Introduction

Restructuring of the U.S. electric power industry has refocused attention on renewable energy and the policies that affect it. Renewable energy sources include water, wind, solar, geothermal, and some combustible materials, such as landfill gas, municipal solid waste (MSW), and other forms of biomass. Public policies favoring renewable energy are nothing new. Policies including tax and financial incentives and guaranteed purchase power contracts, among others, have supported the development of renewable energy in the past. Such policies have sought to develop a sustainable energy future, reduce dependence on foreign oil, and reduce the environmental impacts of fossil-fueled electricity generation. These ends were deemed to be more important than the fact that alternative fuels cost more than fossil fuel sources of energy.

The advent of competition in electricity markets necessitates a reevaluation of renewable energy policies. Concerns about the use of renewable energy sources in a competitive environment can be outlined as follows. Competition in the electric power industry will encourage utilities to become more efficient and reduce costs in order to lower electricity prices. There will be a premium on short-term cost minimization. In this environment, renewable energy sources will be challenged to continue to penetrate electric power markets because they are generally higher-cost options for producing electricity. Proponents of renewable energy thus fear that renewables may be an inadvertent casualty in the transition to a competitive market. This chapter reviews the reasons for the historical interest in renewable electric power in the United States; the Federal and State plans to support renewables; the various mechanisms being implemented or discussed to provide that support; and issues specific to individual renewable energy resources and technologies.

Overview

The electric power industry and its regulators were unprepared for the social, political, and economic upheavals that followed the oil embargo of 1973. The tripling of oil prices precipitated a need for numerous rate increases by electric utilities because oil was being used to fuel many power plants. In the wake of the oil embargo, the goal of national energy policy was to foster an adequate supply of energy at reasonable costs. As a result, interest in renewable energy rose sharply during the 1970s. A strategy to achieve that goal was to promote a balanced and mixed energy resource system. The development of renewable energy—which reduces dependence on fossil fuels, does not need to be imported, and generally produces fewer and less toxic pollutants than fossil fuels—became a national priority.

The oil embargo of 1973 was a catalyst for the proposal and adoption of the National Energy Act of 1978, a compendium of statutes aimed at restructuring the U.S. energy sector. One objective of the Act was to reduce the Nation's dependence on foreign oil and its vulnerability to interruptions in oil supply through the development of renewable and alternative energy sources.

The most significant statute in the National Energy Act for the development of commercial markets for renewable energy was passed into law as the Public Utility Regulatory Policies Act of 1978 (PURPA). Among other things, PURPA encouraged the development of "nonutility" cogeneration and small-scale renewable-fueled electric power plants designated as "qualifying facilities."¹⁶⁰ Under PURPA, utilities were required to purchase electricity from certain qualifying facilities at the utilities' avoided costs, that is, the cost to the utility if it had generated or otherwise purchased the power. Some avoided cost purchase contracts, particularly in California, were very favorable to renewable technologies.

A second major factor influencing the development of renewables was State policies promoting renewable energy. California, in particular, promoted renewable energy strongly in the 1980s with renewable energy tax credits. By the late 1980s, however, California's renewable tax credits for wind energy had ended, and competition and pricing policies had begun to evolve in the electric utility industry. "Competitive bidding" became the predominant approach to defining avoided costs. By the end of the decade, with declining natural gas prices setting the value of avoided costs, renewable facilities had difficulty competing in electricity markets on the basis of price alone.

To spur renewable energy development, the Federal Government provided several tax incentives. By 1982, most renewable energy projects were eligible for a 10-percent investment tax credit, a 15-percent business renewable energy investment tax credit, a 40-percent residential tax credit for renewables, and a 5-year accelerated depreciation schedule. Taking advantage of these incentive packages, private industry responded by pioneering new renewable energy technologies and applications. In terms of Federal research and development budget appropriations, funding for renewables increased dramatically from fiscal year (FY) 1974 through FY 1979, stabilized for 2 years, dropped precipitously in FY 1982, then decreased further each year until rebounding in FY 1991. Funding increased to $391 million in FY 1995 before dropping to $268 million in FY 1996 and $244 million in FY1997. The appropriation for FY 1998 is $272 million.¹⁶¹ This pattern of inconsistent funding, as well as the on-again, off-again availability of some incentives, has created an uncertain investment environment for renewables.

