² The authors are grateful to the Renewable Energy Policy Project for partial funding of this study, and to Martin Heintzelman for assistance. Individuals too numerous to list have contributed their time and perspective to help guide the study. However, responsi-bility for errors and omissions remain with the authors. This paper does not necessarily express the views of REPP, the REPP Board of Directors, or individuals who reviewed the paper.
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³ See, for example, Management Information Services, Inc., Federal Incentives for the Energy Industries (Washington, DC: 1998), and R.L. Bradley, “Renewable Energy: Not Cheap, Not Green,” Policy Analysis, No. 280 (Washington, DC: Cato Institute, 1997).
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⁴ Although the role of oil in electricity generation has diminished over time, it remained important to generation during peak periods of demand until recently. More important, in the 1970s and early 1980s the choice among conventional fuels was between oil and coal, as the availability of natural gas was in question. Hence, the decline in oil prices had an influence on the pace of technological change and cost reductions in the coal industry.
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⁵ Conventional power systems include all forms of generation, of which renewables are just a small portion.
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⁶ Expenditures through the Department of Energy on research, development, and demonstration projects for renewable and fossil technologies were about equal in 1980 and both were in excess of $1.3 billion. Both fell by nearly three-quarters by 1985, but by 1990 expenditures on renewables continued to fall to $129 million while expenditures on fossil rose to over $1.1 billion. In 1995 they were again similar, with renewables receiving $342 million and fossil receiving $504 million (1995 dollars); U.S. Congress, Office of Technology Assessment (OTA), Renewing Our Energy Future, OTA-ETI-614 (Washington, DC: 1995), p. 33.
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⁷ Comments on preliminary versions of this paper have been on opposite sides of this issue. Renewable advocates have argued that we should look to contracting issues, subsidies, and market imperfections as obstacles to renewable technologies. A critic of renewables has argued the opposite, that we should look to these same issues to find preferential treatment of renewables. Indeed, these are important issues that have significant bearing on an evaluation of renewables, but they are not the focus of this study.
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⁸ There may be other impediments to siting of renewable generating facilities. For example, objections to noise levels and potential damages to migrating birds can complicate the siting of wind turbines. See Paul Gipe, Wind Energy Comes of Age (New York, N.Y.: John Wiley & Sons, 1995); Bradley, op. cit. note 3.
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⁹ For example, several studies were excluded because we were unable to locate the entire report. Others were largely journalistic in nature, lacking the technical detail to make their inclusion useful.
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¹⁰ Criteria concerning projections of electricity production involved whether the following assumptions were explicit: policy initiatives, total electricity/energy demand, cost of conventional generation/fuel, and the continued existence of tax credits. Also we considered whether the assumptions or results were specified by region, and whether the study was original work. Criteria having to do with projections of cost involved whether the following were explicit: the discount rate, year in which dollars are denominated, operating and maintenance cost, and capacity utilization rates. Again, we considered whether the study was original work.
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¹¹ A “score” of 0.5, 1.0, or 1.5 was given to each study with respect to each of the criteria, and the scores were tallied to develop an overall weight for each study with respect to production projections, and separately with respect to cost projections. Weights for projections of cost of capital and cost of electricity differ because the studies differed with respect to whether this information was explicit. Similarly, the weights for projections of capacity and generation differ because of information that may not have been explicit in the study.
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¹² A considerable effort was made to contact industry associations and individual firms, some of which provided us with technical background or served as reviewers of this study. However, off-the-shelf estimates by firms in the renewable technology industries were not readily available to us.
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¹³ We restrict our focus to the U.S. market, to the exclusion of the expanding opportunities for U.S. technology in foreign markets. However, we do not believe this was the primary context for public policy debates over the period we considered, nor was it a primary element of the studies we reviewed.
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¹⁴ Data tables and a larger set of graphs are available from the authors.
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¹⁵ This analysis does not include cost projections for small-scale wind turbines intended for distributed applications - that is, applications located close to the user that tend to be less than 50-kW in size.
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¹⁶ Committee on Nuclear and Alternative Energy Systems (CONAES), Domestic Potential of Solar and Other Renewable Energy Sources: Supporting Paper 6. Study of Nuclear and Alternative Energy Systems (Washington, DC: National Academy of Sciences, 1979).
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¹⁷ Ibid.
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¹⁸ The siting process includes a trade-off between the highest quality wind resource locations and proximity to transmission lines.
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¹⁹ Current cost from Resources Data International (Boulder, CO), Energy Choices in a Competitive Era: The Role of Renewables & Traditional Energy Resources in Americas Electric generation Mix (Alexandria, VA.: Center for Energy & Economic Development, 1995); recent bid from Regulatory Assistance Project, Making Room for Renewables, June 1, 1998. From: <http://www.rapmaine.org>. Presumably this bid takes advantage of the 15 mills/kWh Renewable Energy Production Credit currently available to wind and closed-loop biomass, which would be reflected in the bid price.
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²⁰ Forecast of 35,000 MW from Federal Energy Administration (FEA), Federal Energy Administration Project Independence Blueprint: Final Task Force Report — Solar Energy (Washington, DC: National Science Foundation, 1974); 150,000 GWh from CONAES, op. cit. note 16; near zero from Electric Power Research Institute (EPRI), Fuel and Energy Price Forecasts: Quantities and Long Term Marginal Prices (Palo Alto, CA: 1977).
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²¹ R. Stoughbaugh and D. Yergin, Energy Future: Report of the Energy Project at the Harvard Business School (New York: Random House, 1979).
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²² CONAES, op. cit. note 16.
