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US Position in Renewable Energy Technologies

Wallace Tyner James and Lois Ackerman Professor Purdue University CASIC Conference April 1-2, 2011. US Position in Renewable Energy Technologies. Government Incentives.

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US Position in Renewable Energy Technologies

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  1. Wallace Tyner James and Lois Ackerman Professor Purdue University CASIC Conference April 1-2, 2011 US Position in Renewable Energy Technologies

  2. Government Incentives • Wind, solar, and biomass energy industries have been created through government incentives in the US and elsewhere in the world. • These technologies are economic without government support only in rare niche market circumstances.

  3. Solar Incentives • Solar receives several types of incentives from the federeal government: • Corporations get accelerated depreciation, grants, federal loans • Individuals get tax credits for home installation • Many states, especially California, also offer subsidies for solar.

  4. Solar Panel Production • China is the world’s leader in solar panels with at least half the world market. • US demand is growing rapidly, and some believe significant production growth is possible near term. • However, solar electricity is still quite a bit more expensive than other alternatives.

  5. Wind Incentives • Wind has some of the same as solar plus: • Investment tax credit • Production tax credit of 2.2 cents/KWH • 30 states now have a Renewable Portfolio Standard mandating a certain percentage by a given date.

  6. RPS Policies www.dsireusa.org / March 2011 ME: 30% x 2000 New RE: 10% x 2017 VT: (1) RE meets any increase in retail sales x 2012; (2) 20% RE & CHP x 2017 WA: 15% x 2020* MN: 25% x 2025 (Xcel: 30% x 2020) MT: 15% x 2015 NH: 23.8% x 2025 MA: 22.1% x 2020 New RE: 15% x 2020(+1% annually thereafter) MI: 10% + 1,100 MW x 2015* ND: 10% x 2015 OR: 25% x 2025(large utilities)* 5% - 10% x 2025 (smaller utilities) SD: 10% x 2015 WI: Varies by utility; 10% x 2015 statewide RI: 16% x 2020 NY: 29% x 2015 CT: 23% x 2020 NV: 25% x 2025* IA: 105 MW OH: 25% x 2025† PA: ~18% x 2021† CO: 30% by 2020(IOUs) 10% by 2020 (co-ops & large munis)* IL: 25% x 2025 WV: 25% x 2025*† NJ: 22.5% x 2021 CA: 33% x 2020 KS: 20% x 2020 UT: 20% by 2025* VA: 15% x 2025* MD: 20% x 2022 MO: 15% x 2021 DE: 25% x 2026* AZ: 15% x 2025 DC OK: 15% x 2015 NC: 12.5% x 2021(IOUs) 10% x 2018 (co-ops & munis) DC: 20% x 2020 NM: 20% x 2020(IOUs) 10% x 2020 (co-ops) PR: 20% x 2035 TX: 5,880 MW x 2015 HI: 40% x 2030 29 states + DC and PR have an RPS (7 states have goals) Renewable portfolio standard Minimum solar or customer-sited requirement * Renewable portfolio goal Extra credit for solar or customer-sited renewables † Solar water heating eligible Includes non-renewable alternative resources

  7. Wind Turbine Production • China is also the world leader in wind turbines with about half the world market. • However, turbine production and installation is growing rapidly in the US, with GE being the largest company. • Wind based electricity is much closer to being competitive with other alternatives.

  8. Biofuels Incentives • Ethanol has benefited from a federal subsidy since 1978. It is currently 45 cents/gal., and there is a $1.01/gal. subsidy for cellulosic biofuels. • There is now a federal Renewable Fuel Standard mandating 36 billion gallons (ethanol equivalent) by 2022.

  9. Renewable Fuel Standard

  10. Current Situation • Global leaders in biofuels are the US, EU, and Brazil. • In each case, the biofuels industry was launched with government subsidies, but more recently, governments in all three areas have gone to mandates instead.

  11. Biofuels Markets • Corn ethanol is near the 2015 mandate of 15 bil. gallons, so it may be viewed as a mature industry. • Cellulosic biofuels: • No commercial facilities in the US today, but several pilot and demonstration plants. • One small commercial facility in Europe and one in Canada • Generally technology is not commercial without government intervention.

  12. Biofuels Uncertainty • For cellulosic biofuels there are five major sources of uncertainty: • Future oil prices • Feedstock costs and availability by region • Conversion costs and efficiencies • Environmental impacts of biofuels production • Government policy • The combination of all of these makes analysis of biofuels impacts highly uncertain. • Add in the condition of the financial markets at present, and cellulosic biofuel investment becomes quite problematic.

  13. Feedstock Costs and Supply • For years, DOE used a cellulosic feedstock cost of $30/dry ton. • Today we expect that corn stover may be more like $75 and dedicated energy crops closer to $100 per dry ton. • The 2009 NAS study estimated feedstock availability might be 416-548 mil. tons, less than half the bil. ton study number. • That is still more than enough to meet the cellulosic RFS.

  14. Feedstock Costs and Supply • In all likelihood, cellulosic biomass will be contracted long term. • Dedicated energy crops produce 10 years or more. • We are still working on contracting mechanisms that meet the needs of both farmers and conversion facilities. • The basic issue is how to index and share risks associated with the production and delivery.

  15. Conversion Costs • Most estimates put the cost for biofuels from either biochemical or thermochemical conversion above $3/gal. gasoline equivalent. • Generally we need about $120 oil to make cellulosic biofuels competitive on a market basis with no government intervention.

  16. Environmental Impacts • The environmental impacts of cellulosic biofuels could be positive, as they create wildlife habitat and can reduce soil erosion. • Of late, there has been some concern about possible local loss of biodiversity. This could arise if a biofuel plant were surrounded up to fifty miles by mostly miscanthus or switchgrass.

  17. Government Policy • Blend wall • RFS enforcement • Subsidy mechanism • Reverse auctions • Key is to reduce uncertainty for private sector investors • There is considerable federal research $ going to feedstock development and conversion processes.

  18. Blend Wall • Currently we have E10 and E85 ethanol blends, but E85 is miniscule, so most ethanol is consumed as E10 or a lower blend. • At that blending %, our max consumption is 12-12.5 billion gallons – where we are now. If the blending % stays at 10, then we cannot exceed that level of ethanol from any source. • The recent EPA proposed change to 15% for 2001+ vehicles if implemented would shift the blend wall to 19 bil. gal..

  19. Impacts of Blending Wall on Cellulose • So long as corn and sugarcane ethanol are less expensive to produce than cellulosic ethanol, there is little room for cellulosic ethanol. Corn ethanol or imported sugarcane ethanol would supply the quantity needed up to the wall – even if the limit is increased to 15%. • For infrastructure and blend wall reasons, “drop-in” biofuels may be more attractive.

  20. Biofuels Potential • We have the resource base to meet the RFS and beyond for cellulosic biofuels. • The costs will be higher than previously estimated, but likely economic at $120 crude oil, or lower with subsidies. • The five uncertainties loom large in the near term as they inhibit private sector investment. • Reverse auction might get early plants built.

  21. Biofuel Conclusions • All the renewable fuel policy options are now on the table. • Alternatives to the fixed subsidy will be explored this year, such as variable subsidy, energy based subsidy and others. • Cellulose biofuels will not come on without strong incentives or a credible mandate. • The blend wall is the biggest barrier faced by the ethanol industry in the United States today. • US is investing in biofuels research, and that will need to continue.

  22. Thank you!Questions and Comments For more information: http://www.ces.purdue.edu/bioenergy http://www.agecon.purdue.edu/directory/details.asp?username=wtyner

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