The Renewable Electricity Marketplace

Electric utility and nonutility power producers generated 446 billion kilowatthours in 1997, 13 percent of their total generation,¹⁶² from renewable energy sources (Table 11). Including net imports, total available electricity from renewable resources was 467 billion kilowatthours.

Water from conventional hydroelectric power plants¹⁶³ is the major renewable energy source for electricity production in the United States. Conventional hydroelectric plants produced 360 billion kilowatthours of electricity (including exports), about 10 percent of total U.S. generation (81 percent of renewable generation), in 1997. Other renewables accounted for an additional 86 billion kilowatthours, or 2 percent of total U.S. electricity generation for the year. Excluding conventional hydroelectricity, biomass is the largest renewable source of electricity (75 percent), followed by geothermal (19 percent). Wind and solar account for the remainder (6 percent).

Of the 86 billion kilowatthours domestically generated from nonhydroelectric renewable energy sources,¹⁶⁴ nonutility power producers accounted for 91 percent and electric utilities 9 percent. Electric utilities have historically devoted few resources to nonhydroelectric renewable energy sources. This is because, in general, these facilities are small in size and more expensive per unit of output than large central generating stations. Federal and State incentives have, however, resulted in the development of some nonhydroelectric renewable power plants by electric utilities. In California, with State incentives and favorable climate conditions, electric utilities have developed geothermal, solar, and wind facilities.

Manufacturing processes and legislative incentives favor the production of electricity from renewable sources by nonutility power producers. A nonutility power producer includes a corporation, person, agency, authority, or other legal entity that owns generating capacity, but, unlike electric utilities, is without a franchised service area or an obligation to serve retail customers. Nonutility power producers include qualifying facilities (cogenerators and small power producers) under PURPA, exempt wholesale generators¹⁶⁵ under the Energy Policy Act of 1992 (EPACT), other commercial and industrial establishments that may generate electric power for their own use and buy backup or sell excess power to electric utilities, and independent power producers built solely to supply and sell power to electric utilities.

Table 11. Electricity Generation from Renewable Energy by Energy Source, 1993-1997
(Million Kilowatthours)

The major technology used in nonutility generation is cogeneration—the combined production of electric power and another form of useful energy (heat or steam). Many nonutility power producers use waste energy streams (principally heat) to produce electricity, and some manufacturing processes may produce renewable waste (e.g., sawdust) that can be burned to produce energy.

The distinction between the utility and nonutility sectors assumes additional significance under some restructuring proposals, notably in California. Under many plans, a firm must generate some high percentage (usually over 50) of its electricity from renewable sources to be classified as a "green power" provider. Such requirements will tend to limit utility ownership of renewable generating facilities and push future nonhydroelectric renewable development into the nonutility sector.

Most renewable energy systems (except perhaps for biomass) are not constrained by the same types of fuel supply infrastructure considerations as fossil-fueled power generating units. The constraints that renewable power systems face are related to geographic availability factors associated with particular wind, biomass, geothermal, and hydroelectric resources. To a great extent, renewable generating facilities are very region- and site-specific, which, depending on the circumstances, can be either a drawback or a significant advantage. Until recently, most nonutility renewable energy power generators and other nonutility generators have sold their power directly to local utilities, or used it on site, avoiding the need for nationwide transmission access. With deregulation opening access to electricity transmission, transmission pricing can affect the development of renewable power generating facilities.

