Recent growth in the use of clean energy is fundamentally reshaping the U. S. electricity system. Some of the most pronounced changes involve the increased use of utility- scale renewables, which now account for over 75 percent of all renewables.1 Generation from utility-scale wind and solar generation are now less expensive than coal fired generation in many parts of the nation.2 Solar costs have dropped by more than 70 percent over the last decade with utility-scale prices ranging from 2.8 to 4.5 cents per kwh.3 Similarly, the cost of on-shore utility-scale wind generation has fallen 69 percent since 2009, and 7 percent in 2018 alone, with utility-scale prices below 2 cents per kwh in some regions.4 Even without soon-to-expire federal tax credits, renewable energy costs are lower than the marginal cost of conventional energy technologies under a variety of future scenarios.5 Meanwhile, nuclear power remained steady at 19 percent of the U.S. generation mix in 2018. Commercial scale use of carbon capture and storage (CCS) technology is still limited for power plants, with the Petra Nova plant being the only one in U.S operation, but technology development efforts continue alongside efforts to expand the carbon dioxide pipeline system.6
Technological innovations are occurring on the customer side of the meter as well. These “behind the meter” distributed energy resources include residential and commercial solar power, battery storage, fuel cells, electric vehicle charging, combined heat and power systems, microgrids, demand response technologies, and other energy management strategies. Electric vehicle charging and the opportunity for automotive batteries to serve as distributed storage is also a part of this transformation.
Economics
Renewable energy (both utility scale and distributed) has emerged as an engine of economic growth. The solar industry employs 242,000 Americans, more than double the number in 2012, investing $17 billion in the U.S. in 2018.7 Similarly, the wind industry employees 114,000 Americans, with over 500 factories in 42 states.8 Five classes of distributed energy resources — distributed solar, small-scale combined heat and power, residential smart thermostats, electric vehicles and battery energy storage — contributed 46.4 GWs of impact on the U.S. summer peak in 2017, a figure that’s expected to exceed 100 GWs by 2023.9 The nuclear industry encompasses some 72,000 jobs in the U.S., across the utility, professional services and manufacturing sectors.10
Key Policy Trends
States’ renewable energy ambitions soar
Twelve states and territories in recent years have raised their renewable energy standards to 50 percent or greater.11 California, Hawaii, Nevada, New Mexico, Puerto Rico, and Washington have set a 100 percent clean energy goal.12
Governors leading efforts to address climate change
Twenty-five Governors have pledged that their state will reduce carbon emissions by at least 26 percent below 2005 levels by 2025.13 Together, states making this non- binding commitment comprise over 55 percent of the U.S. population.14
Natural gas and renewables booming, coal generation continues to drop
The shale gas boom led natural gas power production to grow to 35 percent of the U.S. electricity mix in 2018, with renewables growing 5 percent to almost 18 percent.15 At the same time, coal’s percentage of the U.S. electricity generation mix fell to 27 percent, the lowest since World War II, with 13 GWs of coal capacity retiring in 2018.16 In response to these changing economic circumstances, some states are increasingly considering incentives and other financial support to help coal communities.17
Incentives to continue nuclear generation expanding
While nuclear power remained steady at 19 percent of the U.S. generation mix in 2018, economic competition has forced many nuclear power plants to announce early retirements.18 New York, Connecticut, New Jersey and Illinois have enacted incentives to support nuclear power, while Ohio and Pennsylvania are considering similar measures.19
Embrace of renewables by corporations and electric utilities growing
Corporate America’s appetite for renewables has grown steadily in recent years, with over 175 major companies committed to purchasing 100 percent renewable power.20 Changing economic and customer demand has led several major investor owned electric utilities to embrace renewables, including Minnesota-based Xcel Energy, which has pledged to be carbon-free in all eight states in which it operates by 2050,21 Northern Indiana Public Service Company, which plans to retire all of its coal fleet in the next decade,22 Ohio-based AEP, which pledged to cut its CO2 emissions 80 percent by 2050,23 and Michigan-based Consumers Energy, which pledged zero coal use and a 90 percent reduction in carbon emissions by 2040.24
Opportunities, Challenges and State Solutions
Opportunities
The electricity system pioneered by Thomas Edison over 125 years ago is undergoing a fundamental transformation. Driven by technological innovations, growing consumer engagement, and heightened environmental awareness, the U.S. electricity system is evolving into a dynamic network with a decline in traditional generation sources and a rise in a more diverse array of utility-scale renewables and distributed energy resources.
