Houston — The Electric Reliability Council of Texas must massively expand its transmission capacity to move West Texas renewable power to load centers in the eastern half of the state by 2035, a move aimed at accommodating fossil-fuel generation retirements, but experts differ on whether the state government would approve such spending.

ERCOT’s Long-Term System Assessment, mandated to be presented to the state legislature every two years, shows that under various scenarios, locational marginal prices by 2035 could range from less than $82/MWh to more than $125/MWh. The range depends on how much generation transitions to renewable resources, what renewable mandates are established, and how much battery storage becomes available.

Posted on the ERCOT website on Dec. 23, the LTSA identified 16 high-voltage projects that potentially may be needed by 2030 and two more by 2035. All but four are in the eastern half of the state, with the remainder in far West Texas.

The projects have a total estimated breakeven cost of $13.8 billion, which ERCOT spokeswoman Leslie Sopko said Jan. 4 is “the amount of capital expenditure that the analysis indicates could be supported based on the current economic planning criteria.”

In an email, Morris Greenberg, senior manager for North American power analytics at S&P Global Platts Analytics, said the estimated breakeven cost “represents the value of the upgrade (or what you would be willing to invest to build it).

“So, for example, taking the aggregate value $13 billion in the Current Trends case, this would produce levelized benefits of about $1 billion/year,” Greenberg said. “If the projects cost that amount or less, you would build them.”

Potential savings

Under a scenario with current trends – increased renewables, reduced fossil-fueled generation, continued moderate load growth – the 18 projects would save about $1.1 billion a year in production costs and $1.9 billion a year in congestion rent by the 2030 study year, according to the LTSA.

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The renewable energy industry enjoyed a banner year in 2020. According to the International Energy Agency (IEA), the global economy installed a record amount of new renewable capacity in 2020, primarily powered by surging demand in the U.S. and China. Overall, 90% of the new electricity generating capacity added in 2020 was renewable energy. 

And as good as 2020 was, 2021 could be an even stronger year for renewable energy. Here are three things investors should keep an eye on in the coming year.

1. A continued acceleration in renewable energy

While 2020 was a great year for renewable energy, the pandemic held it back slightly as the global economic slowdown caused some delays. For example, sales of solar panels and other components like inverters were below their pre-pandemic levels in the U.S. during the third quarter. 

But those headwinds should fade in 2021. Meanwhile, new tailwinds should grow stronger. For example, the IEA anticipates that the European Union and India will join the U.S. and China in accelerating their shift toward renewables in the coming year. This tailwind started picking up in the third quarter. Solar inverter maker SolarEdge Technologies (NASDAQ:SEDG) noted that its “third-quarter results reflect significant growth in Europe” as its “solar business outside the U.S. reached an all-time high.”

Add that to the U.S. solar market showing signs of returning to its pre-pandemic installation levels and emerging markets like India and China accelerating their renewable energy efforts, and 2021 looks like it will be another record year for renewables.  

2. The continued rise of solar plus storage

The cost of battery storage has fallen dramatically over the years. A decade ago, it cost between $71 to $81 per megawatt-hour (MWh) for a four-hour battery storage adder to a wind or solar energy project. But by 2020, the cost of adding a battery storage component had plummeted to between $6 to $12 per MWh. And it’s currently on track to fall to a range of $4 to $9 per MWh by 2022.

Because of the dramatic decline in costs, more projects will include battery storage in the future. Only 28% of the utility-scale solar projects built in 2019 had battery storage, but most projects developed in 2021 will likely feature it as companies like NextEra Energy (NYSE:NEE) want to supercharge the country’s battery storage capacity. In addition to including battery storage in newly developed projects, companies will likely also retrofit more existing ones with it in 2021. 

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65% of Germany’s total electricity demand will be met by renewable power within the next decade, according to a revision to the country’s renewable energy law passed by the country’s parliament last week.

An agreement within Germany’s governing coalition was reached at the last possible moment, after months of fighting over how high the target should be and how it should be designed. A compromise was only found after all 27 EU governments agreed to a new more ambitious emissions reduction target of 55% by 2030 earlier this month.

The amended law can now take effect as planned next month. That start date was important because 20-year feed-in tariffs to many renewable plants are scheduled to end next month. The new renewable energy law will replace those feed-in tariffs with auctions for renewed support as of 2022.

But the German government has left many decisions for next year, for instance new targets for renewables’ contribution to power consumption. Environment minister Svenja Schulze said at a press conference that these decisions should be taken in January. “It would be wise, it would be consistent, if the new EU climate target were to be incorporated into the [renewables law] very quickly, and the planned expansion rates for wind and solar plants were to be adjusted upwards,” she said.

However renewable energy companies have been left unimpressed by the compromise. Solar power industry association BSW called it “completely inadequate and half-baked”, and said that it actually creates new market barriers that will result in market decline in large commercial PV systems in the coming years.

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There’s a big tomorrow in power generation. No, not in public utilities, which always are draggy stocks. At issue is the equipment that will help the world meet a growing need for more electricity, and doing that via renewable energy.

And a good means for investors to take advantage of that trend is with a company that does a lot of power-related things well, enjoys good revenue growth, still isn’t profitable, but has seen its stock quadruple over the past five years. That sounds a lot like Amazon AMZN +1.2% in the 1990s.

In this case, we’re talking about AMSC (it stands for American Superconductor Corporation AMSC -12.9%),  which focuses on the electrical grid, the lifeblood of modern civilization, and does so with modern technology. The outfit also is a big player in wind power, cementing its place in renewable energy.  Recently, it expanded yet again via its purchase of Northeast Power Systems, which makes gear vital to the grid’s operations. Acquiring companies often see their share price dip. Not AMSC. This year alone, its stock is up a bracing 228%.

