While the production of fossil fuels drops in the United States, solar and wind power is skyrocketing as technology and cheaper financing drive down the costs.
“In the U.S., we’ve known that wind energy can be cheaper than (natural) gas in some states, but solar is now inching toward that same milestone,” said Jacqueline Lilinshtein, U.S. analyst for Bloomberg New Energy Finance, a firm that advises industry clients on energy issues.
Texas leads the U.S. in wind power, with about 10 percent of its power from wind. California, Nevada and North Carolina are the nation’s top solar states and dominate the market.
The federal government expects a surge in renewable energy in the coming year, especially as solar expands from its traditional base of home rooftop panels to major utility-scale production.
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“U.S. solar and wind power generating capacity is expected to see double digit growth in 2016,” said Adam Sieminski, the head of the U.S. Energy Information Administration.
This comes as America’s fracking boom is starting to falter. The crash in oil prices is shrinking the profits for drillers. Estimated U.S. crude oil production dropped by 120,000 barrels a day last month and is forecast to keep going down for most of the coming year at least.
Onshore wind and solar are both now much more competitive against the established generation technologies than would have seemed possible only five or 10 years ago.
Luke Mills, energy economics analyst for Bloomberg New Energy Finance
Coal continues its downward spiral. Even coal areas that weathered past hard times, such as Indiana and Western Kentucky, are having a tough year, and major coal companies are going bankrupt.
“Production is expected to decrease in all coal-producing regions in 2015, with the largest decline on a percentage basis occurring in the Appalachian region,” according to the Department of Energy.
Costs of generating electricity from coal and natural gas are rising as renewables penetrate the market and fossil fuel plants run less, according to Bloomberg New Energy Finance.
In the meantime, the cost of wind and solar continued to go down this year, signaling “a significant shift in the generating cost comparison between renewable energy and fossil fuels.”
“Onshore wind and solar are both now much more competitive against the established generation technologies than would have seemed possible only five or 10 years ago,” said Luke Mills, an energy economics analyst for Bloomberg New Energy Finance.
The average U.S. price of coal and natural gas power is still cheaper than renewables at $65 a megawatt-hour, compared with wind at $80 and photovoltaic solar – generating electricity from sunlight – at $107.
But that gap is shrinking, and renewable costs can be even lower with federal subsidies. Ethan Zindler, head of policy analysis for Bloomberg New Energy Finance, said he saw a solar power purchase agreement in Texas for $50 per megawatt-hour.
“There are definitely markets where solar is competitive,” Zindler said.
Renewables could run into problems, though, as lawmakers push back against helping the industry. The federal solar tax credit is set to expire in 2016 unless Congress renews it.
In North Carolina, which has emerged as a national leader in solar power, the legislature is ending its state renewable energy tax credit at the end of the year.
There’s also debate in Congress over the wind tax credit, which allows a reduction in tax payments for the first 10 years of a project. Some lawmakers are targeting the incentive for extinction, but American Wind Energy Association CEO Tom Kiernan said he’s optimistic.
“The support we have on Capitol Hill is significant and enduring,” Kiernan said.