Among the benefits attributed to utility-scale renewable technologies and distributed energy resources are energy cost savings, deferred infrastructure upgrades, enhanced system resilience and reliability, power quality benefits, and improved environmental performance.1 Some states are also looking to continue the use of nuclear power as a reliable, emissions-free resource and interested in the opportunities for carbon capture and storage for coal generation.
Challenges
Wind and solar technologies are variable resources since the wind does not always blow and the sun does not always shine. Integrating these variable resources onto the grid requires significant planning and the use of controllable generation, such as natural gas, hydropower and battery storage, that can ramp up or down quickly as supply and demand fluctuate.
Similar care must be taken to effectively integrate distributed energy resources onto the grid. Among the unique challenges posed by distributed energy resources are the need for more robust distribution system planning, privacy concerns related to third-party access to consumer energy data through mobile energy-conservation applications and cyber-security concerns.2
Existing nuclear generation faces economic challenges while the technologies associated with carbon capture and storage or utilization are cost prohibitive and call for additional infrastructure developments to achieve scale.
State Solutions
As discussed below, states have developed a wide array of policies to promote utility-scale renewables and distributed energy resources. Some are also developing incentives to support continued operation of nuclear plants. State solutions include:
Specifying that a certain percentage of the electricity provided by utilities come from renewable or clean energy resources which could include zero emission resources like nuclear power or carbon capture utilization and storage.
Encouraging Distributed Solar Generation
Updating state “net metering” policies and/or adopting alternative “value of solar” rates to accelerate residential and commercial solar projects without shifting the costs of maintaining the electricity grid to other customers.
Encouraging Community Solar
Promoting solar facilities shared by multiple community subscribers who receive credit on their electric bills for their share of the power produced.
Accelerating Adoption of Battery Storage Technologies
Establishing state storage targets, integrating storage with existing programs (such
as RPS or clean peak standards), and incorporating storage into utility integrated resource planning and similar exercises.
Addressing Transmission Constraints and Siting Requirements for Land-Based Wind Farms
Expedite the often decade-long transmission permitting process while balancing environmental and procurement protections and adopt model state siting ordinances and/or reasonable setback requirements to ensure safety without hindering growth.
Expanding Clean Energy Funding and Financing
Innovative efforts to leverage public funds with private capital including Property Assessed Clean Energy (PACE) programs and green banks.
Adopting Greenhouse Gas Reduction Targets
Setting greenhouse gas emission targets to address climate change.
Expanding Corporate Access to Renewables
To meet growing corporate demand for renewables, many states are working to develop green power tariffs and reconsidering perceived barriers such as prohibitions on power purchase agreements, solar array size restrictions, onerous wind setback requirements, and prohibitions on companies obtaining electricity from the generator of their choice.
Revisiting Hydropower
Encouraging relicensing, upgrades at existing projects, and developing non-powered existing dams, new pumped storage projects, and conduit hydro projects.
Supporting Continued Nuclear Generation
Creating nuclear procurement targets and zero emissions credits (ZEC) Programs, using state mandated power purchase agreements (PPAs), including nuclear in state energy plans.
The U.S. electricity system is experiencing a fundamental transformation as a result of the rapid maturation of clean energy resources like wind and solar, advanced battery storage and other distributed energy technologies. These technologies are increasingly cost-competitive, are less susceptible to fuel price fluctuations, offer customers greater control of their energy choices, and typically involve lower or no emissions, including greenhouse gases, than most traditional sources.
