The State of Play for Renewable Energy REFF-Wall Street Gregory Wetstone President & CEO June 20, 2017
ACORE: Driving Investment and Deployment Our Mission: Accelerate the Transition to a Renewable Energy Economy 2
The Transition to Renewables Is Well Underway Electric Generation Capacity Build by Fuel Type, 2000-2016 Renewables Hydro Nuclear Oil Gas Coal Source: Data courtesy of EIA, BCSE and BNEF 3
Domestic Investment Remains High U.S. Total Renewable Energy Investment, 2004-2016 $60 $500 $50 $49.6 $51.4 $46.3 $450 $400 $US Billions $40 $30 $29.3 $39.3 $35.8 $23.9 $35.3 $40.6 $33.8 $38.4 $350 $300 $250 $200 $US Billions $20 $150 $10 $5.7 $11.9 $100 $50 $0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 $0 Cumulative Investment Annual Investment Technologies include all biomass waste-to-energy, geothermal, and wind projects greater than 1 MW; all hydropower between 1 MW and 50 MW; all wave and tidal projects; all biofuel projects with a capacity of one million liters or greater per year; and all solar projects. Source: Data courtesy of Frankfurt School, UNEP/BNEF 4
New U.S. Renewable Energy Generating Capacity 25 U.S. Renewable Energy Installations, 2004-2016 125 21.5 20 100 Annual Installations (GW) 15 10 5 5.7 9.7 11.1 6.6 8.7 17.5 6.8 12.1 16.4 75 50 25 Cumulative Capacity (GW) 2.9 3.0 0 0.7 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 0 Biomass Hydro Geothermal Solar Wind Source: BNEF/BCSE 5
Overview of Global Renewable Energy Policies Countries with Renewable Energy Power Policies (2016) 176 countries with renewable energy targets 191 of 197 countries have NDCs for the Paris Agreement (98% or emissions) 33 countries issued new tenders in 2016 Source: Chart courtesy of REN21 6
High Levels of Global Investment Global Renewable Energy Investment, 2004-2016 $350 $300 $281.2 $278.2 $312 $3,000 $2,500 $250 $243.6 $244.4 $234.4 $243.7 $2,000 $US Billions $200 $150 $100 $72.7 $112.7 $159.3 $181.4 $178.3 $1,500 $1,000 $US Billions $50 $47.0 $500 $0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 $0 Cumulative Investment Annual Investment Technologies include all biomass waste-to-energy, geothermal, and wind projects greater than 1 MW; all hydropower between 1 MW and 50 MW; all wave and tidal projects; all biofuel projects with a capacity of one million liters or greater per year; and all solar projects. Source: Frankfurt School UNEP/BNEF 7
Global Investment In Renewables Is Outpacing Other Energy Sources Annual Renewable Energy Investment from 2008-2016 Nearly Double That of Fossil Fuels (Power Sector, $Bn) Renewables ex. large hydro Fossil fuel Nuclear Large hydro Source: BNEF 8
Reasons for Rapid Renewable Energy Dramatic improvements in cost effectiveness Growth
The Growing Cost-Effectiveness of Wind and Solar Power (Part 1) 66% Reduction in Wind LCOE since 2009 85% Reduction in Solar LCOE since 2009 Charts courtesy of Lazard Source: Lazard 10
The Growing Cost-Effectiveness of Wind and Solar Power (Part 2) Unsubsidized Levelized Cost of Electricity Comparison (U.S.) Source: Lazard 11
Wind and Solar Power and Electricity Rate Increases 4.0% Average Annual Increases In U.S. Retail Electricity Prices, 2002-2015 3.5% 3.442% 3.0% 2.892% 2.5% 2.0% 1.973% 1.5% 1.0% 0.5% 0.0% Top 10 Renewable States US - Whole Bottom 10 Renewable States Source: EIA 12
Reasons for Rapid Renewable Energy Growth Dramatic improvements in cost effectiveness Aggressive state renewable standards in populous (big load) states
State Renewable Energy Directives a Key Driver for Renewable Demand 14
Market Evolution: Renewable Energy Growth Exceeds RPS Mandates Growth in US Non-Hydro Renewable Generation (TWh) Source: NREL 15
Reasons for Rapid Renewable Energy Growth Dramatic improvements in cost effectiveness Aggressive state renewable standards in populous (big load) states Increasing demand from residential consumers and American companies
Growing Consumer Demand: Part 1 Increasing Deployment of Distributed Solar Annual U.S. Distributed Solar Installations, 2010-2016 4,500 4,000 3,500 1586 Megawatts (MW) 3,000 2,500 2,000 1,500 1,000 1043 1112 1036 1011 2099 2583 500 0 826 1231 336 792 488 246 302 2010 2011 2012 2013 2014 2015 2016 Residential PV Non-Residential PV Source: SEIA and GTM 17
Growing Consumer Demand: Commercial & Industrial PPAs Corporate Demand for Renewable Energy: New Market Entrants & Global Expansion Annual GW 6 5 4 3 2 1 Cumulative GW 24 20 16 12 8 4 0 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD AMER EMEA APAC Cumulative (right axis) Source: BNEF 18
