A federal renewable energy portfolio standard (RPS) of 15% would drive down natural gas demand and price and lower the overall price of power, but would only lead to a lowering in the growth rate of greenhouse gas emissions (GHG) rather than an absolute reduction from current levels, according to a new study by UK-based consultants Wood Mackenzie.

In an attempt to cut GHG emissions, current congressional proposals call for an average of 15% of power generation to come from renewable sources within the next two decades, up from the existing level of 6%.

But “renewable energy alone will not be enough to result in the large GHG reduction targets being proposed” by Congress, said Joe Sannicandro, vice president of North American Power at Wood Mackenzie, and Michael Pickens, a senior analyst. “Our study shows that a federal RPS would only be one small piece in a large and complicated puzzle to halt the growth of or reduce the absolute level of [carbon dioxide, CO2] emissions.”

A federal RPS would cut total domestic CO2 levels in 2025 by only 10% from the Wood Mackenzie base case, while the growth rate in CO2 production would still be a positive 0.8% annually during that period, the Wood Mackenzie officials said. The study clearly shows that a reduction in total CO2 levels would require other options to be implemented, including nuclear power, integrated gasification combined cycle with carbon sequestration and demand-side approaches to constrain the growth rate of electricity consumed and GHG emissions.

The adoption of a 15% federal RPS would require a flood of new wind and other renewable projects well beyond current proposed projects, leading to a 500% increase in renewable capacity from current levels by 2026, the study said. The increase translates into an incremental construction cost of $134 billion in 2006 dollars between 2006 and 2026, it noted. The study defined renewable energy as wind, solar, landfill gas, biomass and small hydro power.

The report further said that the switch to renewable energy would drive down the demand and price of natural gas, which would lead to lower electricity prices. It estimated that a federal RPS would produce savings of $240 billion in wholesale power costs over the next two decades, offsetting the high capital investments needed to build additional, less emitting generation capacity. Lower natural gas prices also would cut the total value of other generation technologies, particularly coal and nuclear capacity, the study noted.

Despite these benefits, there still are significant challenges confronting the renewables industry that must be resolved before such a large-scale national renewable program can be achieved, including uncertainty surrounding tax incentives, the ever-present NIMBY concerns and land requirements for the additional build-out of renewable facilities, Wood Mackenzie said.

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