The market for renewable energy, including small wind energy, will continue to grow at rates of 40%-50% annually for the next 10 years due to the following market drivers:
- Feed In Tariffs
- Government subsidies
- Federal and state Renewable Energy Standards
- Mitigation of environmental impacts (global warming)
- Growing need for distributed energy
- The importance of “green jobs” creation
- Increasing demand for energy
- Power company incentives
The two primary federal subsidies, the 30% Investment Tax Credit was renewed in 2009 with a six year lifetime. These subsidies effectively drive down the price to about 6 cents per kWh making it price competitive with conventional fuels. Grants available from the federal government e.g. USDA, and state and local governments, drive down the price even further, as much as 30%.
Renewable Energy Standards (RES)
Federal and state legislation mandates that energy portfolios have between 20% to 30% of renewable energy within 10-20 years depending upon the particular governmental entity. This has resulted in “net metering” in the majority of these states requiring utilities to accept at retail price electricity from small renewable energy systems. The RES goals have been set so high that they cannot be realized without incorporating all forms of renewable energy. In order to satisfy the RES in Minnesota, for example, an additional 5,000 MW of renewable energy capacity ---seven times the state’s current capacity---must flow onto the state’s grid by 2025.
Mitigation to environmental impacts associated with fossil fuels energy generation i.e. global warming, has prompted “Cap and Trade” legislation to displace CO2 emissions. This market-driven approach besides limiting and gradually reducing CO2 emissions provides financial incentives in revenue streams to the renewable energy generators. A certain segment of the population in Europe, Asia and the U.S. has indicated a desire to only utilize clean, renewable energy and a willingness to pay the higher price. Studies have shown that when the costs of environmental impacts are added to the price of conventional fuels they are extremely price competitive.
A focus on distributed energy is key in the rural US and in emerging countries where there typically is insufficient transmission capacity. Distributed energy is effective in holding down electricity rates due to transmission losses and the high cost of transmission systems. In order to further hold down electricity rates, to work toward energy independence and to create revenue streams, rural communities are developing energy systems comprised of multiple, complementary renewables including small wind. The development of Smart Grid technology further enhances the successful integration of renewables. This is especially critical when integrating intermittent renewables such as solar and wind. In addition, the quality of electricity improves and becomes more stable which is important in operating digital electronics and high tech manufacturing equipment.
Renewable energy is becoming an increasingly important component of the “new economy” focused not just on energy independence and environmental mitigation but also in creating and sustaining quality, high tech “green jobs”. Energy drives the economy. The current imbalance of international trade payments is primarily due to the dependence on and the importation of hydrocarbons. The creation of “green jobs” connected to the generation and management of renewable energy will be funded out of the trillion dollars per year the US pays for imported oil and natural gas.
Global energy demand, especially in the form of electricity, is increasing at a rate of nearly 25% per year. Electrical devices are the norm even in third world economies. In emerging nations the energy infrastructure is insufficient. In the US and other developed areas of the world, the 30-40 year process to bring conventional power plants and transmissions lines online and public concerns with siting result in capacity not keeping up with growth in demand. Distributed renewable energy is the only potential strategy for keeping up with demand. All of these points support the fact that renewables must be developed at accelerated rates. This will require accelerated development and integration of technology. This is especially true for small wind. Unfortunately, technology development and the path to commercialization typically takes 5-10 years. Fortunately, some key technology that can support renewable energy is near the end of that cycle. One example of that is the RFG. The GMI RFG will be commercialized soon and will be boosting the efficient output of small wind by 25%-40%, reducing CapEx costs by 40%-50% and reducing O&M costs by 40%.
Many nations, provinces, states, cities and power companies have adopted feed-in- tariffs that successfully funds private/public renewable energy projects. Feed-in tariffs provide key funding support based on the cost of generation plus a reasonable profit. They tend to be structures to meet the unique aspects of the specific renewable energy source. The tariffs for small wind and PV are typically much higher than the “avoided cost” of conventional baseload generation plant. Successful models like the Systems Benefits Charge model is “flexible “ applied to ratepayers after-the-fact with a “pool” sized to cover the actual costs of the renewable on the system. Unlike pools where the charge is fixed and the pool of funds established to pay for the renewable generation is limited, the flexible pool adjusts annually to pay for the actual amount of renewable generation. The pool expands as more renewable energy capacity is added and the charge to ratepayers adjusts accordingly. Typically a “front-end loaded rate is established such that the energy generator receives through the PPA a higher rate early in the contract in order to have an accelerated investment payback.