Reasons for Rapid Renewable Energy Growth Dramatic improvements in cost effectiveness Aggressive state renewable standards in populous (big load) states Increasing demand from residential consumers and American companies A supportive tax platform
Wind PTC and Solar ITC Phase-Down Schedules Wind PTC Solar ITC 120% % OF FULL VALUE OF CREDIT 100% 80% 60% 40% 20% 100% 100% 100% 100% 80% 100% 60% 100% 40% 100% 86.70% 73.30% 33% 0% 0% 0% 0% 2015 2016 2017 2018 2019 2020 2021 2022 PTC guidance with four year safe harbor will delay the impact of the wind phase out Section 48 ITC continues permanently at 10%, while section 25 (residential) phases out ITC guidance still pending at Treasury 20
Assessing Key Market Drivers Today 1. Dramatic improvements in cost effectiveness IMPACT: Costs have continued to decline, but Suniva ITC case could change the cost picture for solar 2. Aggressive state renewable standards in populous states IMPACT: Unchanged and apparently growing, but headwinds in some states 3. Increasing demand from residential consumers and American companies IMPACT: Unchanged and apparently growing 4. A supportive tax platform IMPACT: unchanged, but tax reform effort creates uncertainties 21
Potential Impacts of Tax Reform on the Renewable Energy Sector The mere possibility of tax reform creates uncertainty that is already complicating deals and giving some investors pause. Changes to Wind and Solar Tax Credits (PTC/ITC) are highly unlikely, but not impossible. = Reductions in corporate tax rates reduce the value of depreciation benefits for renewables and others. Lower tax rates could also reduce tax equity supply and increase pressure on market.
Key Considerations Tax reform is slow and difficult. Success is not a given. Tax reform also presents important opportunities to level the long-term playing field. = Renewable energy sector today has unprecedented private sector support. Renewable energy sector is used to uncertainty.
Other Factors Creating Uncertainty Pending DOE Grid Study and troubling rhetoric about a national security need for more coal and nuclear power. Suniva suit at International Trade Commission could impact PV prices. U.S. withdrawal from Paris and related isolationism could create complications in international trade. Political uncertainty could create broader economic instability.
We ll Always Have Paris Decision to withdraw from Paris has galvanized dramatic new commitments to renewable energy from state and local governments and major corporations. US NDC required an economy-wide GHG reduction of 26-28% below 2005 levels by 2025. Reducing electric power sector GHG emissions by 50% provides a path to achieve economy-wide targets, despite retrenchments in GHG regulatory programs. Recent fossil plant retirements and renewable growth puts us in striking distance of that objective. Near-term investment in additional renewable capacity provide the only long-term path to the ultimate Paris milestone (2 C).
Achieving Paris: The Renewable Energy Gap ~400 GW of new U.S. renewable capacity will be required by 2025 to achieve a 50% GHG reduction in the power sector. This would require nearly $600 billion in U.S. renewable investment over the next nine years. If we keep attracting investment at the same rate as 2016, we would be within $200 billion of this target. 450 $700 400 $600 Capacity (GW) 350 300 250 200 150 100 50 Investment ($ Billions USD) $500 $400 $300 $200 $100 Projections (w/o CPP ) 50% CO2 Reductions 0 Wind Solar Total $0 Wind Solar Total Source: ACORE Anaylsis of EIA & BNEF Data 26
Steps in Securing 400 New GW by 2025 Maintain Momentum: Retain investor confidence in the face of today s uncertainty Expand the Market: Continue ambitious state and local programs; community aggregation; corporate and defense sector procurement; and electrification of the broader economy Modernize the Grid: Facilitate a combined state and federal effort to improve market design Secure New Sources of Capital: Broaden investor community, recruit additional participation of insurance and pension funds, expand tax equity market Level the Federal Tax Playing Field for All Renewables: Enact a technology neutral incentive post PTC/ITC for all renewable energy sources 27
Thank You Gregory Wetstone President & CEO wetstone@acore.org www.acore.org www.uspref.org 1600 K Street NW Suite 650 Washington, DC 20006