State RPS Policies Will Create 250% Increase In Renewable Energy
State renewable portfolio standards (RPS) will be the most criticaldriver determining the pace of U.S. renewables growth, according to a new IHS EmergingEnergy Research market study.
IHS estimates thatcumulative renewables demand across all states with binding RPS policies will grow from an expected 137 TWh in 2010 to 479 TWh by 2025 – anincrease of approximately 250% by 2025.
As of June, mandatory RPS policies, which require states to procure a percentage of generationfrom renewable energy, have been passed in 31 U.S. states and theDistrict of Columbia, with six additional states approving conditionalor non-mandatory renewables goals.
While utilities in a fewstates – led by Washington, Maine, Colorado and New Hampshire – arealready well on their way toward meeting their 2015 RPS targets, themajority of states will require rapid renewables growth if they are tomeet near-term objectives, the report notes.
The U.S. renewablesmarket has experienced explosive growth since 2005, expanding from atotal installed base of 30 GW to over 60 GW at the end of 2009. "Withincreasing challenges – including low power pricing and uncertainfederal policies – escalating RPS demand will define the timing andlocation of renewables growth across the U.S. over the next few years,"says IHS Renewable Power Research Director Alex Klein.
RPSpolicies are estimated to require more than 1,000 investor-ownedutilities, load-serving entities and competitive retail suppliers toprocure renewable power over the next decade, according to the study.Beginning this year, significantly escalating RPS demand will creategradually intensifying compliance pressure across the U.S.
"Thenext five years will be especially critical as the industry faces itsfirst real test of a significant ramp-up in RPS demand," predicts Klein. "Before the industry can attempt to reach already lofty longer-termrenewable energy goals, utilities and regulators must prove in the nextfew years that they can reach initial compliance with the RPS targetscoming due in many U.S. states."
Utilities’ strategies arerapidly evolving in response to RPS, as they weigh compliance-drivenmandates in the broader context of their regional strategies,competitive positioning, and longer-term generation-mix objectives.Power purchase agreements will remain the predominant mechanism forutility RPS compliance, expected to account for approximately 70% oftotal renewable energy added to the U.S. supply mix over the next threeyears, according to the study.
Spurred on by long-term statemandates, utilities are increasingly moving toward development andownership of renewable energy assets in several key renewables markets,such as the Midwest, Northwest and California.
According to IHS,state RPS would be significantly strengthened if complemented by afederal renewable electricity standard or energy policy that addressestransmission bottlenecks and siting issues on federal lands, both ofwhich will be critical to sustaining renewables growth toward the middle of the next decade.
"The passage of a national RPS, currentlybeing considered in Congress, would substantially broaden renewablesgrowth compared with existing state RPS policies, with the potential for more transparent mechanisms for enforcement across the U.S.," Kleinsays.
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