Energy at the Crossroads
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PREPARED BY The Oregon Center for Non-Partisan Policy Studies A Project of OESTRA: Oregon Energy Systems, Technology, and Research Alliance ENERGY AT THE CROSSROADS New energy economy trends toward a paradigm for renewable energy and associated technologies in coming decades OCTOBER 2012 1 TABLE OF CONTENTS PURPOSE OF THE STUDY 5 ENERGY USE, TECHNOLOGY AND ECONOMIC DEVELOPMENT 6 OVERVIEW 6 A SHORT HISTORY OF ELECTRICITY GENERATION 8 TRENDS IN FUEL SOURCES, USES, AND COSTS 10 FUEL CONSUMPTION 10 SECTOR USES FOR ENERGY 13 FUEL CONSUMPTION FOR ELECTRICITY GENERATION 13 ELECTRICITY SECTOR FUEL COSTS 15 POWER PLANT COSTS 17 CURRENT User COST COMPARISONS FOR FUEL 18 FUEL COST COMPARISON FOR ELECTRIC ENERGY 18 CURRENT ELECTRICITY COSTS BY STATE 19 A NEW PARADIGM FOR ENERGY 21 BACKGROUND 21 CLIMATE CHANGE 22 SCARCITY, NATIONAL SECURITY 23 FOSSIL FUEL CONCERNS 24 PRIVATE SECTOR BEHAVIOR 25 RECENT INVESTMENT TRENDS IN RENEWABLE ENERGY 26 MOMENTUM FOR RENEWABLE ENERGY 26 RECENT DEVELOPMENTS 26 CORPORATE INVESTMENT EXAMPLES 28 VENTURE CAPITAL 28 2 ENERGY AT THE CROSSROADS: RENEWABLE ENERGY SECTOR DIFFICULTIES 30 GOVERNMENT INCENTIVES 31 EMPLOYMENT AND ECONOMIC IMPACTS OF RENEWABLE ENERGY INVESTMENTS 34 JOB GROWTH 34 SKILLS SHORTAGES 34 TRAINING RECOMMENDATIONS 35 APPENDIX - STATUS AND OUTLOOK FOR TRADITIONAL AND EMERGING ENERGY SOURCES 39 OVERVIEW 39 HYBRID POWER GENERATION 39 OUTLOOK FOR ONSHORE WIND 40 OUTLOOK FOR OFFSHORE WIND 41 OUTLOOK FOR SOLAR/PV 41 OUTLOOK FOR CONCENTRATED SOLAR (CSP) 44 OUTLOOK FOR GEOTHERMAL 45 OUTLOOK FOR HYDRO 47 OUTLOOK FOR ENERGY STORAGE 49 OUTLOOK FOR BIOMASS 52 OUTLOOK FOR BIOFUELS 55 OUTLOOK FOR WAVE ENERGY 61 OUTLOOK FOR SMART GRID 62 OUTLOOK FOR ENERGY EFFICIENCY AND CONSERVATION 65 OUTLOOK FOR MANAGEMENT EFFICIENCIES 66 AUTHORS & CONTRIBUTORS 69 AUTHORS 69 CONTRIBUTORS 70 BIBLIOGRAPHY 71 ENERGY AT THE CROSSROADS: 3 TABLE OF EXHIBITS Exhibit I: World Marketed Energy Use by Fuel Type (Quadrillion Btu), 1990-2035 10 Exhibit II: US Energy Use by Source (Quadrillion Btu), 1949 - 2010 10 Exhibit III: US Energy Production and Consumption (Quadrillion Btu), 1949-2010 11 Exhibit IV: Fuel Use by Broad Sectors of the Economy 14 Exhibit V: Electricity Generation Mix (Trillion kWh/yr), 1990 – 2035 14 Exhibit VI: Wholesale Energy Prices ($/Million Btu), 1970 - 2009 16 Exhibit VIII: Capital Costs by Type of Production (2009 Dollars, $/kW) 16 Exhibit VII: Average Retail Electricity Costs and Projections ($/MWh), 1990 – 2030 16 Exhibit IX: Electric Power Plant Capital Costs by Fuel Type (2009 Dollars, $/kW) 17 Exhibit X: Cost of Fuels to End Users (1982-1984 Dollars, $/Million Btu) 17 Exhibit XI: Estimated Levelized Cost of New Generation Resources ($/MWh) 18 Exhibit XII: Rate of Growth Trend for Electricity Consumption 19 Exhibit XIII: Average Nominal Electricity Prices by Sector (Cents/kWh), 1960-2010 19 Exhibit XIV: State Electricity Average Retail Prices, 2012 20 Exhibit XV: Wind Incentive Project Deadline Schedule 31 Exhibit XVI: Renewable Energy Tax Incentive Expiration Timeline 33 Exhibit XVII: Residential Group Purchase vs. Grid Solar 43 Exhibit XVIII: Residential Solar vs. Commercial Solar in L.A. 43 Exhibit XIX: U.S. Installed PV Capacity Forecast (MW), 2007-2016 44 Exhibit XX: Navigant Study Findings for U.S. Undeveloped Hydro Capacity 48 Exhibit XXI: U.S. Hydro Potential Assessment by State 48 Exhibit XXII: Electricity Generation Specifications for Various Biofuel Resources 54 4 ENERGY AT THE CROSSROADS: PURPOSE OF THE STUDY The purpose is to provide an ongoing base of background information for Oregon policy makers as they allocate public resources toward energy related purposes. Data will be updated at regular intervals such that material changes in pricing, technology, and other factors can be considered in relevant context. This White Paper is part of a series of studies and policy publications undertaken by OESTRA beginning in 2008. Other publications by OESTRA include: OREGON’S RENEWABLE ENERGY ADVANTAGE, Investing in Talent, Creating Family Wage Jobs, Measuring Outcomes, 2010 (first White Paper) A ROLE FOR ENERGY AND HIGHER EDUCATION IN OREGON’S PRIVATE SECTOR JOB GROWTH, February 2012 (a policy document) POWER OREGON, June 2012 (a Proposal to Oregon Innovation Council with attachments that includes recommendations to the Governor) OESTRA projects underway for future publication include: Prioritizing Economic Development Expenditures: Considering the New Energy Paradigm Optimizing Oregon’s Public Investments: Energy Conservation and Energy Efficiency ENERGY AT THE CROSSROADS: PURPOSE OF THE STUDY 5 ENERGY USE, TECHNOLOGY AND ECONOMIC DEVELOPMENT OVERVIEW of energy is rising. Fossil fuels, especially coal and petro- leum, are a major source of