The Renewables Part II: Remaking the Map of U.S. Energy Production

The coal belt of America is a zigzag of mining towns and power plants that runs along Eastern rivers and mountainous states, from Kentucky and West Virginia down through Tennessee into Georgia. The mining of coal has been in a terrible slump the past few years, as the ripples of softening global demand have bankrupt several coal companies, putting many out of work. But it’s the burning of coal also that’s being hit hard now, as aging plants die.

Built as far back as fifty years ago along great rivers, these giant furnaces were fed a constant stream of thermal coal, ferried by barge upon the waters of the Ohio, Muskingum, and Susquehanna. This year alone, according to the Energy Information Agency (EIA), 13-15 gigawatts (GW) of U.S. coal-fired capacity will retire. That’s roughly enough electricity to power 6 million homes. By the time this decade is through, over 60 GW of coal-fired capacity will have retired, mostly throughout the Mid-Atlantic states, according to the EIA.

The question arises: what’s going to replace this lost capacity? The economy may be growing slowly, but not enough to handle an actual decline in electricity output. Interestingly, as the coal belt becomes a retirement belt, there’s rapid buildout of new energy infrastructure, and it’s not taking place in the East.

A Westward Shift to Wind and Solar

In a decidedly westward shift, to the mighty wind corridors of the Great Plains, and the sunshine belts of the American southwest, and into California, broad new capacities in solar and wind power are being constructed and plugged in to the national grid. More powerfully: combined wind and solar have started to dominate new, marginal additions to the national system of U.S. power generation.

To be sure, both wind and solar enjoy an ongoing suite of tax credits and other incentives. This is especially true in California where rooftop and also big grid solar are benefitting from the state’s aggressive renewable energy standard (RES). California is truly reaching for the stars in this regard, as it hopes to derive 50% of its total energy from renewables by the year 2030. Despite the legacy of incentives, however, rapidly declining costs are now more of a driver of the recent boom.

Consider the growth. In 2005, combined wind and solar power provided a statistically insignificant 18 terawatt hours (TWh) of power, less than a half of one percent of total U.S. electricity generation. Last year, however, the two renewables together provided 200 TWh, which, in a power grid that has seen no demand growth in a decade, accounted for 4.8% of total generation. (Wind power alone, which has grown fast enough to become an important component of U.S. power generation, is forecasted to account for a full 5% of total U.S. power generation in 2016, according to the EIA.) Amazingly, as existing power generation flattens or even declines, combined wind and solar account for the majority of new power generation. The U.S. energy mix is starting to change.

Modern-day Manifest Destiny

Perhaps it was another example of manifest destiny, but the shift from the tired, played-out coal mines of the east to the roaring wind supply in Oklahoma, Iowa, and Kansas, and the ascent of massive solar power in southwestern U.S. deserts, has started to dislodge the center of gravity in U.S. power production.

Many of America’s legacy utility companies began in the east. Duke Energy of Charlotte, North Carolina; Southern Company of Atlanta Georgia; and AEP of Columbus, Ohio all were established or have roots in the early days of the 20th Century. Most of these eastern-based utility companies are having to grapple with a difficult array of problems as U.S. coal and nuclear fleets reach the end of their lifecycle; as legacy transmission infrastructure is costlier to maintain; and finally as efficiency gains start to hit the entire system—adding to the challenge of zero, overall demand growth for electricity. Last year, the U.S. produced at total of 4093 TWh of electricity, barely 1% more than the 4055 TWh produced in 2005 (EIA).

The U.S. power sector lost 5,800 jobs mostly due to nuclear and coal shutdowns, but actually gained 1,800 non-hydro renewables jobs—mostly due to wind and solar.

