The Changing U.S. Energy Landscape

The Environmental and Energy Study Institute (EESI) and the Business Council for Sustainable Energy (BCSE) held a briefing providing information on the rapid changes occurring in the U.S. energy sector. The findings of the 2016 Sustainable Energy in America Factbook show that the U.S. energy sector, and the power sector in particular, have experienced unprecedented growth in newer, cleaner sources of energy. 

The briefing featured an overview presentation by Bloomberg New Energy Finance (BNEF) on the findings from the Factbook, followed by a moderated industry panel with senior executives from a range of clean energy industries.

GET THE FACTS: Download the Factbook here: www.bcse.org/sustainableenergyfactbook.

 

BRIEFING HIGHLIGHTS

Colleen Regan, Senior Analyst, Bloomberg New Energy Finance.

• Regan provided an overview of Bloomberg New Energy Finance's Sustainable Energy in America Factbook, which was released in early February. The Factbook focuses on the renewable, efficiency, and natural gas sectors. Key takeaways are that electricity bills for households have been falling, and several records were broken in 2015.
• Record #1: energy productivity is at an all-time high. It takes much less energy to create the same level of economic output as it did 25 years ago. By this measure (GDP per unit of energy consumed), U.S. productivity has increased 56 percent since 1990, and 2.3 percent from 2014 to 2015 (GDP grew 2.4 percent whereas energy consumption only grew 0.1 percent). One of the main reasons the U.S. economy has become more energy efficient is that utilities have increased their spending on energy efficiency programs (by 25 percent a year between 2013 and 2014).
• Record #2: U.S. natural gas production has never been higher (up 7 percent from 2014 levels, and up 26 percent from 2007 levels). Shale production accounts for about half the total. Gas drilling rigs have become much more productive: production has increased even though rig counts have dropped.
• Record #3: 2015 saw the largest number of coal plant closures ever in the United States. A total of 14 gigawatts (GW) were retired, and another 17 GW are slated to go offline between 2016 and 2020. Many of these boilers were 50-60 years old and were due for retirement, but tougher environmental standards (such as mercury rules) and falling gas prices have accelerated decommissions of those coal plants.
• Record #4: a record number of solar photovoltaics (PVs) were installed, both at the utility-scale (up 6 percent, or 4.4 GW for the year) and at the small-scale (2.9 GW for the year). In all, 7.3 GW of solar PV were added in 2015, a record. The economics of small-scale (also known as distributed generation) solar are increasingly favorable, making it a viable alternative to grid power in many regions.
• Record #5: wholesale electricity prices are the lowest they've been in 10 years (in real terms). Wholesale electricity prices fell about a third in 2015, thanks to cheaper natural gas and more renewable energy. Retail prices fell by 1.3 percent on average, and are well below their 2008-2009 peak. The largest retail price drops were in New York (-5.8 percent) and Texas (-2.7 percent). Some regions saw increases.
• Record #6: more and more businesses are securing their own clean energy sources. Business procurement of clean energy doubled in 2014 and again in 2015, reaching 3.5 GW. Google is the largest player by far, having procured 1.671 GW of renewable energy (71 MW of solar and 1.6 GW of wind). Wind energy has attracted the most corporate investment.
• A total of 8.5 GW of new wind plants were built in 2015, still far below the record 14 GW built in 2012, right before the expiration of the wind Production Tax Credit (developers rushed projects to completion to capture the credits). Now that the wind PTC has been renewed for a four-year period (through January 2020), construction of wind plants has picked up again.
• Other forms of renewable energy (such as biomass, geothermal, hydro, and waste-to-energy) are idling without long-term support from policymakers. Output from hydropower plants has suffered because of the drought in the West. But hydropower still represents 44 percent of the renewable energy generated in the United States.
• As a whole, renewables represent 13 percent of the electricity generated in the United States (up from 8 percent in 2007). Coal and natural gas are tied at 33 percent each [editor's note: the slides are based on less up-to-date numbers]. This is the first time coal does not represent the largest source of electricity in the United States. Nuclear (at 19 percent) is the third largest source.
• Greenhouse gas emissions from the power sector are 19 percent below their 2005 peak [editor's note: the slides are based on less up-to-date numbers]. The United States is well on its way to meeting the Clean Power Plan's goal of reducing such emissions by 32 percent from 2005 levels by 2030.
• Because of low gasoline prices at the pump, Americans buying new cars do not value fuel efficiency as highly as they did even a year ago when prices were higher. They are also more willing to drive, so fuel consumption is up 4 percent. Nevertheless, more stringent government standards are driving a long-term improvement in fuel economy.
• We've entered an era of low electricity prices. Thanks to shale gas, the cost of generating electricity from natural gas has decreased to $20-30/megawatts/hour (MWh) and is now cheaper than coal in some U.S. regions. The prices of long-term wind energy contracts have also declined significantly, and are now competitive with wholesale electricity prices in the Midwest and central southern states. The prices of solar installations have fallen, from more than $100/MWh in 2008-2009 to $40-60/MWh in 2015. Solar power is becoming competitive in more and more states (not just sunny California).
• A record $329 billion were invested worldwide in renewable energy technologies in 2015. The United States makes up 17 percent of global investments in renewables. China is number 1, at 33.7 percent.
• The outlook for renewables in the United States is generally positive. The multi-year extensions of the Production Tax Credit (for wind) and Investment Tax Credit (for solar) will help maintain strong investment in the United States, by giving developers policy certainty in the mid-term. The credits are scheduled to phase out by 2020 (for wind) and 2023 (for solar).
• However, some states are erecting barriers to distributed renewable energy, by tightening net metering rules and imposing higher fixed charges for grid connections. This is especially problematic for residential solar power.
• In the lead-up to the Paris climate treaty, the United States pledged to cut its total carbon emissions 26-28 percent below 2005 levels by 2025. According to Bloomberg New Energy Finance and the U.S. Energy Information Administration, existing federal policies (including the Clean Power Plan) may not be sufficient to achieve that goal.
• According to Regan, there is a permanent shift taking place in the U.S. energy sector, towards renewables and away from fossil fuels. The outlook for clean energy remains strong.