environmental degradation. This study is a part of ongoing research relating to energy policy, economic development, and related job growth Oregon’s hydroelectric power generation, which has been by the Oregon Center for Non-Partisan Policy Studies essential to the economic development of Oregon and the (OCNPS). OCNPS grew out of a privately funded initia- Northwest, is at or near its limit. The United States now tive: Oregon Energy Systems, Technology, and Research imports 50% of its petroleum from other nations. In 2011, Alliance. OESTRA set the stage for the successful passage 43% of electricity output in the U.S. came from coal, 24% of HB3507, 2011 (Honorable Tobias Read), by publish- from natural gas, 19% from nuclear, 8% from hydro, and ing a White Paper entitled: “Oregon’s Renewable Energy 5% from renewable energies. Advantage, Investing in Talent, Creating Family Wage Jobs, Measuring Outcomes.” HB3507 had bipartisan Our studies show that a clean, affordable, and sustainable support in both houses of the Legislature and was signed energy supply will be a critical foundation for economic into law by Governor Kitzhaber in 2011. development and job growth going forward. The studies further conclude that establishing a clean, affordable, Our work has been validated by two recent studies: “A and sustainable energy supply requires a technological- Business Plan for America’s Energy Future,” authored by ly trained workforce. While Oregon and the Northwest the American Energy Innovation Council; and, “Leveraging enjoy high quality indigenous sources of renewable State Clean Energy Funds for Economic Development,” energy (hydro, wind and wave for example), there is no authored by the Brookings-Rockefeller Project on State programmatic commitment to match technology training and Metropolitan Innovation. Both studies recognize a with energy policy. need for public/private partnerships and for collaboration in setting goals for government planning, higher educa- The need for new energy paradigm, based on indigenous tion, and energy policies. They also urge that states make resources and technology training to create high wage higher education a priority due to the dwindling pool of jobs, makes it imperative that Oregon examine current engineering and technical talent available to lead the policies and prioritize energy and job skills in its job emerging economy. growth strategy. Oregon is spending hundreds of millions of tax dollars annually on programs that are energy Global warming, energy scarcity, national trade security related. interests, peak oil, environmental concerns, joblessness, and corporate investments provide a sense of urgency for An earlier Policy Paper prepared by OESTRA entitled planners and policy makers. Energy is the foundation for “A ROLE FOR ENERGY AND HIGHER EDUCATION IN economic development. Oregon has an opportunity to OREGON’S PRIVATE SECTOR JOB GROWTH: Optimizing position itself for high wage job growth within the new Outcomes from Public Investment in Economic energy paradigm. Development” evaluates the evidence and makes sugges- tions for public policy based on this and other studies. Historically, economic development, and thus growth in One thing is clear; the needs of economic development jobs, relied on fossil fuel (natural gas, petroleum, and coal) and job growth have changed dramatically with the shift and with hydroelectric energy generation. However, the to the new energy economy. With it, Oregon’s public cost, availability, and environmental problems associated policy must shift to enable it to plan for and participate with fossil fuel sources threaten economic development and job growth going forward. The cost of these sources 6 ENERGY AT THE CROSSROADS: ENERGY USE, TECHNOLOGY AND ECONOMIC DEVELOPMENT in a new energy paradigm to fuel economic development energy sources that affect energy use. One thing is and job growth in the coming decades. abundantly clear; the need for economic development and job growth policies have changed dramatically in the The authors identify the elements of a successful 21st Century. economic development and job growth program in the new energy economy. As a part of the evaluation, an OESTRA and The Oregon Center for Non-Partisan Policy examination of programmatic gaps in existing policies Studies strive to be a resource for legislative leaders, and programs that affect Oregon’s ability to attract Executive Branch (Gov. Treasurer, Attorney Gen), OEDD and maintain high wage jobs and offers alternatives is (Energy), OUS, ETO, DOE, the Oregon Innovation Council, included. and Business Oregon on questions relating to policy, job growth, and strategic investments in economic The evaluation of the components of a successful new development. energy paradigm requires consideration of native advan-