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Wind, solar impact to see US capacity growth rate double demand’s through 2050: EIA

04 February 2021 Keiron Greenhalgh

The growth rate for US power generation capacity through 2050 is expected to be double that of electricity demand, as wind and solar facilities' intermittency dictates requirements, according to the latest US Energy Information Administration (EIA) projections.

The coronavirus pandemic is not expected to lead to long-term structural changes in US electricity demand, according to the projections, but officials foresee more radical alterations than before coming to their forecasts for the power sector and its clean technology segments.

Demand is set to return to 2019 levels by 2025, however, long-term projections are "always uncertain and this year especially so," Stephen Nalley, Acting Administrator, said during a briefing unveiling the findings in the agency's Annual Energy Outlook 2021 report.

The annual average US electricity growth rate is forecast to be less than 1% from 2020 to 2050 in the report's reference case. In the short term, demand for electricity may fluctuate as a result of year-to-year weather changes, but over the long-term EIA projects that efficiency improvements will somewhat offset increases in demand driven by economic growth.

In the agency's reference case, electricity demand won't return to 2019 levels until 2022, and then the average annual growth rate will surpass 1% only toward the end of the projection period. Meantime, EIA projects that US energy-related carbon dioxide emissions will decrease through 2035 before reversing that trend.

Source: EIA

Wind is expected to be responsible for most of the growth in renewable generation from 2020 through 2024, accounting for more than two-thirds of the increases in electricity generation during that period, according to the reference case outlook.

After the production tax credit (PTC) for wind phases out at the end of 2024, solar generation assumes responsibility for almost three-quarters of the increase in renewables generation. EIA assumes solar receives a 30% investment tax credit (ITC) through 2023, which is then reduced to a permanent value of 10% in 2024 and forward, it said.

Keeping to what's on the books, but change is a coming

While EIA's projections are based on what regulations and policies were on the books when it was crunching the numbers, the factors that affect those figures are changing more rapidly than once was the case, according to agency officials.

In the past, it was very rare for a new technology to make a significant impact on the outlook's modeling, said Senior Advisor for Energy Analysis Jim Turnure, but "now we've seen a few," citing shale gas plays, as well as rooftop solar installations and the move from incandescent to LED lightbulbs as past examples. Technological innovation is moving "a little bit quicker than we've ever seen before."

Next on the agency's plate will be increased modeling of the impact of battery storage, both on a standalone basis and in combination with solar photovoltaic generation, said Jim Diefenderfer, director of the EIA's Office of Long-Term Energy Modeling.

Hydrogen and its potential for changing the playing field in many an energy arena only figures in calculations related to oil refineries and natural gas presently, according to EIA Senior Advisor for Energy Analysis John Staub, but that could change too.

In addition, the outlook also doesn't currently include any breakthroughs in battery technology in the transportation sector, said Staub. "We work with what's on the books at the moment … we don't speculate," said Turnure.

Because EIA doesn't model "possible announcements," the 2021 outlook doesn't account for President Joe Biden's promise to build 500,000 electric vehicle charging stations

New announcements would also be needed for wind generation to match growth in the solar power sector from 2025 onwards, over 83% of the period covered by the outlook, according to the EIA, citing cost as the reason.

Wind additions are largely tied to policy, the agency said. The projections assume the PTC for wind runs for an extra year, or through 2024, following a one-year extension.

"Although capital costs for both wind and solar continue to decline throughout the projection period, without additional policy intervention, wind is not as cost-competitive as solar. More than two-thirds of cumulative wind capacity additions from 2020 to 2050 occur before the PTC expires at the end of 2024. The steadier pace of solar additions in part reflects the continued availability of a 10% [ITC], which continues in perpetuity after 2023 when the current 30% phases out," EIA analysts wrote in the outlook.

The expected electrification of the transportation sector also fails to make the cut. Although the greatest potential for increased electricity demand is within the transportation sector, the agency said, electricity demand from this sector remains less than 3% of economy-wide electricity demand throughout the projection period. Those projections currently come down to cost, said Diefenderfer.

Current laws and regulations are not projected to induce much market growth, despite continuing improvements in electric vehicles through evolutionary market developments, the outlook said. Both vehicle sales and utilization (miles driven) would need to increase substantially for electric vehicles to raise power demand growth rates by more than a fraction of a percentage point per year, it added.

Posted 04 February 2021 by Keiron Greenhalgh, Editor, Energy and Natural Resources Group, IHS Markit

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