Shortages of renewable power loom in coming years as production fails to keep pace with demand juiced by state mandates for electricity produced from wind, solar, geothermal and biomass sources.
The gap between supply and demand could be as much as 25% in 2010 -- in other words, in most of the states that have green power, the mandated share of renewable power ratchets up annually through 2015. Currently, 25 states and Washington, D.C., have such "renewable portfolio" rules in place, requiring that electric utilities get between from 3% to 30% of their power from renewable sources, with the share depending on the state's mandate.
Demand for green power will rise to about 110 million megawatt hours (mWh) by 2010, roughly double today's total. But even if the companies making renewable power continue their breakneck expansion pace, their output would only rise to around 82 million mWh in 2010, up from 30 million mWh this year.
Adding to demand is strong interest from individual businesses to buy electricity made from nonfossil fuels to reduce greenhouse gas emissions, which is linked to global warming. Many businesses, especially in steel, manufacturing and other industries, are eager to do this, figuring it will give them a leg up in meeting national carbon emission restrictions that Congress is expected to enact within a few years.
Voluntary purchases of green power by companies and individuals have soared from almost nothing five years ago to about 18 million mWh this year. They're on track to reach 40 million mWh by 2010. Additionally, other states are in various stages of considering green power mandates, too.
So why can't renewable energy companies pick up the investment pace to match projected demand? It comes down to public policy. Alt-energy firms fret about Congress' resolve to continue producer tax credits, which are typically extended by only a couple of years at a time. Lawmakers don't want to extend them further for fear of aggravating the deficit outlook, even though they know that production tax credits are vital for spurring investment. The short time horizon on the tax breaks makes it challenging for companies to raise the hundreds of millions of dollars needed to embark on a sustained build-out of renewable power plants.
A dearth of materials is another limiting factor. Orders are backlogged for key renewable power components such as blades for wind turbines and silicon for making solar cells. Companies in the U.S., Asia and Europe are vying for critical materials. That'll limit manufacturing of key technologies for at least the next two years. Bottom line: You'll have to shell out more for green power as utilities pay a premium to try to meet their mandates.
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