Utility Generation

Electric utilities generated 338 billion kilowatthours from renewable resources in 1996 and 349 billion kilowatthours from renewable resources in 1997 (Table 11). Nearly 98 percent of utility generation came from conventional hydroelectric facilities in both 1996 and 1997. Access to water power by utilities in Washington made that State the leading producer of renewable energy, accounting for 29 percent of all renewable electricity produced in 1996 (Table 12).¹⁶⁶ Washington also leads the Nation in utility power produced from wood and wood waste. Electric utilities in Illinois, Connecticut, and Minnesota generated, respectively, 87 percent, 45 percent, and 31 percent of their renewable- based electricity from municipal solid waste and landfill gas. Virtually all utility geothermal energy comes from California.

In 1996, 14 percent of utility renewable generation nationwide occurred in California. (California's share of nonutility renewable electricity was even larger—over 23 percent (Table 13).) State policies promoting renewable energy have also influenced the development of renewables. California, for example, promoted renewable energy strongly in the 1980's with renewable tax credits. The combined effect of resource availability and energy policy makes California the second-largest producer of renewable electricity generation.¹⁶⁷

Utilities in Oregon, which also has sizable water power resources, produced the third-largest amount of electricity from renewables—13 percent. Besides New York at 8 percent and Montana at 4.1 percent, no other State contributed more than 4 percent of total utility renewable generation.

Nonutility Production

Nonutility generators produced almost 86 billion kilowatthours of electricity in 1995 and 89 billion kilowatthours in 1996 (Table 13). Almost 17 billion kilowatthours (19 percent) of electricity was produced from conventional hydroelectric facilities in both 1995 and 1996. More than 42 percent of nonutility renewable electricity generation is produced from wood and wood waste.

Nonutilities in California produce by far the largest share of electricity, 23 percent. Nonutility renewable generation (outside California) is more evenly spread than is utility renewable generation. One reason is that nonutility plants are usually smaller than utility plants, having been built in many instances to service a single facility (e.g., pulp and paper manufacturing plants). Thus, many more resource locations—particularly for biomass and hydropower—are available. After California, the States with the most nonutility electricity generation from renewables in 1996 were Florida, Maine, Alabama, New York and Louisiana.

Table 12. Renewable Electric Utility Net Generation by State, 1996 (Million Kilowatthours)

Table 13. Nonutility Gross Generation from Renewables by State, 1996 (Million Kilowatthours)

Federal Approaches to Supporting Renewables

Various electric power restructuring bills have been proposed in the U.S. Congress. All the proposals contain sections designed to promote the development of renewable energy. The Clinton Administration has also recently presented a proposal, the "Comprehensive Electricity Competition Plan," as a blueprint for electric power restructuring. This plan and four legislative proposals are summarized below. The legislative proposals discussed were drafted prior to the Administration's plan and were chosen for discussion because they include provisions which have attracted considerable interest.

Administration's Comprehensive Electricity Competition Plan

The Administration's "Comprehensive Electricity Competition Plan" was released in March 1998. The components of the plan were designed to work together to provide the economic benefits of competition in a manner that is fair to all consumers and to enhance the environmental performance of the electric power industry. The plan has five basic objectives: (1) to encourage States to implement retail competition (i.e., end users may choose their electricity provider); (2) to protect consumers by facilitating competitive markets; (3) to assure access to and reliability of the transmission system; (4) to promote and preserve public benefits; and (5) to amend existing Federal statutes to clarify Federal and State authority.

The Administration's plan, with the objective of promoting and preserving public benefits, proposes policy mechanisms, such as a renewable portfolio standard, public benefit funding, and net metering, to promote the development of renewables. The terms renewable portfolio standard, public benefit fund, and net metering are defined and discussed below.

