"State renewables portfolio standards are reaching critical mass creating the most important development in US renewable energy of the last 25 years," says Ron McMahan, Global Energy CEO. "This is triggering a new era in project finance that will drive as much as $53 billion in new investment."
The report, titled Renewable Energy: The Bottom Line, is based on forecasting market prices for 75 different market areas by simulating hourly prices based on the physical characteristics and market behaviour of the nation's electricity grid. The research looked at individual plants, hourly wind data, transmission constraints and presumed customer demand using different scenarios to compare different renewable technologies.
The report also found the top 25 utility companies affected by state mandates for renewable energy will account for almost 65% of the cumulative investment and 76% of the new capacity needed to meet the standards by 2020. California, Illinois and Pennsylvania are projected to be the big players in new projects needed by 2020, with California requiring another $6.9 billion investment; Pennsylvania needing $3.8 billion investment in wind; and Illinois requiring $3.5 billion.
"The renewable generation sector is likely to outgrow its current status as a niche market," says Gerald Keenan, co-author of the report.
With wind's federal production tax credit in place, the cost of installing new wind power capacity is competitive today with adding natural gas generation in most markets. In addition, the overbuilding of natural gas-fired power plants has made new wind projects a more financially lucrative proposition.
"Among the leading renewable technologies deployed today, wind energy provides the greatest growth potential and is truly ready for prime time as a market player," said Jim Newcomb, managing director of Bio Economic Research Associates, a contributor to the report.
The report did note that transmission constraints may present a barrier to wind development. New grid capacity is required for new wind projects in states with existing standards and additional capacity also will allow wind "rich" states to export electricity from wind to other markets.
Another recent study, by Clean Edge, notes that new wind power installations are projected to increase from $8 billion in 2004 to $46.1 billion in 2014. That report says the wind industry has entered a critical phase, where mergers, acquisitions, divestments, bankruptcies and new entrants are the norm. Contributing to the "churn" are continued technological breakthroughs and political support on the part of both Republicans and Democrats, as evidenced by the strong support of the governors of California (Republican) and New York (Democrat) for renewables.