Twenty-nine states, D.C. and three territories have adopted Renewable Portfolio Standards (RPS), which require that a specified percentage of the electricity provided by utilities come from renewable or clean energy resources.1 In some states, these resources may include zero carbon technologies such as carbon capture and storage, or nuclear energy. An additional eight states and one territory have set voluntary clean energy goals. First adopted by Iowa in 1983 under a voluntary approach, these requirements have proven effective in diversifying a state’s electricity generation mix, encouraging domestic energy production and stimulating local job creation.
While most state targets are between 10 and 45 percent, twelve states and territories —California, Hawaii, Massachusetts, Maryland, Nevada, New Mexico, New Jersey, New York, Oregon, Puerto Rico, Vermont, and Washington state have requirements of 50 percent or greater.2 Five of these states and territories – California, Hawaii, Puerto Rico, Nevada, and New Mexico have set 100 percent clean energy goals.3
California
In September 2018, California enacted AB100, requiring that 100 percent of retail electricity sales come from zero-carbon technologies by 2045.4 More specifically, 60 percent of sales must be from eligible clean resources by 2030, while the 2045 100 percent goal includes zero carbon resources as well.
New Mexico
The New Mexico Energy Transition Act, adopted in March 2019, increases New Mexico’s RPS to 50 percent renewables by 2030, 80 percent renewables by 2040 and 100 percent renewables by 2045.5 The action follows an Executive Order issued by Governor Michelle Lujan Grisham earlier in the year.6
New York
To complement their existing 50 percent RPS requirement, in 2016 New York added a “Clean Energy Standard” to compensate nuclear plants under a long-term contract that expires in 2029.7 Illinois and New Jersey have subsequently adopted similar “Zero Emission Credit” approaches to support nuclear power. Governor Cuomo endorsed a 100 percent RPS requirement during his 2018 gubernatorial campaign.8
Adopting Greenhouse Gas Reduction Targets
Over the past decade, twenty-nine have adopted specific greenhouse gas reduction targets to address climate change.9 More recently, over the past year, a bipartisan group of twenty-five Governors have pledged that their state will reduce carbon emissions by at least 45 percent below 2005 levels by 2030.10 Together, states making this non-binding commitment make up 55 percent of the U.S. population.11
Maryland
The Maryland Greenhouse Gas Reduction Act of 2009 requires the State to achieve a 25 percent reduction in Statewide greenhouse gas (GHG) emissions from 2006 levels by 2020.12 In 2016, Maryland extended their goal to 40 percent reduction by 203013,14. Through 2016, Maryland had the largest percentage decrease in greenhouse gas emissions of any state, dropping 30 percent or 24 million metric tons.15 Governor Hogan has since accelerated Maryland’s greenhouse gas reductions efforts, joining the U.S. Climate Alliance – a bipartisan coalition of governors committed to achieving reductions as outlined in the 2015 Paris agreement – and outlining a strategy for Maryland to reach 100 percent clean electricity by 2040.16
New Mexico
In 2019, New Mexico Governor Lujan Grisham issued an executive order to reduce greenhouse gas emissions in the state 45 percent by 2030 as compared to 2005 levels. The order also directed the Energy, Minerals and Natural Resources Department and the Environment Department to work to increase New Mexico’s renewable portfolio standards and create a Climate Change Task Force to create a strategy to address climate change for all of New Mexico17.
Expanding Clean Energy Funding and Financing
To stimulate private investment in clean energy projects (both renewables and energy efficiency), numerous states have launched innovative efforts to leverage public funds with private capital. Popular efforts include Property Assessed Clean Energy (PACE) programs and green banks.