Renewable Portfolio Standard

A renewable portfolio standard (RPS) is a market-based strategy to ensure that renewable energy constitutes a certain percentage of total energy generation or consumption. An RPS could require electricity generators or sellers to cover a percentage of their electricity generation or sales, respectively, with generation from renewable technologies. It guarantees that a minimum percentage of generation comes from renewable sources. Under the Administration's proposal, the initial RPS requirement, based on electricity sales, would be set close to the existing ratio of renewable generation to total retail electricity sales, with an intermediate increase in 2005, followed by an increase to 5.5 percent in 2010. (In 1997, nonhydroelectric renewable generation represented 2 percent of total generation.) Retail sellers could meet the RPS requirement either by generating sufficient renewable electricity to meet the ratio, or by purchasing tradeable renewable electricity credits that would be created and tracked. The RPS would employ market prices through credit trading and spread the cost of supporting renewable generation more evenly across the retail electricity market than does PURPA's "must buy" provision (Section 210), which would be repealed under the Administration's plan. The RPS could be subject to a price cap.¹⁶⁸

Public Benefit Fund

The Administration's plan supports the creation of a $3 billion Public Benefit Fund (PBF) to provide matching funds to States for low-income assistance, energy efficiency programs, consumer education, and the development and demonstration of energy technologies, particularly renewables. The PBF would be a 15-year program, funded through a generation or transmission interconnection fee on all electricity.¹⁶⁹ Since transmission will be regulated, the charge should be nonbypassable to ensure that all customers pay the charge and the charge is competitively neutral. The charge can be based on energy, demand, or a combination of both. In the Administration's plan, the charge would be capped at 0.1 cent (1 mill) per kilowatthour. States would have the option to seek funds and allocate the funds among public purposes. The States would compete for the funds on the basis of cost-effective proposals.

Net Metering

Net metering refers to the concept that a facility is permitted to sell any excess power it generates over its load requirement back to the electrical grid to offset consumption. (A more detailed discussion of net metering is provided later in this chapter.) Under the Administration's plan, all consumers would be eligible for net metering, and all distribution service providers would be required to assure the availability of interconnection. This provision would apply only to very small (up to 20 kilowatts) renewable energy projects and would be subject to a price cap determined at the State level.

Finally, in competitive markets, many different suppliers will offer a diverse menu of energy products and services with different pricing and billing plans. Under the Administration's proposal, consumers will have the option of choosing suppliers on the basis of their generation mix, including paying a premium for "green power" (renewable generation). To ensure consumers that they are purchasing green power, the Secretary of Energy would be authorized to implement a rulemaking to require all electricity suppliers to disclose reliable and easy-to-read information on prices, generation sources, and other information to enable consumers to make informed choices among various offers.

Senate Bill 237 (The Bumpers Proposal)

Section 110 of Title One of Senate Bill 237 has a requirement for a certain amount of renewable energy generation. Starting in 2003, 5 percent of total retail electricity sold must come from a renewable energy source (including partial credit for hydroelectricity). The amount increases to 9 percent in 2008 and 12 percent in 2013. Thereafter, the requirement remains constant until 2019, when it ends. Retail electric suppliers may satisfy the requirement by earning renewable energy credits under the National Renewable Energy Trading Program, depending on the type of renewable energy source used. Credits will be issued by the Federal Energy Regulatory Commission (FERC) to any facility using renewable resources for generation or for any power purchased by the facility from a generator using renewables. One half of one credit can be earned by any large hydroelectric facility that generates and then sells one unit of energy. One credit can be earned by any facility that generates and sells electricity from a renewable energy source other than hydro at a facility built before the enactment of the Act. Two credits can be earned by any facility built after the enactment of the Act that generates and sells electricity from a renewable energy source other than hydroelectric.

