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In this section we summarize projections and actual performance for each renewable technology, and end with a review of projections for electricity generation from conventional sources. Note that many of the graphs use a log scale to display results. Note also that sharp changes in the slopes of some of these graphs are in part an artifact of our chosen methodology, which selects a median value among projections for each five-year increment. There is considerable noise in the data (i.e., a random aspect to the estimates due to our interpretation of the studies and translation of their results into common forms of measurement) due to reasons we have outlined. Hence, we chose to report our findings as graphs, which communicate the qualitative nature of the findings better than data tables would. The data tables are sensitive to our assumptions and interpretations of previous studies; the trends illustrated in the graphs are much less sensitive.14
WIND15
In the 1970s, projections for wind generating capacity were high due to assumptions influ-enced by the energy market disruptions of that decade. Projections were as high as 45,000 MW for 1995 and 140,000 MW by 2000.16
Studies of generation and capacity during the following decades offered projections that were lower by an order of magnitude, due in large part to declining fossil fuel prices. In Figure 1 this is illustrated by a large shift down-ward in projections of generation after the 1970s. Projections of generation and capacity from the 1990s are consistent with those from the 1980s. The industry experienced a brief decline in capacity in the early 1990s, due in part to retiring standard-offer contracts under PURPA and a decline in other public-sector incentives. Actual wind energy generation has been on the rise since the mid-1970s, but specific estimates prior to 1990 are quite uncertain and are not included in the graphs. In 1995, wind production was approximately 3,196 GWh.
Figure 2 illustrates that projections of a decline in the capital cost and COE of wind have been realized or exceeded over time. Wind energy (along with geothermal) is currently the least-cost renewable technology, but its competitive standing depends on the availability of sites with strong wind resources and with access to transmission lines. Some early projections expected that the exhaustion of good wind resource sites early in the development of the technology would prevent costs from falling. For instance, the Committee on Nuclear and Alternative Energy Systems of the National Academy of Sciences envisioned rising capital costs and COE after 1995 for wind energy due to the need to use sites “with lower average wind speeds because the best sites have already been used.”17 The exhaustion of valued wind sites has not occurred, however, because of the unmet penetration of wind into the market and because the inventory of sites identified to have strong wind resources has expanded.18 In addition, technological advances such as lower start-up speeds have improved profitability at lower wind speeds.
Wind has a current cost of about 52 mills/kWh at existing facilities, and a recent bid for 30 mills/kWh for a 100 MW wind farm was submitted to Northern States Power in Minnesota.19 Current cost estimates are close to the average cost of generation from conventional sources.
Like wind, photovoltaic cost projections have been revised downward from the 1970s. Projections from the 1970s for solar photo voltaics range tremendously, as seen in Figure 3. Some authors forecast nearly 35,000 MW of capacity and 150,000 GWh of generation by 2000, while others forecast nearly zero capacity and generation by 2020.20 Viewing the median value of projections of generation chronologically reveals a “fan diagram” that results from downward revisions of expected penetration. This pattern appears often in the Figures on other technologies as well. Capacity and generation have grown more than 10-fold since the early 1980s, but market penetration has been confined to niche markets and remote applications. In 1995, about 89.2 MW of capacity were installed in the United States.
Early studies were relatively optimistic regarding trends in costs for photovoltaic technology compared with those developed later. Stoughbaugh and Yergin (1979) projected that by 1990 the cost of electricity from photovoltaic technology would be about 100 mills/kWh.21 Another early study projected an eventual leveling off of capital costs at around $3,000/kW and of COE at around 150 mills/kWh by 1990.22 Figure 4 indicates these early projections of costs were not achieved.
Since the 1980s, however, projections of COE declines have been met or exceeded. Despite limited market penetration, capital costs and COE have dropped significantly. The current cost of capacity is about $7,000/kW, and the cost of generation is still over 200 mills/kWh. Recent studies project continuing declines in cost in coming decades due to efficiency improvements in both manufacturing photovoltaic cells and capturing solar radiation and transforming it to electricity.23
Projections of solar thermal electricity production also form a fan diagram. Solar thermal electricity production began in the late 1970s with the 10-MW Solar One, a central station receiver, in the desert of southern California. Projections made during the late 1970s and early 1980s put solar thermal capacity at anywhere from 240 MW to 3,400 MW, and expected generation to range from 480 GWh to 5,400 GWh by the end of the 1980s.24 Luz International’s facilities (SEGS I through IX) provided research on commercial adaptability of the technology, and demonstration of the first Stirling dish engine in 1984 signaled that these goals might be attainable by the end of the decade. Projections for capacity during the 1980s reflected this expectation.