 

• Liz Tate, Director of Government Relations, Johnson Controls, reiterated that we are getting more bang for our energy buck.
• Tate also insisted that policy works: it has been driving investments in clean energy. Federal targets for energy efficiency in buildings show what's possible. What is needed is better valuation of grid/load management and energy storage, to incentivize them. We need to value resiliency.

 

• Owen Smith, Director, Energy Policy & Strategy, Ingersoll Rand, noted that decoupling revenue from profits (so that utilities are no longer incentivized to invest in capacity and sell more electricity) has been a key policy driver. Policies calling for the disclosure of the energy usage of buildings have also been key, by creating transparency and encouraging investments in energy efficiency. There is still a lot of potential, as many states and municipalities do not have such policies.
• On the federal level, performance contracting is an important driver for energy efficiency.
• Smith agreed with Tate that there is a need for better price signals in ancillary services (load management, energy storage).

 

• Kathryn Clay, Vice President for Policy Strategy, American Gas Association, explained that although the total amount of natural gas used in the residential sector has remained steady, the number of households using natural gas (for cooking, heating…) has actually grown steadily from 53 million in 1995 to 68 million in 2015. This is because of big improvements in efficiency and less leakage of gas from the gas distribution system.

 

• Katherine Gensler, Director, Government Affairs, Solar Energy Industries Association, emphasized that solar energy has seen spectacular growth, from 300 MW of new capacity built in 2008 to 7.3 GW built in 2015 (that's 24 times more). Total installations are expected to double by 2020, as is the number of workers in the solar industry.
• The big challenge now is to tackle 'soft' costs (such as permitting and installations), and to make it easier for low-income households and renters to benefit from solar. There is also a need for a better grid, more adapted to distributed generation.

 

• Jeff Leahey, Deputy Executive Director, National Hydropower Association, explained that there is still plenty of potential for growth in hydropower in the United States, not only by building new facilities but also by improving existing ones. There are 80,000 dams in the United States, and only 3 percent of them generate electricity. The top 100 dams alone could produce an extra 8 GW.
• Pumped storage already represents 97 percent of energy storage in the United States, and has tremendous potential for growth. Storage can turn intermittent renewables into baseload power.
• Policy does matter. Unfortunately, hydropower's tax incentives were not extended (they expire at the end of 2016) and licensing (even for upgrades) still takes much too long. Hydropower is a renewable energy source and should be valued as such. Policy needs to encourage long-term thinking.

 

• Paula Soos, Vice President, Government Relations, Covanta Energy, said there has been a policy failure when it comes to waste-to-energy (there is too much uncertainty and too many hurdles).
• Even though the levelized cost of waste-to-energy is similar to that of solar and wind, there has hardly been any growth in the United States. But there is plenty of waste-to-energy growth elsewhere in the world, especially in China. Europe invests 1.1 billion euros annually; Denmark converts 45 percent of its waste to energy, compared to a tiny 7 percent in the United States.
• Municipalities generally run the waste-to-energy facilities that exist, and would like to use the electricity they generate for municipal buildings. But that is very difficult in the current regulatory environment, in which they often end up overpaying for their power.