By - Jim Vess

Renewable electricity could overtake coal-fired by 2040 according to federal forecasts

Energize Weekly, January 18, 2017

In the next two decades, the nation’s utility sector faces a transformation in which natural gas and renewable energy could become the dominant sources of electricity generation, according to projections from the federal Energy Information Administration (EIA).

Among renewable generation sources, both wind and solar generation will surpass hydropower, which has historically been the main form of renewable generation.

These forecasts are based on modeling in the EIA’s 2017 Annual Energy Outlook. The modeling covers a range of scenarios—high energy costs, low energy demand—but the so-called reference case is based on the most likely conditions between 2017 and 2040.

In the reference case, natural gas generation grows about 20 percent, providing roughly 1,800 billion kilowatt-hours in 2040. Renewable generation more than doubles over the same period to about 1,400 billion kilowatt-hours, making it the second largest source of electricity.

“On a percentage basis, renewable energy grows the fastest because capital costs fall with increased penetration, and because current state and federal policies encourage its use,” the report said.

Coal-fired generation and nuclear both continue to decrease. “The decline in nuclear generation accelerates beyond 2040 as a significant share of existing plants is assumed to be retired at age 60,” according to the EIA Outlook.

Some of the projections, however, are based on the Obama administration’s Clean Power Plan (CPP), which aimed to reduce carbon dioxide emissions by closing some coal-fired plants. The incoming Trump administration has already criticized the CPP.

“As demand grows modestly, the primary driver for new capacity in the reference case is the retirement of older, less efficient fossil fuel units—largely spurred by the Clean Power Plan (CPP)—and the near-term availability of renewable energy tax credits,” the forecast says. “Even if the CPP is not implemented, low natural gas prices and the tax credits result in natural gas and renewables as the primary sources of new generation capacity. The future generation mix is sensitive to the price of natural gas and the growth in electricity demand.”

Still, if the CPP is scrapped, coal could remain the second largest source of electricity through 2040 followed closely by renewable sources, according to the EIA modeling.

In the short term, rebound in natural gas prices from their 20-year lows which occurred in 2016, will boost coal’s share of generation over natural gas through 2020, the report said.

Demand for electricity will increase over the 23-year modeling period, but only slowly. “In recent history, the growth in electricity demand has slowed as older equipment was replaced with newer, more efficient stock, as efficiency standards were implemented and technology change occurred, particularly in lighting and other appliances,” the study said. “The demographic and economic factors driving this trend included slowing population growth and a shifting economy toward less energy-intensive industries.”

Growth in electricity demand begins to rise slowly in later years as demand for electric services is only partially offset by regulatory compliance and efficiency gains in electricity-using equipment.

The Outlook identified four signification changes in the utility industry where more work needs to be done to improve the models. These are:

  • Energy storage: Improve the representation of energy storage to accommodate multiple grid services including spinning reserve and renewables integration.
  • Renewable generation: Include improved representation of intermittent-generation resources such as wind and solar. Examine the potential for transmission enhancements to mitigate regional effects of high levels of wind and solar generation. Develop higher resolution time-of-day and seasonal value and operational impact of wind.
  • Utility rate structure: Estimate the impact of high levels of distributed photovoltaic generation on utility rate structure.
  • Generator retirement: Assess the vintage of the electric generation fleet and potential for future retirements and life extension for all technologies, including existing nuclear, coal, natural gas and renewable fleets.

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