Make no mistake: The electricity biz has a big future. According to U.S. Energy Information Administration, global power generation will almost double, to 45 trillion kilowatt hours by 2050. “The grid is going to get bigger” with renewable energy, needed to combat climate change, rising too, says Dan McGahn, AMSC’s chief executive. One propellant of the demand for more electricity output, he notes, is a coming surge in electrical vehicles.

Small wonder the company’s revenue growth has been substantial. In its fiscal second quarter, ending Sept. 30, revenue swelled to $21.1 million, compared with $14 million for the year-earlier period. Part of its success is in the burgeoning field of wind power. The existing grid is 56% of its business, with wind at 44%. The company’s slogan is: “We don’t generate the energy. We keep it moving.” AMSC likens itself to an orchestra conductor. Instead of melding woodwinds, brass, strings, drums and the like, AMSC harmonizes transmission lines, substations and generators.

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Shoring up the economic viability of hydrogen will require “massive amounts of collaboration,” according to Mehta, but after several false starts, he and others see reason to believe hydrogen is about to establish a foothold.

“Hydrogen has gone through multiple hype cycles, and has not met its ambition,” Mehta said. But thanks to advances that have boosted the availability of renewable energy and increased government support, he said, “maybe the stars are finally getting aligned.”

Hydrogen is already gaining traction in the transportation sector, with Shell currently building hydrogen fueling stations in California and Germany, Mehta said. But he said increased adoption of green hydrogen production in the energy sector held the key to increasing scale and decreasing costs to competitive levels for other industrial applications.

According to analysis by IHS Markit released the week preceding the panel, hydrogen production is on track to exceed $1 billion by 2023, based on the number of projects already in advanced planning phases. Assuming plans for large-capacity electrolysis plants remain on track, green hydrogen could achieve cost parity with blue hydrogen by 2030 in regions with good access to renewable resources, and by 2040-2050 in additional locations, according to Soufien Taamallah, director of energy technologies and hydrogen research at IHS Markit.

“If plans for large capacity electrolysis plants (100 MW+) do not materialize,” Taamallah said in an email, “it will be difficult to reach cost parity with blue hydrogen.”

But electrolysis is only one part of producing green hydrogen, said Sunita Satyapal, Director of the U.S. Department of Energy’s Hydrogen and Fuel Cell Technologies Office. The price of electricity represents the majority of the cost of hydrogen, she said, but hydrogen could achieve cost parity if the cost of electricity dropped to 3 cents per kWh or lower — which she said low-cost renewable generation is on track to achieve.

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The nation’s two largest coal-producing states, Wyoming and West Virginia, have emerged as leaders in renewable energy and energy storage, respectively, according to a new report.

States that voted red in the 2016 presidential election occupy seven of the top-ten spots for wind and solar generation as a percentage of their electricity consumption, according to Environment America’s Renewables on the Rise 2020, released last week.

“There are clean energy leaders in big states and small states, red states and blue states, states on the coasts and states in the heartland,” say the authors, Tony Dutzik and Jamie Friedman of Frontier Group and Emma Searson of Environment America’s Research & Policy Center. Environment America is a branch of the Public Interest Network.

Kansas, Iowa and North Dakota generate enough renewable energy to meet more than half their electricity demand, according to the report. Oklahoma is not far behind at 45 percent. Wyoming, Nebraska and South Dakota also appear on the top-ten list.

It remains to seen whether the growth of clean energy in red states will turn them purple or encourage cleaner Republican energy policy, but some signs of influence have appeared.

Just after the 2018 Midterm election, a post-election voter survey “found strong support among Republicans and Democrats alike for government action to accelerate development and use of clean energy in the United States,” according to the survey sponsors, Citizens for Responsible Energy Solutions Forum and the Conservative Energy Network.

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I like doing thought experiments. I often use them to help me envision the parameters of a complex problem. For example, a dozen years ago I attempted to calculate the area required to supply the entire U.S. with electricity from solar photovoltaic (PV) power.

Admittedly, these thought experiments require major simplifications. To completely run the U.S. on solar power would require a substantial amount of backup power or storage for when the sun isn’t shining.

I also knew that my solar PV calculation was subject to many assumptions, and the answer could therefore be 50% too large or 50% too small. But the number I calculated — an area less than 100 miles by 100 miles — at least provided me with a point of reference for the scale of such an undertaking.

I wanted to imagine about how much area it might take, and that calculation gave me a ballpark figure to visualize. The National Renewable Energy Laboratory (NREL) once calculated that there are about 2,000 square miles of suitable area for PV generation just on U.S. rooftops. So it didn’t seem like a preposterous notion.

In the dozen years since I did that calculation, U.S. solar power generation has increased by a factor of 66. U.S. wind power generation, which started from a larger base at that time, has increased by a factor of five. The number of electric vehicles (EVs) on the roads has also grown exponentially in the past decade.

That led me to wonder how much U.S. gasoline demand could be displaced if all of the wind and solar power generation went into powering EVs. In turn, that led me to wonder about the scale of displacing all U.S. gasoline consumption with wind and solar power.

Again, I will note that this is just a thought experiment. It isn’t constrained by issues like the number of available EVs, or the amount of storage required to ensure that the power is always available on demand. With those caveats, I will attempt the calculation — with no idea beforehand how it is going to turn out.

According to the Energy Information Administration (EIA), in 2019 the U.S. consumed 142 billion gallons of gasoline. The EIA value for the energy content of a gallon of gasoline is 120,286 British thermal units (Btu). Thus, in 2019 the U.S. consumed 17 quadrillion Btu (quads) of gasoline.

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