Connecticut
The Connecticut Green Bank is a quasi-public organization created as the nation’s first green bank in 2011. With funding from a system benefits charge and Regional Greenhouse Gas Initiative (RGGI) auction proceeds, the bank administers a statewide PACE program and offers an array of energy efficiency and clean energy financing options – including products for low-income households. Through 2018, the bank has mobilized over $1.5 billion of investment dollars, with every dollar of public ratepayer money bringing in $6 of private capital and helping to generate over $75 million in state tax revenue.18
Missouri
Missouri’s Property Assessed Clean Energy program, enacted in 2010, allows local governments to raise money to fund renewable or efficiency projects through a voluntary special assessment on a business or homeowner’s property tax bill.19 The projects funded to date include solar panels on a Scottish Rite Temple in Kansas City and Greenworks Lending for commercial transactions.20 At least twenty states have created PACE programs, primarily in the commercial sector.21
New York
New York’s Green Bank, established in 2013, combines funds from ratepayers and RGGI to leverage private clean energy capital. With commitments now totaling over $522 million in support of up to $1.7 billion in clean energy investments, recent projects include loans to support community and residential solar.22
Encouraging Community Solar
Community solar has emerged as an affordable way for renters, homeowners and businesses to enjoy the benefits of solar power regardless of whether their building is conducive to hosting a solar array. Community solar typically refers to a solar facility shared by multiple community subscribers who receive credit on their electric bills for their share of the power produced.23 Nineteen states have enacted policies and programs to promote community solar, with 43 states having at least one community solar project on-line.24
Colorado
The Coyote Ridge Community Solar Farm is an initiative led by the Colorado Energy Office to demonstrate how low-income community solar can cut energy costs for utilities’ highest need customers. The almost 2 MW Coyote Ridge Community Solar Farm will generate energy that will benefit low-income households, affordable housing providers and nonprofit organizations located within the service territory.25
New Jersey
In January 2019, New Jersey’s Board of Public Utilities approved at least 225 MW of community solar to be built over the next three years under a 2018 law, which will provide bill savings and power to approximately 20,000 to 30,000 homes and other customers. The program will also create local clean energy jobs and help the state meet its clean energy goals.26
Accelerating Adoption of Storage Technologies
The need for continuous, real-time balancing of electricity supply with demand has defined the nature of the electricity grid to date. The emergence of cost-effective electricity storage is transforming the grid, helping to avoid excess grid infrastructure, integrating variable wind and solar resources, and enhancing grid reliability and resiliency.
The global energy storage market is growing exponentially.27 In the U.S., energy storage revenue has grown from $58 million to $701 million over the last five years with technologies including flywheels, thermal energy storage, and advanced battery technologies.28
State policies that have proven successful in accelerating the adoption of storage technologies include establishing state storage targets, integrating storage into existing programs (such as RPS or clean peak standards), and incorporating storage into utility integrated resource planning and similar exercises.
Arizona
Storage is emerging as an important component in Arizona’s plans to modernize its grid. In February 2019, Arizona Public Service announced plans to deploy 850 MW of battery storage by 2025.29 The utility plans to provide “solar after sunset” by coupling solar projects with battery storage, which beat new natural gas peakers in the competitive bidding process. This effort builds on the utility’s 2017 success, when it installed two battery storage systems in rural Arizona to avoid rebuilding twenty miles of transmission and distribution lines.30
California
In accordance with a 2010 California law,31 investor-owned electric utilities in California were required to procure over 1.3 GW of energy storage by 2020. This procurement target helped establish the nation’s largest commercial energy storage market. As of August 2018, the three largest utilities have already exceeded their targets based on the amount of energy storage procured or in the approval process.32
Promoting Off-Shore Wind Resources
U.S. offshore wind has a technical resource potential of over 2,000 GWs,33 which is one-sixth of the total existing capacity.34 The combination of steady wind, absence of buildings or mountains, and relative proximity to the nation’s largest cities, has made offshore wind an increasingly competitive clean energy resource. Rhode Island completed the nation’s first offshore wind project in 2016. Today, there are 15 active projects off the east coast, with more under consideration in California, Hawaii, New York and South Carolina.35
Maryland
