US RPS would reduce energy prices, not GHG emissions: Report

Washington (Platts)--5Mar2007

A US renewable portfolio standard of 15% would drive down natural gas and
electricity prices, but would not lead to a reduction of greenhouse gas
emissions compared with current levels, according to a new report from
consulting firm Wood Mackenzie.

If Congress adopted a national RPS requiring 15% of power supplies to be
from renewable sources over the next 20 years, a flood of new renewable power
projects would lead to a 500% increase in renewable capacity by 2026, at a
cost of $134 billion in 2006 dollars, the report said, adding that the extra
capacity would drive down demand for fossil fuels as well as dragging
wholesale power costs lower.

"Over the next 20 years, the federal RPS case leads to savings of $240
billion in wholesale power costs, outweighing the higher capital investment to
build the additional capacity" from renewable facilities, said Joe
Sannicandro, vice president for North American power at Wood Mackenzie.

However, the consultant cautioned that there are several significant
challenges to adding renewable power projects on a large scale, including
uncertainty about tax incentives, land requirements and concerns about siting
new facilities.

Even with a large growth in renewable projects, "renewable energy alone
will not be enough to result in the large GHG reduction targets being
proposed" in Congress and elsewhere, Sannicandro said.

With the power sector producing 39% of the carbon dioxide emissions in
the US, a federal RPS would halt growth in GHG emissions, but it would be one
part of a larger effort to reduce the absolute level of CO2 emissions, the
report said.

It said implementing a national RPS would reduce total CO2 levels in 2025
by only 10% in the base case, but the growth rate in CO2 production would
still be 0.8% annually.

"Clearly, a reduction in total CO2 levels will require other options to
be implemented including nuclear power, integrated gasification combined cycle
with carbon sequestration and demand-side approaches to reduce the growth rate
of electricity consumption," Sannicandro said.