The hot utility companies of today are instead names like Berkshire Hathaway Energy of Omaha Nebraska—Warren Buffet’s utility arm that is either gobbling up or building out wind and solar assets from the American Midwest to California. Pacific Gas and Electric (PG&E) also, due in part to the state of California’s RES, now oversees the largest collection of rooftop solar; and along with Southern California Edison, is helping to integrate utility-grade solar into the power grid by entering into the long-term power purchase agreements (PPAs) on which new solar capacity depends. Unlike many Eastern utilities, saddled with old capacity, these utilities are clearly chasing the rapidly declining cost curve of solar. According to the National Renewable Energy Laboratory (NREL) solar photovoltaic (PV) system prices dropped a huge 12%-19% in 2013 alone. Solar’s cost declines have taken the world by surprise, especially in the last five years.

The swing from old power to new power also means a shift in jobs. In conjunction with the Bureau of Labor Statistics (BLS), EIA shows that from 2011 through 2014, the U.S. power sector lost 5,800 jobs mostly due to nuclear and coal shutdowns, but actually gained 1,800 non-hydro renewables jobs—mostly due to wind and solar. But these are merely the jobs associated with power generation, and do not account for the tens of thousands of jobs associated with the manufacturing, deployment, and construction of new renewable power facilities or rooftop solar. The largest installer of residential solar, Solar City of San Mateo, California, now employs over 6,000 people, for example. And according to the Solar Foundation, and their 2014 solar census, the U.S. now employs over 173,000 people in the solar industry, with another 40,000 workers to be added over just the next 12 months. As a kicker, they note, this well exceeds today’s U.S. coal sector employment.

The Utility Death Spiral

Political blowback, as you might expect, now stalks the land in the coal retirement belt. Ohio was the first out of the gate last year, as the state legislature froze its own renewable energy standard in place. An RES essentially mandates that a state guide higher to a target, over time, the portion of electrical power generation it will source from renewables. West Virginia passed a bill this year, not to freeze, but to completely kill its own renewable energy standard.

Sadly, there is a kind of tragedy in these reactionary moves.. The coal industry is beset on all sides these days, from the price competition coming from cheap natural gas, to the flattening of global demand as China’s coal super-cycle—its huge systemic impact on the global coal market since the year 2000– tails off. Worse, coal-fired plants are among the nation’s oldest, with an average age over 40 years, and have grown woefully inefficient with the passing of time. Few financiers are eager to provide the capital to build new ones. Consequently, foreclosing on new job opportunities in the construction and deployment of wind and solar power in the coal belt will do nothing to revive the fortunes of coal.

The clash between outdated beliefs and new realities becomes more interesting in a wind corridor state like Iowa where presidential candidates, primarily Republicans who are not in favor of renewable tax credits, must thread a tricky, political needle. Iowa derived over 27% of its total power generation in 2013 from wind. And more capacity is on the way. Warren Buffett, an Iowa neighbor, has teamed up with Google to build 407 megawatts (MW) of new wind power as part of a larger portfolio of over 1000 MW to be completed this year. Where tensions run even higher, however, is in a state like Arizona—the top state in the country for solar power potential, and, host to a giant solar manufacturer like Tempe-based First Solar—but which maintains a very weak RES, aiming for only 15% renewable generation by 2025.

  • Part One: The New Kids In Town
  • Part Three: Case Study: Los Angeles
  • Part Four: Making Gains, But A Need For a Grid Storage Solution
  • Part Five: Winners and Losers

To illustrate, Arizona utilities like Arizona Public Service (APS) initially worked to undermine the spread of rooftop solar, pushing back against this rapidly spreading form of energy by proposing homeowners pay surcharges to cover their cost of maintaining the grid. “The utility war on customer solar is particularly intense in Arizona,” notes Christian Roselund, a longtime solar analyst in Boston, Massachusetts, and currently with SolarPVTV. “Salt River Power is notable for its attempt to kill rooftop PV in its service territory, by doing what APS tried to do and only partially succeeded.”

Indeed, Solar City has just recently filed an antitrust lawsuit against Salt River Power (SRP), after SRP announced in December it would levy a fee on solar customers. These attempts mirror the pressure utilities are facing across the country, and what is sometimes referred to (if somewhat hyperbolically) as the utility death spiral. In the death spiral, utilities face declining revenues as customers either go independent with rooftop solar, or source power from wind, while the overall cost to the utility of maintaining the grid and servicing existing customers stays the same, or even rises. Utilities then try to recover this squeeze on margins by levying fees, charges, or rates—thus driving more customers off the grid, in a quest for independence.