Maryland created “offshore wind renewable energy credits” (O-RECS) as part of its 2013 Maryland Offshore Wind Act. Since then, 368 MW of offshore wind projects have been approved for development by the Maryland Public Service Commission. The projects are estimated to create 9,700 full time equivalent jobs and result in more than $2 billion of economic activity, including $120 million of investments in port infrastructure and steel fabrication facilities.36
Massachusetts
Massachusetts enacted an offshore wind legislative target of up to 1,600 MW in 2016, which they subsequently doubled to 3,200 MWs in 2018.37 In May 2018, the utilities selected the first 800 MWs at a levelized price of 6.5 cents per kwh.38
Addressing Transmission Constraints and Siting Requirements For Land-Based Wind
Utility scale wind energy was the number one source of new U.S. electricity generation in 2018, and is expected to keep the top spot with 10.9 GWs of new capacity scheduled to come online in 2019.39 With 2018 industry growth at 8 percent, U.S. wind power supports 114,000 American jobs, over 500 domestic factories, and more than $1 billion a year in revenue for states and communities that host wind farms.40 Three states – Texas, Iowa, and Illinois – will host more than half the planned wind additions.41
Many of the nation’s best land-based wind resources are located in the nation’s midwest and southwest, often far from large population centers.42 Major new transmission lines are therefore needed if the nation is to harness this resource. Such projects typically cross multiple states and federal lands, which makes the process of obtaining the environmental permits, right of ways, easements and licenses particularly challenging. The Transwest Express from Wyoming to Nevada recently received its final permit approval from Wyoming, clearing the way for construction to begin as early as 2020 and to be in operation by 2023.43 Other major transmission proposals currently under consideration include the SSO Green Renewable Rail from Iowa to Illinois and the Grain Belt Express from Kansas to Indiana. Expediting the often decade-long transmission permitting process can significantly accelerate land-based wind development.44
Many states are also grappling with siting concerns from nearby residents prompted by this rapid growth. Some states have designated siting authority to state agencies, while most “home rule” states rely on local governments to manage siting.45 Nine states, Maine, Massachusetts, Michigan, New York, Oregon, Pennsylvania, South Dakota, Utah and Wisconsin, have adopted a model state wind siting ordinance, such as requiring property line setbacks of 110-120 percent of the turbine’s height, to help local officials ensure safety without hindering the industry’s continued growth.46
Encouraging Distributed Solar Generation
With the cost of installing solar dropping 70 percent over the last decade, the solar industry continues its rapid growth.47 Today, the U.S. solar industry includes over 242,000 employees involved in the manufacture and installation of solar power, ranging from small rooftop systems to large utility-scale solar arrays.48
To encourage adoption of distributed solar generation, 38 states. and 4 territories offer “net metering,” which allows residential and commercial customers to sell excess solar power back to the grid.49 In recent years, many states have considered updating their net metering policies to avoid shifting the costs of maintaining the electricity grid to non-solar and other customers with distributed generation systems.50 Some states have adopted alternative “value of solar” rates to compensate solar based on the variety of costs and benefits provided rather than paying a fixed retail rate.51
Expanding Corporate Access to Renewables
Over 70 of the Fortune 100 corporations and almost 50 percent of Fortune 500 companies have set either clean energy or sustainability targets.52 Yet these businesses have discovered a range of barriers that often prevent them from purchasing the type of electricity that they want. Common obstacles include prohibitions on the use of power purchase agreements, size restrictions on solar arrays, overly restrictive wind setback requirements, and, more fundamentally, a regulatory structure that requires the company to obtain its electricity from the local regulated monopoly.
To attract new business and economic development, governors are working with corporate leaders and utilities to develop creative solutions to hurdle these barriers. For example, in Kentucky, several utilities have proposed a “green tariff” to promote local clean energy projects and economic development.53
Revisiting Hydropower
Hydropower remains the nation’s largest generator of clean energy with 101 GWs currently operational.54 As the nation incorporates more variable resources to the grid, emission-free hydropower can provide flexibility, given its ability to ramp up quickly and provide black start power when the grid is down.
Relicensing is a critical issue for the 325 hydropower plants whose licenses expire by 2032.55 Although relicensing is a federal process, states should remain aware of the timeline for in-state assets. States interested in expanding hydropower can consider upgrades at existing projects, developing non-powered existing dams, new pumped storage projects and conduit hydro projects. To support existing hydropower, states could also consider including hydropower in their Renewable Portfolio Standards.
