Wind Turbines in Idaho. Photo credit: energy.gov

A June report from the National Renewable Energy Laboratory (NREL) estimated that renewable energy could provide 80% of the nation’s electricity demand by 2050 (Check out this really cool animated map that shows how our electricity mix changes over time under this scenario). In July, NREL put out another report that looked at the renewable potential state by state.

The results were interesting in that all states have large potential for renewable energy. Even the Southeast, where many politicians believe renewable energy is more difficult to pull off, has large potential. A mix of solar, offshore wind and biomass could provide a big chunk of electricity demand for states in the Southeast.

Although a theoretical exercise, the report highlights an important point. Some politicians dismiss renewable energy as a niche market, but the upside is huge. Costs are rapidly coming down for solar and wind power. The average price for solar has dropped by nearly 50% since the beginning of 2011, for example. The rate of solar and wind installations are strong in 2012. The solar industry installed over 500 megawatts (MW) in the first quarter of this year, its second highest quarter on record. The wind industry installed 2,896 MW in the first half of 2012, a 34% increase from the year before. (It should be noted, however, that despite this progress, the wind industry faces an uncertain future with the expiration of the production tax credit, a key policy incentive, looming over the industry).

Renewable energy critics point to the fact that many renewable energy technologies are not ready to compete with coal and natural gas. It is true that low natural gas prices are making it extremely difficult for the renewable energy industry.

However, natural gas prices have historically been quite volatile. If natural gas prices rise, renewable energy will suddenly look very attractive. Bloomberg New Energy Finance predicts that the average wind farm will reach grid-parity by 2016. Fang Peng, an executive at JA Solar, a large Chinese solar manufacturer, predicts that solar will be cost-competitive with fossil fuels in most places by 2015. He said this will lead to a “second wave of growth.”

An analyst from Bloomberg New Energy Finance framed the optimistic outlook for renewable energy well in a press release last November:

The press is reacting to the recent price drops in solar equipment as though they are the result of temporary oversupply or of a trade war. This masks what is really going on: a long-term, consistent drop in clean energy technology costs, resulting from decades of hard work by tens of thousands of researchers, engineers, technicians and people in operations and procurement. And it is not going to stop: In the next few years the mainstream world is going to wake up to wind cheaper than gas, and rooftop solar power cheaper than daytime electricity. Add in the same sort of deep long-term price drops for power storage, demand management, LED lighting and so on – and we are clearly talking about a whole new game

Indeed, the future for the renewable energy industry looks promising, but policymakers can hasten the transition. There are a variety of policy options that can accelerate cost reductions. Regardless, as the NREL report notes, renewable energy will grab an increasing share of the U.S. electricity market in the years ahead.

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