Wind Power, Solar Energy Demand to Outpace Supply, Report Finds

By Jim Efstathiou Jr.
October 23, 2007

Oct. 23 (Bloomberg) -- Demand for renewable energy will outpace supply by 28 million megawatt-hours in 2010, driving prices higher and undermining efforts to promote non-polluting fuels, according to a government report.

The shortage is equal to the electricity needed to supply 2.6 million U.S. homes, according to the report from the National Renewable Energy Laboratory.

Renewable energy demand from windmills, solar cells and other technologies is being driven by state government mandates requiring electric utilities to use clean fuel sources for 2 to 30 percent of their supply and voluntary use by consumers. Efforts to encourage such use could falter if supplies fall short and prices rise.

"The success of these initiatives depends on an adequate domestic supply of renewable electricity at a reasonable cost," according to the report.

Demand for renewables has exceeded expectations, Lori Bird, a senior energy analyst at the national laboratory in Colorado and co-author of the report said in an interview. "It's been growing so rapidly, there has been the need for the industry to ramp up."

Surging wind power demand has led to supply shortages and higher prices for turbines.

Twenty five states and the District of Columbia have passed renewable energy requirements setting out clean energy targets over the next five to 15 years. An average of about 51.3 million megawatt-hours of new renewable energy will be needed annually to meet those requirements between now and 2010.

Commercial renewable purchases rose 18-fold since 2001 to nearly 7 million megawatt hours in 2006.

Some Imbalance

"Demand for renewable energy is growing rapidly and like any market there may be temporary imbalances in the industries' abilities to respond," Mike Eckhart, president of the American Council on Renewable Energy, said in a statement. The Washington- based group represents equipment providers and utilities.

Renewable fuel sources include geothermal energy, landfill gas, municipal solid waste and biomass. Power from cogeneration, recycled energy from industrial operations, is not included in the U.S. Energy Department database of renewable fuels.

Only seven states count cogeneration toward renewable targets, said Thomas Casten, founder and chairman of Recycled Energy Development, a private-equity backed firm in Westmont, Ill. Cogeneration can include power from the heat exhaust of steel furnaces, and could provide 50,000 megawatts of new capacity, Casten said.

"They don't allow all of the clean energy forms to participate, and of course that significantly drives up the market price," Casten said in an interview. "We need all of these technologies and we ought to open up the field of play."

The U.S. Environmental Protection Agency, which funded the report, promotes renewable power through its Green Power Partnership, a voluntary program that encourages green energy purchases. The National Renewable Energy Laboratory is part of the energy department.

To contact the reporter on this story: Jim Efstathiou Jr. in New York at jefstathiou@bloomberg.net.

Last Updated: October 23, 2007 13:38 EDT

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© 2007 Bloomberg L.P.

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