Investment in renewable energy technologies such as solar, wind, hydroelectricity, biomass, and biofuels has accelerated dramatically in recent years, driven by high fossil fuel prices, environmental concerns, and a blizzard of current and proposed policy measures. More than half of all US states now have renewable portfolio standards setting mandatory or voluntary requirements for up to 20 percent of electricity as early as 2020.
Excluding hydro, renewables now account for 4 percent of installed capacity and only 2 percent of electricity supply. Expanding the role of renewable power in the US this aggressively will present opportunities as well as significant challenges and uncertainties for industry participants.
The market is subject to significant regulatory, technical, and economic uncertainties. The regulatory landscape is highly volatile. Today's mix of federal production tax credits, individual tax credits, and diverse state incentives and policies is subject to expiration, cancellation, or replacement with any number of new policy regimes being considered. Among other potential policies, federal renewable portfolio standards, state or federal level set tariffs, and potential federal or state level carbon policies all contribute to the uncertainty in the future regulatory environment.
Many renewables – such as wind or concentrating solar – will requires substantial investments in transmission that will have to be supported by policymakers and local communities.
The technology landscape is equally uncertain. The technologies all continue to move towards commercialization – "grid parity" – at their own pace, making it highly uncertain which technology or combination of technologies will emerge as the winner.
Finally, while the economics of the renewables business today remains dependent on subsidies and tax credits, if and when the technologies emerge on a fully commercial basis, it remains unclear what business model will prevail among the many competing market approaches currently being pursued.
SDG's Energy & Environment team has worked with clients in addressing their most critical strategic challenges with renewable energy in this uncertain market environment. We have worked with utilities in evaluating how to achieve the goals set by renewable portfolio standards. We have worked with new market entrants to develop growth strategies. and we have worked with investors who are evaluating emerging technologies.