SolarPVTV’s Roselund, however, observes that while utilities are perhaps not willing to back down just yet to the threat from rooftop solar, they are starting to change tactics. “Utilities, particularly in the south, are shifting from opposing solar to embracing utility-scale solar and other forms of solar they own, while still opposing customer and third-party owned solar. Big moves on that front by Xcel and Southern.”

To the extent utilities are starting to capitulate to renewable realities, it’s likely the utility death spiral will be something power sector analysts will worry about, but perhaps will never come to full fruition. Importantly, Roselund pointed out to TPM that, “the larger story here is that red-state constituencies are starting to split, with a lot of Republicans embracing renewable energy as a means for energy self-sufficiency, in opposition to monopoly utilities.”

Reversing the Trend

The EIA has recently published their annual look-ahead map, which covers the coming year in new power generation. 2015’s map is no surprise. While new natural gas-fired power plants mostly in the in the east will provide a meaningful 6.3 GW of new capacity, the states of Texas, Oklahoma, Kansas, Iowa, Minnesota, and North Dakota are all lit up with imminent, new wind power. Wind corridor states, according to the EIA, will add 85% of new U.S. wind power this year—a whopping 8.4 GW of new capacity. Meanwhile, Utah, Nevada, and California are as usual dotted with pending new solar. The U.S. will add at least 2.2 GW of new utility-grade solar this year.

But there are surprises to behold in the redrawn map of us energy production. Challenging California’s usual top solar ranking is North Carolina, which will build 0.4 GW of new utility grade solar this year compared to the Golden State’s 1.4 GW of planned additions. And these national totals do not include, as always, yet another robust year to come in the rollout, in many states, of rooftop solar.

But if the migration from east to west has defined the changes in U.S. power production and infrastructure in the first half of this decade, the trend may reverse over the next five years. Ron Pernick, founder and managing director of CleanEdge in Portland, Oregon, a renewable energy data provider and advisory firm to the clean tech market, thinks the next steps in the renewable rollout will be much more diffuse, showing up in many states not normally associated with wind, or solar–or both. “Yes, there’s a lot more coal in the east, but in the east there are solar gains as well,” Pernick says. “Solar is just at the beginning of its growth.”

This will trigger deployment, and job gains, across a much broader swath of the United States. Noting the most up-to-date trends, Pernick says “Look at the recent EIA data: solar is no longer a rounding error and is showing up along with wind and natural gas as a major contributor to new generation capacity additions. But the smaller, distributed stuff, which doesn’t get accounted for in the EIA generation numbers, tells an even more expansive picture; the growth of regional energy and employment impacts associated with distributed PV—that can be anywhere.”

And this really points to bifurcation now showing up between utility scale solar, which has prominently shown up in the deserts, versus domestic and business solar, which is showing up in cities. “As solar becomes increasingly cost competitive, as costs come down, solar could be everywhere,” says Pernick

CleanEdge, in its 2014 Clean Tech Leadership Index report, tracks the buildout of renewables in the United States, adjusting for population, and notes that although Hawaii and California are number one and two in solar PV capacity, respectively, they are followed by New Jersey, Arizona, Nevada and, Vermont, Massachusetts, New Mexico, Colorado, and Delaware. The population-adjusted figure is an important statistic: it provides a useful lens to consider the scale of the economic impact on jobs and business expansion, of a state’s renewable growth.

“If you ask Americans if they support clean energy they overwhelmingly say yes—so it’s no longer a right or left issue.”

Pernick goes on to point out that although California currently has the most aggressive RES, targeting the 33% level by the year 2020 (with a proposed 50% level by 2030), other states like New York are starting to take significant action to overhaul policies related to power. States like New York of course have older power grids, so there’s some benefit in tilting policies away from centralized generation (the legacy configuration) to local power generation. In short, New York recently took steps to protect distributed solar—the kind that’s endured moderate attacks in Arizona—from incumbent utilities.

