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3 factors driving renewable energy forward

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While the global COVID-19 pandemic had an impact on renewable energy development in 2020, the overall trend line remains crystal clear: renewables are growing. 

After surpassing coal consumption for the first time in 130 years, the U.S. Energy Information Administration (EIA) now projects that renewable energy will make up the vast majority of new generation capacity in 2021. Wind, solar, and battery storage are set to account for a staggering 81 percent of all new capacity this year. 

What are the major energy trends to watch for in 2021 and what does the clean energy transition mean for businesses? The growth in renewable energy is attributable to a mix of three factors: public policy, technological advancements and, most importantly for businesses, basic economics. 


State Policy Mandates

Across the U.S., individual states have enacted renewable energy policies that diversify their electricity generation resource mix, spur economic development and reduce greenhouse gas emissions.  

Almost two-thirds of states have adopted independent goals or renewable energy standards that dictate how much of the electricity consumed in their state must come from renewable resources. 

One of the most common types of these state-level policies are known as “Renewable Portfolio Standards (RPS).” An RPS mandates that a certain percentage of electricity sold by utilities must come from renewable energy resources. 

RPS policies have had a tremendous effect on renewable energy development: nearly half of all growth in renewable energy generation over the past two decades can be attributed to state-level renewable energy policies. Iowa was the first U.S. state to pass an RPS in 1983 and since then 29 states, 3 territories and the District of Columbia have followed suit by adopting some variation of an RPS. In addition to states with an RPS, 8 states and Guam have also set voluntary renewable energy targets. 

State policy mandates also continue to change and evolve. New York and the District of Columbia have made more recent commitments to procure 100 percent carbon-free or renewable electricity. Virginia has also taken strides by giving large commercial and industrial customers (with demand above 5 megawatts) the ability to work directly with retail energy suppliers in procuring renewable energy. 

 

Technology Advancements 

Importantly, renewable energy technology has improved while deployments have increased.  

As more solar and wind have been deployed, the installed cost has dropped about 80-90 percent from what it was a decade ago and the efficiency output from those facilities is increasing.  

Wind turbines offer an important case study in how quickly and dramatically energy technology can improve. In a span of 15 years, the average capacity factor – a measure of how often a generating unit operates – for U.S. wind projects jumped from 25 to 43 percent. At the most cutting-edge, one of the newest and longest models of wind turbines boasts a capacity factor of 63 percent, which is on par with the capacity factors of many natural gas and coal-fired generation facilities. 

Because of advancements in turbine technology, many aging wind farms are now being “repowered” with new components or completely torn down and replaced in favor of new, more efficient technology.


Lower Costs

Apart from advancements in policy and technology, the costs for solar, wind and battery storage have fallen dramatically in recent years.  

It’s possible to build an onshore wind facility or a grid-connected solar facility at or below the cost of producing electricity from a new natural gas plant.  

In fact, costs for wind and solar have fallen to the point that – on an unsubsidized, levelized cost of energy (LCOE) basis – they are more cost-effective than natural gas and coal-fired generation in many regions and scenarios.   

Whether it be policy mandates, lower costs due to technology improvements, or basic economics, all three of those support that, for the next decade, we will see a clear trend towards a cleaner grid. 

 

Businesses Will Continue to Drive Renewable Energy 

Businesses will continue to play a major supporting role in the drive towards a cleaner grid. 

There is a strong and growing interest on the part of U.S. corporations, and even small businesses, in a shift towards renewable energy. 

Direct Energy Business recently conducted a survey  of businesses and found that 90 percent of respondents believe that switching to renewable energy was important for their business. Many businesses pursue renewable energy in three main ways : 

• Bundling Renewable Energy Credits (RECs) with their existing energy supply contract  
• Setting specific corporate renewable energy  or sustainability goals  
• Developing renewable energy resources on-site  

While most businesses are interested in pursuing renewable energy there are two important caveats: about half of businesses view cost as the main consideration in pursuing renewable energy; and, a majority of businesses don’t feel confident in navigating the renewable energy space alone. 

To that end, it’s important to partner with a company that you trust, that is an expert in renewable energy and that can provide you with guidance and execution to help you achieve your goals. 


Learn how Direct Energy Business can help your business achieve a more sustainable future with renewable energy today
 

Posted: February 12, 2021

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