Senate Bill 687 (The Jeffords Proposal)

Section 5 of Senate Bill 687 instructs the Secretary of Energy to establish a National Electric System Public Benefits Board to fund programs related to renewable energy sources, universal electric service, affordable electric service, energy conservation or efficiency, or research and development in any of these areas. The money for the National Electric System Public Benefits Fund will be financed from transmission wire charges imposed by FERC and will be distributed to the States by the Board. States must provide matching funds. The Board will recommend eligibility criteria for disbursements from the Fund and will determine the amount needed every year for the fund. FERC will impose a nonbypassable, competitively neutral wires charge paid directly to the fund by the operator of the wire. The charge will be applied to all electricity carried through the wire, measured from the busbar at a generation facility, which has an impact on interstate commerce.

Section 6 of the bill provides a renewable energy portfolio standard imposed on any nonhydroelectric facility that generates electricity for sale. Starting in the year 2000, 2.5 percent of total electricity generated by all (nonhydropower) electricity generators must be generated from renewables. Renewable energy sources include wind, organic waste (excluding incinerated municipal solid waste), biomass, geothermal, solar thermal, and photovoltaics. The required renewables portfolio schedule after the year 2000 increases by approximately 1 percent a year until the year 2020 up to a total of 20 percent, which is the target level for beyond that time period. The bill also provides for renewable energy credits, to be issued by the Federal Energy Regulatory Commission (FERC) beginning in 2001. One credit will be given for each megawatthour of electricity sold by a facility in the preceding calendar year that was generated from a renewable energy source. Credits can be traded and used in lieu of generation to meet the generation requirement of the renewables portfolio standard.

House of Representatives Bill 655 (The Schaefer Proposal)

House of Representatives Bill 655 calls for a minimum renewable generation requirement (Section 113) by December 31, 2000. It directs the FERC to establish a program to issue renewable energy credits to electricity generators, providing for their sale and exchange. It would require each generator (excluding hydroelectric facilities) selling electric energy to submit such credits to FERC in an amount equal to the required annual percentage of the total renewable electric energy it generated in the preceding year. PURPA would be amended so that it would no longer apply to any electric utility whose customers are able to purchase retail services from any offeror on a competitively neutral and nondiscriminatory basis.

House of Representatives Bill 1359 (The DeFazio Proposal)

The intent of House of Representatives Bill 1359 is to amend PURPA to establish a means to support programs for energy efficiency, renewable energy, and universal and affordable service for electric customers. It would establish a National Electric System Public Benefits Fund, to be administered by the National Electric System Public Benefits Board, which would provide matching funds to States for the support of eligible public purpose programs. This program would not supersede other programs that support renewable energy.

State Approaches to Supporting Renewables

Much of the regulatory initiative to bring competition to the electricity industry is occurring at the State level. As at the Federal level, most States have formulated policy measures to preserve or promote renewables in a restructured electric power market. The States have been considering a number of regulatory mechanisms to promote renewable energy development, including a system benefits charge (SBC) or "wires charge," RPS, net metering, and green pricing (voluntary).

The SBC would be a fee that would be paid by users of distribution lines, either generators or consumers. It would be included in the cost of electricity to all consumers. Revenues from the charge could be pooled for use in a number of ways to fund the development of selected renewable energy projects.

By design, both the SBC and the RPS would be competitively neutral with respect to fuels and technology, and would put in place a minimum public obligation to support the development of renewable energy. Used singly or in combination, they will have differential effects on renewable energy development. The SBC provides for a regulatory agency with the latitude to promote specific renewable technologies or projects.

Given that the SBC is collected on a regular basis from wires usage, it would provide consistent support to renewables. By providing this consistent support, it would also have the effect of making the cost of capital lower for this type of project development. The biggest drawback of the SBC is the administrative cost and difficulty of decisionmaking. The RPS, on the other hand, does not have these administrative obstacles because the market is used to determine which projects are developed. The renewable portfolio standard would encourage the lowest cost, highest efficiency projects to be developed. There is, however, a risk of neglecting the development of those renewable technologies that have a longer development horizon. As of February 9, 1998, 6 States had enacted RPS provisions, 5 States had enacted SBC provisions, and 26 States had some form of green pricing program legislation (discussed below).