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²³ U.S. Congress, op. cit. note 6; President’s Committee of Advisors on Science and Technology, Federal Energy Research and Develop-ment for the Challenges of the Twenty-First Century (Washington, DC: 1997); EPRI and U.S. Department of Energy (DOE), Renewable Energy Technology Characteristics (Washington, DC: 1997).
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²⁴ Energy Information Administration (EIA), Annual Report to Congress 1979. Volume 3, DOE/EIA-0173(79)/3 (Washington, DC: DOE, July 1980); CONAES, op. cit. note 16.
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²⁵ EIA, Annual Energy Outlook 1998 (Washington, DC: DOE, 1997).
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²⁶ FEA, National Energy Outlook, A-N-75/713 (Washington, DC: 1976); CONAES, op. cit. note 16.
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²⁷ EIA, Renewable Energy Annual 1997, Volume 1, DOE/EIA — 0603(97)/1 (Washington, DC: DOE, February 1998).
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²⁸ CONAES, Geothermal Resources and Technology in the United States: Supporting Paper 4. Study of Nuclear and Alternative Energy Systems (Washington DC: National Academy of Sciences, 1979); CONAES, op. cit. note 16.
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²⁹ U.S. Congress, OTA, New Electric Power Technologies: Problems and Prospects for the 1990’s, OTA-E-246 (Washington, DC: July 1985); EIA, op. cit. note 25.
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³⁰ EPRI, op. cit. note 20; CONAES, op. cit. note 16. The graph of COE displays an unusual pattern for the 1980s. This is because only one study is used (U.S. Congress, op. cit. note 29), and it projected a significant drop in COE between 1990 and 2000 (150 to 77.8 mills/kWh).
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³¹ EIA, Office of Coal, Nuclear, Electric and Alternate Fuels, Renewable Energy Excursion: Supporting Analysis for the National Energy Strategy (Washington, DC: DOE, 1990); C. Flavin and N. Lenssen, Beyond the Petroleum Age: Designing a Solar Economy, Worldwatch Paper 100 (Washington, DC: Worldwatch Institute, 1990); U.S. Congress, op. cit. note 6; EPRI and DOE, op. cit. note 23.
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³² The conversion rate was 10,353 Btu/kWh.
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³³ This applies to dedicated feedstock fuel, and to wood and agricultural wastes if these are being purchased. Often for municipal solid wastes there is a tipping fee received by the plant for taking in the waste that offsets transportation costs.
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³⁴ EIA, Annual Energy Outlook Forecast Evaluation, prepared by Susan Holte and Eugene Reiser (Washington, DC: DOE, 1998). Cohen et al. provide a review of energy price and production projections for a number of sectors including electricity beginning in the 1970s; Barry Cohen, Gerold Peabody, Mark Rodekohr, and Susan Shaw, “A History of Midterm Energy Projections: A Review of the Annual Energy Outlook Projections,” unpublished mimeo (Washington, DC: EIA, June 1995). Their finding that price forecasts have been less accurate than production forecasts is reinforced in our review in this section.
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³⁵ Based on data in EIA, Annual Energy Review 1997 (Washington, DC: DOE, July 1998).
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³⁶ EIA, op. cit. note 34, states that the reports published in 1983 through 1988 were entitled the Annual Energy Outlook 1982 through the Annual Energy Outlook 1987. In 1989 the numbering scheme changed, and that year’s report was titled the Annual Energy Outlook 1989. Thus, although a forecast has been published annually, there is no Annual Energy Outlook 1988. Hence, for AEO82-AEO87, the forecasts were based on data ending with the year identified in the title. For AEO89-AEO98, the forecasts were based on data ending with the year prior to the one identified in the title.
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³⁷ This decomposition is crude. For instance, EIA, op. cit. note 25, p. 11, presents a different estimate of the share of costs associated with T/D. But we believe any bias implicit in our methodology to be relatively unimportant. We seek to find a rough baseline against which we can compare trends, in an order of magnitude that is roughly comparable to the costs of generation with renewable technologies.
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³⁸ The data suggest that 61 percent of total capital costs is attributable to generation and 39 percent to T/D. We apply 25 percent of total O/M costs to generation, and 75 percent to T/D. For 1995 actual, EIA shows a “wholesale power cost” of 0.4 cents/kWh in addition to the other three components shown. We allocated the 0.4 cents in proportion to the other three components. We apply the shares of costs attributable to generation and to T/D that are estimated for the year 1995 to the calculations for 1983 in Table 3, and to the discussion in the remainder of this section.
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³⁹ The only exception appears in the case of capital costs for photovoltaics, where expectations from the 1970s and 1980s were well below realized costs in the 1980s and 1990s. However, even in this case projections of the COE for photovoltaics were roughly accurate in comparison with realized costs.
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⁴⁰ Bradley, op. cit. note 3.
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⁴¹ C. Carlson, D. Burtraw, M. Cropper, and K. Palmer, SO2 Control by Electric Utilities: What Are the Gains from Trade? Discussion Paper 98-44 (Washington, DC: Resources for the Future, 1998). Table 3 indicates capital costs have declined while O/M costs have risen over this timeframe. Part of this change could be realized by full depreciation of existing facilities ending capital charges accruing at those facilities. Although O/M costs would be expected to increase as facilities age, this is offset by technological change manifest through the advent of electronic controls in power plant management, as well as changing work relationships and articulation of work rules on site; see Denny Ellerman, “Note on The Seemingly Indefinite Extension of Power Plant Lives, A Panel Contribution,” The Energy Journal, vol. 19, no. 2, pp. 129–32 (1998).
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⁴² Renewable technologies benefited indirectly from these trends, because construction costs through the entire industry were reduced.
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