more it can help to support mainstream electricity needs and reduce national emissions."
Study participants include: ARC Financial, Hydro Quebec, Ontario Power Generation, Puget Sound Energy, Salt River Project, and We Energies, among others. For additional information about the study, go to www.navigantconsulting.com.
About Navigant Consulting
Navigant Consulting, Inc. is a specialized independent consulting firm providing litigation, financial, restructuring, energy and operational consulting services to government agencies, legal counsel and large companies facing the challenges of uncertainty, risk, distress and significant change.
The company focuses on industries undergoing substantial regulatory or structural change and on the issues driving these transformations.
More information about Navigant Consulting can be obtained on the Company's website address, www.navigantconsulting.com.