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UCS used a modified version of the Energy Information Administration's (EIA) National Energy Modeling System (NEMS) to examine the costs and benefits of increasing renewable energy use in our latest analysis, Renewing America's Economy.¹ We evaluated a 20 percent by 2020 national renewable electricity standard (RES) proposal by Senator Jeffords (I-VT) and the federal production tax credits (PTC) for renewable energy that were supported by the Senate energy bill conference committee in November 2003. We also examined the costs and benefits of the national 10 percent by 2020 RES and PTC passed by the U.S. Senate in July 2003 as part of a comprehensive energy bill (HR 6). The NEMS runs were performed for UCS by the Tellus Institute, a Boston-based consulting group with extensive experience running the NEMS model.

We started with the version of the model that EIA used to produce Annual Energy Outlook 2004 (AEO 2004)—the EIA's most recent long-term forecast of U.S. energy supply, demand, and prices. The business as usual forecast used in our analysis is identical to EIA's business as usual (BAU) forecast for AEO 2004, except as noted below. (UCS also modeled the RES with no changes to the EIA assumptions. The results of these runs, which also found a reduction in both electricity and natural gas prices under 10% and 20% RES scenarios, can be found by clicking here. 

UCS first modified NEMS to incorporate more conservative estimates of the market potential for wind, geothermal, and biomass resources to account for siting, transmission, penetration, and other potential constraints in some regions of the country. In both the BAU and RES/PTC runs, we:

• reduced the developable wind potential by up to 50 percent in the Northeast, Plains, and West regions;
  
  
• reduced the amount of conventional geothermal resource available for development by 60 percent on average based on a new study done for the California Energy Commission and input from geothermal developers;
  
  
• reduced the available biomass supply by reducing forest residues by 50 percent to provide an extra margin against relying on unsustainable sources, even though EIA's estimate already excluded road less areas, steep slopes, and more than half the remaining residues; and
  
  
• excluded an additional five percent of construction and demolition debris from the biomass supply-on top of EIA's 75 percent exclusion-to provide an extra margin against relying on contaminated materials.

UCS also modified several EIA assumptions that artificially constrain the growth and raise the projected cost of these renewable energy technologies. As a starting point, we incorporated changes made to NEMS by the U.S. Department of Energy (DOE) Office of Energy Efficiency and Renewable Energy (EERE) to examine the impact of their renewable energy R&D programs for the FY05 Government Performance Review Act (GPRA) and by EIA for the "DOE Goals" case in AEO 2004.² We also supplemented this information with input from renewable energy experts and developers and other studies.

We made the following changes to both the BAU and RES/PTC runs:

For wind energy, we:

• changed EIA's designation of wind as a commercial technology to "evolutionary" status to allow for a greater reduction in capital costs as installed capacity increases based on the GPRA projections;
  
  
• assumed wind could provide up to 30 percent of a region's electricity (EIA assumes 20 percent), based on actual experience in regions of Germany, Denmark, and Spain that have already achieved penetrations of over 20 percent.
  
  
• increased capital costs by up to 50 percent as the penetration of wind increases to 30 percent of a region's electricity. This includes a 20 percent cost increase for integrating wind into the broader electricity system based on a recent analysis for PacifiCorp's Integrated Resource Plan and a 30 percent increase for additional siting and transmission costs based on estimates from wind developers, utilities, and other studies. (EIA assumes, without substantiation, cost increases up to 200 percent);
  
  
• added over 12,700 MW of wind potential in the ERCOT electricity reliability region in Texas based on updated data from NREL and over 4,100 MW of wind potential in the Mid-Atlantic based on plans by developers.

For geothermal energy, we:

• included 3,400 MW of potential development by 2025 from advanced technologies (Enhanced Geothermal Systems) based on data from the GPRA analysis.

For the RES/PTC policy cases only, we assume continued R&D investments combined with increases in installed renewable energy capacity that result from the PTC and RES will lower costs and improve performance to the levels projected in the GPRA analysis (for wind, solar and biomass) and EIA's "DOE Goals" case (for geothermal). We also assume that a maximum of 100 MW of geothermal capacity could be developed annually at each geothermal site based on the GPRA analysis, whereas EIA assumes a limit of 25-50 MW (depending on the year).

References

1. Union of Concerned Scientists. Renewing America's Economy, September 2004.

2. Click here to view GPRA assumptions. EIA assumptions for the DOE Goals case can be found in Assumptions to Annual Energy Outlook 2004, pp 135-137. These assumptions are an update to assumptions originally made in NEMS by the Interlaboratory Working Group of the five national energy laboratories in Scenarios for a Clean Energy Future. The renewable energy cost and performance assumptions were originally developed by the Electric Power Research Institute (EPRI) and recently updated by the National Renewable Energy Laboratory (NREL) in the Power Technologies Databook 2003 and in the GPRA analysis.