Market Trends — Renewable

Wind dominates renewable capacity growth, but solar and biomass gain market share

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From 2010 to 2035, total nonhydropower renewable generating capacity more than doubles in the AEO2012 Reference case (Figure 100). Wind accounts for the largest share of that new capacity, increasing from 39 gigawatts in 2010 to 70 gigawatts in 2035. Both solar capacity and biomass capacity grow at faster rates than wind capacity, but they start from smaller levels.

Excluding new projects already under construction, PV accounts for nearly all solar capacity additions both in the end-use sectors (where 11 gigawatts of PV capacity is added from 2010 to 2035) and in the electric power sector (8 gigawatts added from 2010 to 2035). While end-use solar capacity grows throughout the projection, the growth of solar capacity in the electric power sector is concentrated primarily in the last decade of the projection period (2025-2035) when the technology becomes more cost-competitive. Geothermal capacity nearly triples over the projection period, but in 2035 it still accounts for only about 5 percent of total nonhydropower renewable generating capacity.

Renewable capacity additions are supported by State RPS programs, the Federal RFS, and Federal tax credits. Total renewable capacity—particularly, wind and solar—grows rapidly in the near term in the AEO2012 Reference case. There is, however, relatively little projected need for new generation capacity of any type, including renewables, for the remainder of the current decade, primarily because there is an abundance of existing natural gas fired capacity that can be operated at higher capacity factors. After 2020 there is a need for new generation capacity in the Reference case, resulting in a resurgence in renewable capacity growth.

Nonhydropower renewable generation surpasses hydropower by 2020

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In the AEO2012 Reference case, nonhydropower renewable generation grows at an average annual rate of 3.9 percent, nearly tripling from 2010 to 2035. Generation from nonhydropower renewable sources has been small historically in comparison with hydroelectric generation; however, nonhydropower renewable generation surpasses hydroelectric generation in 2020 in the Reference case (Figure 101).

The share of the total electricity generation accounted for by nonhydropower renewable generation increases from about 4 percent in 2010 to 9 percent in 2035. Although wind remains the largest source of nonhydropower renewable generation through 2035, both solar and biomass generation grow at faster annual rates. Solar generation increases by an average of nearly 10 percent per year, and biomass generation increases by 6 percent per year.

Both solar and wind energy are intermittent resources, and as a result their contributions to the generation mix are less than their contribution to the capacity mix. Biomass-fired generation, on the other hand, is dispatchable and grows to levels approaching wind generation by the end of the projection, at 145 billion kilowatthours in 2035, as compared with 194 billion kilowatthours for wind-powered generation. Most of the growth in biomass generation comes from CHP units used in the production of biomass-based liquid fuels, primarily in response to the Federal RFS. Biomass co-firing and end-use generation play an important role in satisfying State RPS mandates, particularly from 2010 to 2020, when overall capacity growth is modest.

State renewable portfolio standards increase renewable electricity generation

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Regional growth in renewable electricity generation is based largely on two factors: availability of renewable energy resources and the existence of State RPS programs that require the use of renewable generation. After a period of robust RPS enactments in several States, the past few years have been relatively quiet in terms of State program expansions, primarily due to the subdued economic climate.

The highest level of nonhydroelectric renewable generation in 2035, 93.9 billion kilowatthours, occurs in the WECC California (CAMX) region (Figure 102), whose area approximates the California State boundaries. (For a map of the electricity regions presented, see Appendix F.) The three largest contributors to the total are wind, solar, and geothermal generation. The region encompassing the Pacific Northwest has more overall renewable generation, the vast majority of which comes from hydroelectric sources.

Although the Western and Southwestern States have the most projected solar installations, State RPS programs heavily influence the growth of solar capacity in the eastern States, where both the Reliability First Corporation/East (RFCE) and the Reliability First Corporation/West (RFCW) regions have large amounts of end-use solar generation, with 1.7 billion kilowatthours and 1.9 billion kilowatthours, respectively. The two regions are not known for a strong solar resource base, and the installations are in response to the ITC as well as solar requirements embedded in State RPS programs. Most biomass capacity— confined largely to the end-use sectors—is built at the sites of cellulosic ethanol plants, many of which are in the Southeast.