Net Metering

As mentioned above, net metering is an arrangement that permits users generating power to sell any electricity in excess of requirements back to the grid to offset consumption.¹⁷⁰ How excess energy (if any) from facilities under net metering is treated, and what rates are paid, are what differentiate State net metering policies. Some State initiatives require the utility to pay retail rates instead of avoided cost rates for the excess energy. States may apply certain capacity restrictions and, in some cases, fuel restrictions on facilities that qualify for net metering.

Most net metering programs are available to customer-owned small generating facilities only, and some programs further restrict the eligibility to renewable energy technologies. Net metering can increase the economic value of small renewable energy technologies for customers by allowing them to use the grid to bank their energy, producing electricity at one time and consuming it at another. This form of energy exchange is especially useful for such renewable energy technologies as wind turbines and photovoltaics, which transmit electricity to the grid intermittently (when the wind is blowing or the sun is shining) and, at other times, are consumers of electricity from the grid.

Green Pricing/Marketing

Green pricing or green marketing is an approach States have used to maintain or increase demand for renewable electricity. In green marketing programs, electricity suppliers offer consumers electricity produced from environmentally preferred resources consisting largely of renewable energy. Consumers who voluntarily choose to purchase their electricity under a green marketing program pay a premium above their normal electricity bills. This premium is then applied toward the additional costs incurred by electricity suppliers to develop and maintain a renewable power project that might otherwise not be cost-effective.

Initially,¹⁷¹ the goal of green marketing was to provide customer-driven mechanisms for enabling the development of additional renewable energy power projects. Although the concept of green marketing originated in a regulated environment, a number of utilities and nonutilities are looking at green pricing programs as a way to differentiate their product in a more competitive market. Market research conducted to date suggests that there is a willingness among consumers to pay more for power from renewable energy up to a certain point.¹⁷² Assuming that this remains true in the future, regardless of what shape the restructured electric industry takes, green marketing programs are likely to continue evolving as viable competitive strategies that electricity suppliers can use to aggregate customer groups, reach specific market segments, and retain existing customers.

As of March 1998, there were 17 State level green pricing programs in operation, 5 in active development, 7 that were pending formulation based on utility market research, and 4 in the planning stage. A current list of green pricing programs can be found at http://www.eren.doe.gov/greenpower/summary.html. This web site is maintained and regularly updated by the Department of Energy's Office of Energy Efficiency and Renewable Energy.

The case of green marketing is illustrative of the types of issues associated with this strategy. With hundreds of nonutility "electric service providers" planning to offer electricity in the California market, fierce competition will likely produce a variety of claims about the electricity being offered. In order for customers to make informed choices, they must understand what really distinguishes one supplier from another. A criterion that some customers say they will use is the extent to which generation is environmentally acceptable. For most such customers, this means renewable sources.

Unfortunately, pilot programs in New England illuminated the potential for "green fraud," when some suppliers allegedly offered their customers electricity that they labeled as green but that in fact was no different from any other electricity in the New England Pool. To prevent such abuses in the future, legislatures, regulators, and private organizations have proposed measures to give electricity customers valid information on the renewable content of their electricity. To provide customers data on their suppliers, California's Assembly Bill (AB) 1305 legislation, enacted in 1997, requires all electric service providers annually to state the source of their electricity.¹⁷³ Categories include coal, large hydroelectric (greater than 30 megawatts), natural gas, nuclear, other, and eligible renewables (biomass and waste, geothermal, small hydroelectric, solar, and wind). In Illinois, the new Environmental Disclosure Law¹⁷⁴ requires every "electric utility and alternative retail electric supplier" to provide customers quarterly the known sources of electricity by fuel type, with corresponding emissions information.

