A study applying this new method found that renewable energy generation is economically viable in many parts of the United States largely due to rapidly declining technology costs.
The report released by NREL describes a geospatial analysis method used to estimate the economic potential of several renewable resources. Economic potential is a metric that quantifies the amount of economically viable renewable generation that is available at a specific location. Analysis to date includes photovoltaics (PV), wind, geothermal, biomass and hydropower resources.
“This report presents one method for estimating economic potential,” NREL Energy Analyst Philipp Beiter said. “The initial results are intended to explore this method as a screening metric for understanding the economic viability of renewable generation at a detailed geospatial resolution.”
Findings indicated that when the social cost of carbon is taken into account, renewable generation is economically viable in many parts of the country. At 2014 costs, the technologies combine for 820 TWh of estimated economic potential beyond the generation from renewable energy facilities already in operation. This additional potential is equivalent to nearly 20% of total U.S. annual electricity generation from all sources in 2014.
“Declining renewable technology costs are a significant driver for these results,” Beiter said. “Economic potential has more than tripled as a result of cost reductions already realized for renewable generation technologies between 2010 and 2014, particularly for wind and solar PV.”
The study also found that projected future renewable energy cost reductions yield further increases. According to the company, at 2020 projected costs, economic potential equals almost half of U.S. annual generation; in 2030, further cost reductions result in over 75% of generation, showing the significant impact that could be realized through continued research, development and deployment that drive down renewable energy costs.
This work is a follow-on analysis to NREL’s 2012 report that estimated the technical potential of U.S. renewable generation. While NREL believes technical potential is a measure of renewable potential based on system performance and land use constraints, the new report also considers renewable generation costs in comparison to prevailing electricity prices. This initial application of the method shows a large range of outcomes for the new metric, depending on specific factors considered. This report includes national level estimates of economic potential, along with maps and tables documenting state-level estimates for specific cases.
According to NREL, economic potential differs from other projections of renewable energy deployment in that it does not directly consider market dynamics, customer demand, exports from one location to another, or most policy drivers that may incentivize renewable energy generation. The methodology represents a first-level screening that identifies where renewable energy can be cost-competitive. As technology costs and other relevant factors change, economic potential may be a useful metric to assess the evolving role of renewable generation in the energy landscape.