However, reductions in public-sector financial incentives and government R&D spending on solar thermal hit this technology particularly hard. Luz International entered bankruptcy, contributing to a decline in production in the beginning of the 1990s. As with photovoltaics, the outcome is a fan diagram of declining forecasts of generation apparent in Figure 5. Recent projections anticipate capacity and generation to increase to twice current levels by 2020.25
Few projections exist for the capital costs of solar thermal technology, and those we found varied greatly with regard to the type of technology modeled. There is also substantial variation in the measure of COE. Projections from the 1970s for 1990 ranged from 36 to 198 mills/kWh.26 Figure 6 illustrates that the median projections have been tracked closely by the actual COE.
Projections of electricity production from geothermal produce a much weaker version of the familiar fan diagram. Generating electricity from geothermal energy involves capturing naturally heated steam to drive turbines. “Dry steam” is the easiest to use and cheapest, and is the resource type found at The Geysers, California, the largest geothermal electricity generation facility in the U.S. Increasingly, advances in geophysical theory and mapping, as well as more economical drilling technology, have increased the reservoir of geothermal energy that can be tapped cost-effectively.27 Also, valuable minerals (e.g., zinc) in the briny byproduct can be captured and sold to improve the economics of a geothermal project. These advances have not come quickly compared to expectations in the 1970s.28 However, in a trend similar to petroleum extraction, they have enabled new installations in the outer areas of existing fields to compensate for the moderate decline in production at long-established facilities such as The Geysers.
Recent forecasts for new geothermal energy capacity and generation have been more moderate than previous ones.29 This produces in Figure 7 a weak version of the familiar fan diagram.
Many early reports from the 1970s forecast higher costs than those realized for generating electricity from geothermal in the future.30 The earliest development of geothermal resource and technology used dry steam resources, historically the least expensive form of the resource. It was anticipated that as dry resources were exhausted, subsequent development would have to turn to more expensive resources. However, technological advances have expanded the types of geologic settings that can be tapped. Figure 8 indicates that recent predictions have projected a declining path from 5.5 to 4 cents/kWh over the next 20 years, a smaller decline than projected today for other renewable technologies.31
Biomass resources can be converted into energy and can be divided into three categories: wood and agricultural wastes, municipal solid waste, and biomass grown specifically for energy content. All three sources can be used for generating electricity as well as heat, while the last source also is frequently converted into fuel to power transportation (as in the blending of ethanol with gasoline). Currently wood and agricultural waste account for about 70 percent of biomass capacity.
We focus here on biomass for electricity generation. Unfortunately, few early studies dealt specifically with “biopower.” Instead, most early studies aggregated all the varied uses of the fuel and reported future market penetration as the energy content of the fuels it was to replace (including inputs to electricity generation). It is therefore difficult to separate the electricity contribution from the heat and fuel contribution of these projections, so few studies from before 1990 are included in our survey.
Figure 9 indicates that generation projections decreased from the 1970s to the 1980s, but then exceeded all prior levels in the 1990s. This is due to advances in co-firing biomass with fossil fuels (e.g., replacing a small percentage of coal burned in a power plant with biomass), use of waste-to-energy plants to burn municipal solid waste, and technological developments for closed-loop biomass generation systems, which have been developed but are not yet in use.
The actual production numbers used here are based on only utility generation until 1990. Nonutility data (such as the use of wood waste to generate electricity in pulp and paper production) were not collected by the EIA until 1989, and no reliable source could be found for estimation of electricity generation by these sources before that date. Both utility and nonutility generation are included after that, accounting for the jump in actual capacity and generation between 1985 and 1990.
As in the case of production statistics, few studies segregated the cost data among the various uses for biomass. Costs typically are reported in dollars per million Btu ($/mmBtu) to represent the cost of fuel input in biomass applications, including production of heat and electrical generation. For the evaluation of biomass electricity generation, we converted these estimates to the standard mills/kWh to estimate the COE when it was appropriate to consider it as equivalent to electricity generation.32
Biomass costs for electricity generation as a whole parallel more closely those of conventional fossil fuels because this is the only renewable technology with fuel costs. A large portion of delivered costs stems from the transportation of biomass resources for combustion or fuel production.33 The capital costs of electricity generation from biomass are similar to those of fossil fuel generators. The other renewable technologies reviewed have high initial capital costs and no fuel costs.
Figure 10 shows that projections of biomass COE have fallen over time, and expectations have been met or exceeded. Currently, biomass electricity generation costs are slightly higher than wind and geothermal, at about 70 mills/kWh. However, biomass is the largest provider of renewable energy due mainly to its availability 24 hours a day and its ability to co-fire with traditional fossil fuels.
