Renewable generation across the US has been steadily rising over the years and shows no signs of slowing in 2021, which would tend to suppress wholesale power prices, but the latest stimulus bill could mix things up before the year is over.
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All regions expect increasing renewable capacity in 2021, even if the growth is not as strong as in 2020, said Manan Ahuja, North American power analytics manager at S&P Global Platts Analytics. The year-end stimulus bill is expected to extend federal tax credits, which could lead to even more renewables in the next year or two.
"The trend is likely to continue as there is plenty of solar, wind and storage capacity in the queue," Ahuja said about renewable growth. "So, absent dramatic weather patterns, the renewable generation should also increase with increasing installed base of renewables."
Wind, solar additions
While new wind installations will likely dip year on year in 2021, it will still be an increase in total installed base, Ahuja said. Wind additions have been quite strong this year at about 19 GW, Ahuja said, but some end-2020 projects could spill over into 2021 due to US Internal Revenue Service tax credit safe harbor provisions.
The US Energy Information Administration expects the US electric power sector will add 9.5 GW of new wind capacity in 2021 and 14 GW of new utility-scale solar capacity, according to the latest EIA short-term energy outlook.
Renewable power generation may marginally increase beyond EIA estimates in 2021 based on actions of President-elect Joe Biden, said Matthew Cordaro, a former Midcontinent Independent System Operator president and CEO who now resides in New York.
"The bigger factor in renewable power consumption is how strong the economy will be in light of the COVID pandemic," Cordaro said. "Nevertheless, delays in offshore wind permitting and development and a slowing down in retiring coal units could have a dampening effect on the growth of renewables."
Looking further down the road, developments in storage technology will be critical for increasing renewable power use, Cordaro said.
The West continues to lead the energy transition with renewables within the Bonneville Power Administration footprint at nearly 83% of market share so far this year, up 2.4 percentage points from 2019, according to BPA data. Renewables make up 38.5% of the fuel mix year to date in the Western Electricity Coordinating Council footprint, and account for more than 33% of market share in the California Independent System Operator so far in 2020.
Even so, Cal-ISO renewable generation decreased 7 percentage points year on year, according to ISO data. Specifically, hydro generation slipped 6.4 percentage points from 2019.
Precipitation in the October 2019-September 2020 water year in the Sacramento River Basin measured about 60% of normal and precipitation in the San Joaquin Basin measured about 50% of normal, following an above-normal water year the preceding year, which amplified the year-on-year decline, said Morris Greenberg, senior manager of North American power analytics at Platts Analytics.
Renewable generation leaders
While BPA had the most hydro generation so far in 2020 at 75% of its mix, Southwest Power Pool had the most wind generation at 31.6% of its fuel stack, and Cal-ISO had the most solar generation at 13.5% of its fuel mix. Cal-ISO also had the most generation of other renewables, such as geothermal, biomass and biogas, at 5.6% of its stack.
Meanwhile, Texas and the central plains have had the strongest annual growth of overall renewable generation in recent years.
Electric Reliability Council of Texas renewable generation increased 3.5 percentage points year on year to average nearly 25% of the total fuel mix so far in 2020, while SPP renewable generation rose 2.6 percentage points to average about 36% of market share. Midcontinent ISO renewables added 3.2 percentage points from 2019 to average nearly 15% of the fuel mix.
Offshore wind blowing in
Offshore wind is one to watch in 2021, including how quickly the Biden administration can get federal permitting back on track, which is not dependent on Congress' composition, said John Rogers, senior energy analyst with the Union of Concerned Scientists.
"Offshore wind is an amazing technology and getting better all the time, and we need to make sure the pieces are there for it to do its thing," Rogers said.
The East Coast should start to see some offshore wind output increases, plus some new planning around Gulf Coast offshore wind in Texas and Louisiana, said Eric Smith, Tulane Energy Institute associate director. However, Texas already has daily surpluses of wind power, usually at low-demand periods of the day.
Coal generation rebounding
"We expect coal capacity to continue to decline in 2021," Ahuja said. "However, with natural gas prices forecast to be higher year on year in 2021, we are likely to see switching back from gas to coal, hence leading to higher coal generation. Our current forecast has coal generation rising by about 20% year on year in 2021."
An uptick in coal in 2021 is a possibility, but only if pipeline and power transmission grids fall short, said Smith, adding power generated by natural gas should see an increase first. In the event of gas shortages, then some coal may come back on stream. But first, gas prices will increase as the virus subsides, followed by gas shortages causing further gas increases, which could drive coal deliveries.