by C. Baird Brown

The U.S. Energy Information Administration predicts that renewable energy will grow from 13% of the U.S. energy supply in 2011 to 16% in 2040. This wildly understates the likely growth trajectory, in my view. A number of factors, such as evolving financing techniques and growing customer acceptance, will help accelerate adoption, but first, consider recent performance: renewables, principally wind and solar, are the fastest-growing segment of the generating fleet, and they accounted for 82% of new capacity in the first quarter of 2013. Here are four other factors that will drive this trend.

Renewable Portfolio Standards

Through roughly 2020, renewable portfolio standard mandates currently in place in many states will require continued escalation of renewable installations. Most states are currently ahead of their targets, but the targets accelerate over the next few years. They will plateau after 2020, but by then market forces should have taken over.

Price Declines

Commercial-scale, land-based wind power has essentially achieved price parity with other forms of new generation. The price of solar panels has fallen 60% in the last three years, and technology continues to improve. Current panel efficiency is around 16%. A recent tweak to existing technology that involves incorporating aluminum studs in the panel surface has improved that result by 22%. Some experimental solar cells are achieving 45% efficiency. These trends should continue for many renewables.

I expect solar to be cheaper than gas-fired generation in 10 years.

Storage

Batteries and other forms of energy storage, including thermal storage, can stabilize the output of renewables such as solar and wind. Currently, these renewables are intermittent, placing additional burdens on the transmission and distribution systems. With coupled storage, renewable installations can move from requiring additional reserves and regulation to providing such services to the grid. Under Federal Energy Regulatory Commission orders 755 and 784, these hybrid systems can be reimbursed for their services, further improving payback. Current solar investment tax credits are available for battery installations that are integrated in solar projects. Batteries are the subject of intense research to improve performance, and like the prices of renewable generation, battery prices are falling.

Distributed Generation

The combination of renewables and storage makes particular sense in distributed generation installations. Most retail-level solar installations currently can’t operate if the grid goes down. With integrated storage, they can operate as islands independent from the grid and continue to serve their owners and communities. For campuses and other large installations, they can be combined with cogeneration and “smart” thermal management into full-scale microgrids, as discussed in my last column. Technologies such as the Nest thermostat and Passivhaus building techniques will increasingly allow homeowners to join in sophisticated, integrated energy use.

I expect that the Energy Information Administration will be surprised.

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C. Baird Brown is a partner in the firm’s Environment and Energy Practice Group. His practice includes the development and financing of electric generating facilities, waste disposal and recycling facilities, water and wastewater facilities, and other infrastructure projects. Baird currently focuses on renewable energy, energy efficiency and sustainable infrastructure. He can be reached at 215-988-3338 or Baird.Brown@dbr.com.