To provide an estimate of projections for conventional technologies, we relied on a recent EIA document that evaluates forecasts over the last two decades.34 The EIA evaluation begins with forecasts made in the 1982 Annual Energy Outlook for all electricity generation. This included nonhydroelectric renewable technologies, which made up a very small part of total generation (at most 0.3 percent in 1982). It also included hydroelectric (14 percent), nuclear (13 percent), and fossil-fired power production (73 percent).35
Electricity sales increased by about 2.7 percent a year or about 80 percent overall from 1975 to 1997. Figure 11 indicates that from 1982 until now, government forecasts in the Annual Energy Outlook of 2-3 percent a year annual growth have been largely accurate. The succession of forecasts displayed in the Figure appear mutually consistent and predict well the actual sales.36
In contrast to the agency’s relatively accurate sales forecast, EIA projections in the 1980s significantly overestimated electricity costs in the future. For example, the 1982 Annual Energy Outlook forecast real electricity prices to rise by somewhat more than 8 percent during 1980-90; in fact, real prices declined by 10 percent. By the mid-1980s, the softening of world oil prices began to be reflected in EIA’s updated forecasts, so that its 1984 Annual Energy Outlook (which serves as the basis for the observations that follow) foresaw a real price decline during 1983-95 of around 5 percent. The actual decline over the period was more than 25 percent.
It is instructive to dissect the components of that 12-year price change. The steady and increasingly sharp fall in world oil prices beginning in the early 1980s was of prime importance to the economics of electric power production, as it was to other sectors of the economy. Thus the entire difference between the projected and actual energy price in 1995 arises from the degree to which the fuel component of the price fell short of the forecast. During 1983-95, fuel costs were projected to rise 21 percent; they actually fell nearly 65 percent. Indeed, the drop in fuel prices exaggerates the overall decline in electricity prices, since operation-and-maintenance costs exceeded the forecast estimate, while the other major price component — capital charges — just about equaled the projected number. Table 3 summarizes the relevant data.
Table 3 also provides a rough estimate of the breakdown in real delivered electricity price between costs incurred at the electric generating plant (so-called busbar costs) and those accounted for by transmission/distribution (T/D) costs.37 The former is of particular interest here, since it provides the more appropriate basis of comparison with renewable technologies, whose cost is measured at the point of electricity generation rather than delivery. In contrast to the 21-percent gap between projected and realized delivered electricity prices, Table 3 indicates that the actual outcome in 1995 with respect to real generation costs was about 44 percent below what had been forecast from a 1983 base. This larger difference is not surprising since the fuel component (whose costs are highlighted in Table 3) applies exclusively to the generation stage. In total, we estimate that about 51 percent of the cost of retail electricity is attributable to generation.38
To develop an estimate of cost projections for generation from all sources, which are predominantly nonrenewable, we relied on estimates of retail prices attributable to generation and aggregated these estimates into groups of four years each, over the period examined in EIA’s 1998 Annual Energy Outlook Forecast Evaluation. Figure 12 indicates that the familiar fan diagram emerges especially clearly when viewing the projections compared with actual value for the generation portion of retail price projections.
VIEWING PROJECTIONS BY AUTHOR AFFILIATION Generation/Market Penetration
To the extent that non-government organizations (NGOs) have historically served as advocates for renewable technologies, these groups could presumably be expected to have been most optimistic with respect to the potential for renewables in general and market penetration in particular. We did not find this to be the case, however.
For wind, geothermal, and biomass, NGOs were the most conservative in their projections of capacity and generation, and in each case they were below levels actually realized. Projections by NGOs were relatively conservative with respect to generation from photovoltaics as well, with projections below realized levels. Only in the case of solar thermal technology were NGOs relatively high in their projections, although not the highest. (All groups overstated the market penetration of solar thermal to date.)
Studies sponsored or conducted by government (more than half of our sample) and independent research organizations (which include the national laboratories) have tended toward the highest projections of production and capacity. For all technologies except biomass, these studies have issued projections that erred on the high side when compared with actual installed capacity and generation. Studies associated with research organizations were almost accurate with respect to geothermal. These organizations also offered the highest projections for biomass, which turned out to be quite accurate.
Studies by EPRI usually, though not always, offered the most conservative projections across all technologies. These projections were on the low side for solar technologies and biomass compared with actual outcomes, and fairly accurate for geothermal.
Overall, there is little systematic difference among the spon-sors and authors of the studies with respect to projections of costs.
For wind, EPRI’s projections have been lower than others, and consequently the most accurate.
For solar photovoltaics, NGOs were relatively optimistic regarding trends in cost of electricity compared with those offered by other groups, and they are the only ones to have erred on the optimistic (low-cost) side. Independent research organizations also erred on the optimistic side with respect to capital costs for solar photovoltaics.
All groups that conducted studies offered similar estimates for solar thermal, and these proved to be accurate or slightly pessimistic (high-cost) compared with actual outcomes. The different types of studies converged in their projections for 1985 and beyond for the costs of wind and solar technologies.
In the case of geothermal, NGO projections of cost were the lowest but nonetheless the closest to actual costs. Research groups have projected the highest costs and they are the only group to project increasing costs.
In the case of biomass, relatively few studies were included. Government estimates of COE were high compared with what has been realized.
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