To provide further assistance to customers in evaluating how "green" their electricity is, the non-profit Center for Resource Solutions in San Francisco will certify with its "Green-e Brand" that approved electric service providers:¹⁷⁵

• Obtain at least 50 percent of total energy from "eligible renewable resource facilities" through performance obligation contracts
• Utilize fossil resources in the nonrenewable component of the electricity product that have equal or lower air emissions (for SO_x, NO_x, and CO₂) than the fossil portion of an equal amount of system power (from California's Power Exchange). Generate air emissions from waste renewable fuels, to the extent they are utilized, at a rate as low as or lower than would be generated by alternative waste disposal methods
• Refrain from using nuclear power beyond that contained in system power purchased for the eligible electricity product's portfolio.

The success of green marketing programs is related to the extent that consumers would choose to pay higher rates for renewable-based electricity.¹⁷⁶ Green marketing amounts to product differentiation, with the result that the demand for renewable-based electricity would have its own supply and demand functions. Absent system benefits charges (SBC) and renewable portfolio standards (RPS) in a competitive market, renewable electricity product differentiation is even more critical because it (ostensibly) increases the demand for renewable energy. However, some believe that in a competitive marketplace, both an RPS or SBC and green marketing are necessary and serve to complement each other.¹⁷⁷

Current Economics

Renewable technologies are generally characterized by relatively high capital costs and low operation and maintenance costs. These characteristics make them attractive in the long run, but less so in a competitive setting where the premium is on near-term cost minimization. Renewable generating technologies continue to make advances, thereby increasing their efficiency and lowering cost; however, outside of some niche market applications, they still are not economically competitive with conventional sources of power.

One of the ways in which capital costs decrease is through "learning by doing." That is, as the number of units of a product are built, manufacturers learn more efficient production techniques and costs thereby decline. In the case of renewables, this can occur whether a company builds for the domestic market or for export. With American firms competing for foreign markets, costs are likely to decline further domestically. Capital costs and operations and maintenance (O&M) costs also decline through "economies of scale," that is, up to a certain (optimal) plant or project size.

Levelized Costs of Renewable Electric Technologies

When determining the fuel source to use in constructing a new generating plant, "levelized" cost is usually used to determine which technology and energy source will be least cost. Levelized costing considers all capital, fuel, and operating and maintenance costs. In levelized costing, capital costs are amortized over the expected power output for the life of the plant.¹⁷⁸

EIA estimates the levelized costs of all generating technologies using its National Energy Modeling System, (NEMS). Tables 14 through 17 show decision year 2000 cost and performance information, based on NEMS, for fossil and renewable technologies for the major regions of the country best suited for renewables.

Although geothermal energy appears to be the least costly of the technologies compared in the California-Southern Nevada power area (CNV) (Table 14), there is very limited capacity available for development at 37.6 mills per kilowatthour. Wind power offers a 10-percent cost advantage over natural gas combustion turbine technology. However, wind technology is intermittent and therefore cannot be fully credited for firm capacity. The levelized cost of biomass power is about double that of wind and gas combustion turbines. The biomass power cost, however, does not include any credit for waste disposal costs that might be otherwise incurred.

In the Northwest (NWP) and the Southwest, except California (RA), the cost comparison is much the same, except that biomass is about one-fourth less expensive than in California.¹⁷⁹ In most of Texas (ERCOT), however, natural gas combustion turbines are 10 mills per kilowatthour cheaper than the next cheapest technology, wind power. Biomass in eastern Texas produces power for approximately the same cost as in NWP and RA.

It is worth reiterating that site-specific conditions are critical to the economic feasibility of renewable electric generating plants. NEMS does not assess generating plant feasibility on a site-specific basis.

A number of state public utility commissions (including Rhode Island and Massachusetts) have also studied levelized/life-cycle costs of renewables.¹⁸⁰

Table 14. Cost and Performance Characteristics for Combustion Turbine and Renewable Generating Technologies, California-Southern Nevada (CNV)

Table 15. Cost and Performance Characteristics for Combustion Turbine and Renewable Generating Technologies, Southwest (RA)