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Although renewable energy resources have potential application elsewhere in the economy, e.g., ethanol as a transport fuel, for now, most interest in renewables centers on electricity generation.
Excluding hydropower, renewable energy makes up a tiny portion of the nation’s overall electricity
supply -- its roughly 2.3 percent share is dwarfed by fossil energy, nuclear power, and
hydroelectric dams. But given all the environmental and safety
caveats associated with more traditional energy sources, a lot of people are paying closer attention
to how renewables can play a larger role in the domestic energy mix.
Hydropower continues to overwhelm all other renewable resources in magnitude, but even
existing dams, much less newly built ones, are widely seen as unpopular because of their effect
on commercial and recreational fishing and on ecosystems as a whole. Virtually no one
expects any meaningful addition to the nation’s current hydropower capacity.
In the current marketplace, the dominant renewables are wind power, wood products
(used mainly as a fuel source in manufacturing), municipal solid waste, and geothermal resources.
Wind power has taken the lead in this race, with an 11 percent growth rate since
1990, pushing it from 4 percent of total renewables generation (excluding hydropower) in
1990 to 13 percent in 2003. This trend of relatively strong growth for wind power is likely to
continue.
A variety of public policies, such as federal production tax credits serve to encourage reliance on renewables in the electricity production. Another policy tool increasingly employed to expand the use of renewable resources in the electricity sector is the so-called "renewable portfolio standard" (RPS). This refers to a requirement that a minimum proportion of retail electric power deliveries by a state’s utilities are generated by fuels defined as renewable. The definition of what constitutes a renewable resource differs somewhat among the roughly 25 states that, toward the end of 2005, had legislated such RPS obligations. But, typically, wind, solar, biomass, municipal solid waste, and geothermal energy are the resources that meet the renewable criteria. For example, in strengthened RPS policy recently adopted, Texas law mandates that over the next 10 years, nearly 6,000 megawatts (MW) of new electric-generating capacity be produced from renewables, with that statewide total allocated proportionately among individual utilities. If reached, that goal would mean that around 5 percent of the state’s installed capacity would be based on renewables. Currently, around 1 percent of the state’s retail power deliveries are fueled by renewables, with wind by far the dominant resource.
A feature in a number of states with RPS obligations allows a trade in renewable production credits between utilities over-fulfilling their requirements and those under-complying. An additional and common safety valve -- a cap on the price of credits -- is designed to keep the price of electricity in check. This tradable credit scheme ensures a degree of market efficiency in RPS transactions. Although both research analysts and a majority of the U.S. Senate have urged the enactment, and underscored the benefits, of a nationwide RPS system, implementation of that broader goal has not been successful.
Since electric generation in the U.S. is fueled largely by coal (53 percent) and natural gas (13 percent), progressively supplanting some use of these fossil fuels -- especially coal, which is far more carbon-intensive than natural gas -- would represent one positive, albeit limited, step toward greenhouse gas mitigation. But elevated, and possibly rising, natural gas prices might prompt more “backing out” of gas than of coal in emerging power markets.
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