State renewable portfolio standards (RPS) will be the most critical driver determining the pace of U.S. renewables growth going forward, according to a new IHS Emerging Energy Research market study: US RPS Markets and Utility Strategies: 2010-2025.
The US renewables market has experienced explosive growth since 2005, expanding from a total installed base of 30 GW to over 60 GW at the end of 2009. IHS estimates that cumulative renewables demand across all states with binding RPS policies will grow from an expected 137 terawatt-hours (TWh) in 2010 to 479 TWh by 2025--an increase of approximately 250 percent by 2025.
As of June 2010, mandatory RPS policies, requiring states to procure a percentage of generation from renewable energy, have been passed in 31 US states and the District of Columbia, with six additional states approving conditional or non-mandatory renewables goals. While utilities in a few states, led by Washington, Maine, Colorado and New Hampshire, are already well on their way toward meeting their 2015 RPS targets, the majority of states will require rapid renewables growth if they are to meet near-term objectives.
“With increasing challenges including low power pricing and uncertain federal policies, escalating RPS demand will define the timing and location of renewables growth across the US over the next few years,” said Alex Klein, IHS' renewable power research director.
RPS policies are estimated to require more than 1,000 investor-owned utilities (IOUs), load-serving entities (LSEs) and competitive retail suppliers to procure renewable power over the next decade, according to the study. Beginning in 2010, significantly escalating RPS demand will create gradually intensifying compliance pressure across the US.
Signing power purchase agreements will remain the predominant mechanism for utility RPS compliance, expected to account for approximately 70 percent of total renewables added to the U.S. supply mix over the next three years, according to the study. Spurred on by long-term transparent state mandates, utilities are increasingly moving toward development and ownership of renewable assets in several key renewable markets such as the Midwest, Northwest and California.
According to the study, state RPSs would be significantly strengthened if complemented by a federal RPS or energy policy that addresses transmission bottlenecks and siting issues on federal lands, both of which will be critical to sustaining renewables growth toward the middle of the next decade.