“New York is a great example—they don’t have great power grids to ship all these electrons,” Pernick says. “So, New York is going to give California a run for its money. But they’re going to do so in a different way. New York is more dense, with aging infrastructure—so they are trying to completely re-envision energy, and they’re going to do it differently: a green bank, energy storage and demand response initiatives, and more.”

A cultural shift may ultimately drive these policy changes. Echoing the remarks of SolarPVTV’s Roselund, Pernick observes that there’s an emerging solar constituency that can’t be easily pigeonholed. “If you ask Americans if they support clean energy they overwhelmingly say yes—so it’s no longer a right or left issue. And when you ask questions about the rights of utilities to block things, you get a very clear, hey ‘don’t touch my power’ response. It crosses states, regions, politics. I think this bodes very well.”

On the Global Stage

The contours of these changes in the U.S. energy mix can be found more broadly, across the globe. China is desperate to tackle the horrendous air pollution built up over a twenty year run, in which its coal consumption tripled. China’s ability to crank out solar voltaic panels has helped drive the cost curve lower—not only for itself, but the rest of the world. More than half of all solar panels are made in China, a fact that cuts in two separate ways. On one hand, China’s flooding of the world solar markets has drawn the protectionist ire of both the U.S. and Europe. In 2012, and again last year, the U.S. imposed steep tariffs on China’s solar panels. But this has made solar advocates quite unhappy.

Although the global demand for coal may simply pivot from China, instead, to the rest of Asia and perhaps India, there is little slowdown in the global zest for solar. In fact, Prime Minister Modi has just set a gargantuan target for his country, aiming to install 100 GW of solar by the year 2022. That is heroic indeed, considering India today has just 3-4 GW of solar capacity. But clearly Modi understands the zero-to-one imperative: the world must address populations with zero power access, and bring them their first electricity. Like in most of Asia, the long construction timelines to build new coal, new natural gas or new nuclear or hydropower in India, and the requisite transmission infrastructure, looks onerous compared to the task of distributing solar panels.

The one competitor to the great renewable buildout, however, is likely to be liquefied natural gas (LNG). Huge new volumes of LNG are set to come online in the next five years as Australia and the United States unleash their cheaper domestic gas resources to the world. Wintertime LNG prices have already been pulled way, way down in Asia towards $10 per million btu—partly as a result of weak global energy prices but also in view of the imminent LNG volumes that will set sail towards China, and Japan.

SolarPVTV’s Christian Roselund cautions that new natural-gas-fired power generation is keeping pace with the torrid pace of newly-built wind and solar in the United States. “While the coal shutdowns are exciting, I always like to note that the largest (single) form of new generation coming online is gas, not solar or wind.”

Roselund cites data from GreenTech Media showing that last year, though combined wind and solar accounted for 55% of new capacity, new natural gas-fired power accounted for 42%. But when you apply the fact that natural-gas-fired power generation operates more continuously than wind or solar (this is known as the capacity factor), the competition from natural gas looks robust.

A Nationwide Shift

It was to be expected, therefore, that in the coal retirement belt, some rebound would take place from the very natural gas that’s now coming out of the Marcellus Shale, which stretches across Ohio, West Virginia, Pennsylvania and New York. A few of the coal plants in the region, either in whole or in part, have actually been converted to natural gas. And while it’s true the U.S. has vast reserves of natural gas, it is still the case that to burn it, it must be extracted first and piped over distances. This will continually generate public friction, if not outright opposition. For example, New York actually banned natural gas fracking last year.

Increasingly, however, the advantage of wind and solar can be seen in the multiplicity of domains they can be deployed. Unlike fossil fuel extraction, often tied to specific regions and burdened with long development timelines, wind and solar are constructed quickly. With further cost declines ahead, and efficiency gains to be harvested as technology marches onward, the spread of wind and solar throughout all fifty of the United States looks inevitable.

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