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To evaluate the performance of renewable technologies, we documented projections made by a variety of organizations (see List of Studies Reviewed) and compared them with what has actually transpired over the last three decades. These forecasts varied with respect to their intervals and ultimate time horizon. We report projections in five-year increments beginning in the 1970s, with forecasts as far as 2020. Our principal focus is performance to the mid-1990s. We follow up that discussion with a retrospective look at how projections for conventional power systems compare with actual outcomes over the same time horizon.5
Each category of renewable energy technologies for electricity generation reviewed encompasses a variety of technologies, but for ease of discussion they have been aggregated into biomass, geothermal, solar photovoltaics, solar thermal, and wind. Hydropower has been excluded for two reasons: first, it has been developed so extensively that typically it is considered a conventional source of electricity, and, second, significant expansion of this resource would face severe opposition based on environmental concerns. Similar considerations apply to our exclusion of nuclear power, whose underlying resource base could, like geothermal energy, be viewed as virtually unlimited.
The studies we reviewed differed in their level of sophistication of potentially important assumptions, including the treatment of subsidies and incentives for the development of renewable and nonrenewable technologies. On the federal level, these incentives included investment tax credits, production credits, and accelerated depreciation of capital. Many states offered various incentives for renewables, such as California’s Interim Standard Offer contracts, which were offered to Qualifying Facilities and Cogenerators under PURPA, and additional investment tax credits of 10-15 percent. Direct expenditures by government on research and various other subsidies contributed to the development of not only renewable technologies but nonrenewable technologies as well.6
The varied treatment of incentives in these studies is relevant in two ways. If possible, it would be best to control for each study’s assumption about the level of public-sector incentives over the horizon with respect to each study’s cost projections, reported cost, and projected market penetration. Unfortunately, most of the studies failed to make their assumptions explicit. Those that did so did not offer enough complementary detail to allow us to disentangle the effect of these assumptions from those of others in the study.
Therefore on this and many other issues we accept the pro-jections at face value. That is, we do not adjust the projec-tions for potential differences in their underlying assumptions.7 Clearly, projections of cost and market penetration sometimes were built with anticipation of sustained high levels of government support. To the extent that this support did not materialize, was intermittent, or was dominated by support for conventional technologies, this could have weakened the performance of renewable technologies in comparison with the projections.
CHARACTERISTICS OF THE TECHNOLOGIES
Another missing and potentially important piece of the analysis is an accounting of the special characteristics of renewable technologies that make their marginal cost in the delivery of energy services (and their environmental characteristics) differ in qualitative ways from other technologies. One aspect that detracts from their value to an electricity grid is the intermittent generation potential of solar and wind resources. Absent a technology such as hydroelectric pumped storage or batteries to store electricity and/or potential energy, the energy from the sun and the wind are only available a portion of each day. Often the availability coincides with periods of peak energy demand, but not always. The possible unavailability of these resources, especially at peak periods, detracts from their potential contribution to a system grid.
Yet these technologies have an offsetting virtue associated with their relatively small scale and independence from fuel supply. These attributes make siting easier and especially practical in remote areas not served by the electricity grid.8 This feature enhances the “niche market” appeal of renewable tech-nologies, particularly in remote areas of the developing world. Hence renewable energy will often compete not on the cost of energy, but on the basis of value provided to the customer. In addition, the distributed nature of these generation resources can be used to ease congestion and loop-flow problems on an electricity grid, thereby adding to their value within an electric system.
In designing the study, we tried to cover a wide range of the projections that were cast into the public debate, though of course we could not do so exhaustively. About 60 studies were located. Not all of those found could be given equal weighting, because the rigor of the analyses varied tremendously. To account for this variation we developed a qualitative scheme to evaluate the studies.
First, on subjective but fairly transparent grounds, we reduced the number of studies we reviewed in detail to 25.9 Second, we constructed explicit criteria and evaluated the studies in light of these in order to develop weights that were applied to each study in the aggregate analysis. The criteria are listed in Tables 1 and 2.10
For each result, the median value among the studies (after accounting for the weighting) is the point used as an estimate.11 It is noteworthy that the results are not highly sensitive to weights given to the studies. The overall results displayed in the next section are largely unaffected by our rating scheme compared with one that would have applied equal weights to each of the 25 studies. This is partly due to the use of a median value rather than a mean value of the weighted studies. This also indicates that the rigorous and not-so-rigorous studies were distributed about equally in the sample.
Also reported in Tables 1 and 2 is an affiliation of the author or authors by categories described below. The column “Broad Technical Specification” indicates whether the study addressed all, many, or just one of the renewable technologies we considered. Further, the Tables indicate the range of years covered in the study. These two columns were not used in weighting the studies.
We organized the studies in two different ways. Our primary focus is a chronological organization by the decade when the studies were written (1970s, 1980s, and 1990s). A secondary focus is the affiliation of the authors: government agencies, research institutions (including national labs and academic groups), the Electric Power Research Institute (EPRI), and nongovernmental organizations (NGOs). In our sample, projections from within the renewable energy technology industry itself are not represented due to our inability to locate original sources.
The first evaluation criterion we considered was penetration into the market or — the equivalent — the contribution of technologies to electricity supply. This is measured by electricity generation and installed capacity. We placed primary emphasis on electricity generation — the measure of how much energy is actually produced by a specific technology over the course of a year, reported in million kilowatt-hours, or gigawatt-hours (GWh). We occasionally refer to capacity, which is the measure of how much electricity is available at any one point in time reported in megawatts (MW), and is the sum of all nameplate ratings of the respective generation sources.13
The second evaluation criterion was cost, measured by the levelized cost of electricity generation and by capital costs. The cost of electricity at point of production was our primary measure, and it incorporates capital, fuel, and operation and maintenance (O/M) costs, as well as expected lifetime and capacity factors. The total costs of production over the lifetime of the facility were amortized in a straight-line fashion (just as payments for a standard home mortgage would be). This annual cost was divided by the average annual amount of electricity produced over that lifetime to calculate the levelized cost of electricity generation (COE). Levelized cost is reported in mills per kilowatt-hour (mills/kWh), where a mill is equal to one-tenth of one cent. We occasionally refer to capital costs, measured by the dollar expenditure for the rated capacity in dollars per kilowatt ($/kW). Cost data are reported in constant 1995 dollars. To normalize costs we used the consumer price index, and assumed values in each study were denominated in dollars for the year the study was published if no other information was given.
None of the studies reviewed offered a complete set of projections. Transformations were made from capacity to generation and vice versa, and from capital cost to the levelized cost of energy for each of the technologies using standard capacity and utilization factors. When data were plotted on a logarithmic scale, geometric means were used to interpolate estimates for missing time periods between projected years in each study; otherwise, arithmetic means were used.
For each technology we also constructed a measure of actual generation and cost. For the early years, assessments by different organizations of the actual generation and costs of renewable technologies often disagreed. In such cases, we relied on whatever assessments were available from the Energy Information Administration (EIA).
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