Renewable Energy, Energy Efficiency Will Grow Based on Cost Competitiveness Alone

Renewable energy and energy efficiency are competitive resources in today’s marketplace that will not only be cost-effective mechanisms for compliance with EPA’s Clean Power Plan (CPP) but should also be expected to grow strictly on the basis of cost, according to a recent report by the Advanced Energy Economy (AEE) Institute.

The report, Competitiveness of Renewable Energy and Energy Efficiency in U.S. Markets, says official projections of renewable energy deployment and the impact of energy efficiency on electric demand growth do not capture market realities, discounting the growth potential of these resources and the role they can play in state compliance plans for the CPP.

These government projections, made by the Energy Information Administration (EIA) in its Annual Energy Outlook (AEO), consistently underestimate the growth rate of renewable energy, leading to “misperceptions” about the performance of these resources in the marketplace, the report claims. The EIA projections fall short of actual renewable energy installations year after year, raising doubts about current projections that show little growth in wind or solar capacity stretching out to 2030.

The installed generating capacity of solar power, for example, is likely to double between 2014 and 2016 based on market analyses that take into account actual projects in the pipeline. However, in the AEO 2015 forecast, solar capacity does not double from its current level until 2026.

The same is true for energy efficiency, the report says, as official projections fail to capture the impact of efficiency investments on electricity consumption. The trend in overall electricity demand growth has been consistently downward in recent years, in parallel with the rise in spending on energy efficiency, which more than tripled from 2005 to 2013.

The effect of these misperceptions can be seen in some responses to the CPP, which identified renewable energy and energy efficiency as two key sources of emission reduction in the electric power sector. Comments submitted to EPA by several states questioned their ability to develop sufficient renewable energy or to achieve energy efficiency gains on a cost-effective basis beyond what they were getting already.

The report shows that both renewable energy and energy efficiency are competitive in electricity markets today, can be expected to grow in the future, and can play a significant role in state compliance plans for the CPP, while holding costs down.

Improving energy efficiency also plays a role in reducing water waste in the water-energy nexus. A 2013 report found that the U.S. could dramatically lower the power industry’s draw on strained water supplies by replacing aging power plants with water-smart options such as renewable energy and efficiency. This could go a long way in helping to alleviate the effects of the drought afflicting California and other areas of the American Southwest.


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