Accounting giant Ernst & Young’s latest United States renewable energy attractiveness index confirms commonly understood perceptions of which states are friendliest to renewables, such as California and Hawaii, but also shows remarkable progress by individual states and the solar industry as a whole.
The top ten states on the All Renewables Index, which you can view in full here, are as follows:
- California
- Hawaii
- Texas & Colorado (tied for 3rd)
- Nevada
- New Mexico
- Illinois
- Maine & New York (tied for 8th)
- Massachusetts
The index’s ratings draw on a range of factors, which include availability of infrastructure, renewable portfolio standards, ease of planning, permitting and grid connection, access to finance and resource quality. “Nobody builds a wind farm where the wind doesn’t blow,” Mike Bernier, head of Ernst & Young’s national tax practice, told Breaking Energy.
One of the components with the largest weighting is offtake attractiveness – how much it costs to produce a kilowatt hour of electricity in a given state, and at what price can that kilowatt hour be sold. Other major factors are market growth potential, tax climate, and installations to date. “Developers are attracted to states that have installations,” Bernier said. “People are attracted to hot markets.”
Solar Closes in on Wind
The index has undergone some significant changes over the last five years. One of the most telling is an adjustment to the weighting of solar in the “all renewables” index.
At the outset, wind accounted for 85% of the “all renewables” category. “Since then, and particularly looking at PTC [Production Tax Credit] issues, now we have solar and wind on equal footing,” Bernier said.
“We think they’ll be installing as much solar as wind over the next 3-5 years,” Bernier said. “A lot of that ties to PTC issues.”
The inconsistency of the PTC has been behind a number of booms and busts in wind installation since its inception. “Past expirations of the PTC in 1999, 2001 and 2003 led to drop-offs in installations of between 73% and 93% the following year,” according to the report.
For more on how the PTC affects renewables markets, see Renewables Hold Promise, but Predictable Policy is Critical.
The PTC is set to expire at the end of this year. “Without an extension of the PTC, it becomes more expensive to generate wind. It is a 2.2 cents per kWh tax credit, and the market does not necessarily bear a 2.2 cents/kWh increase across the board,” Bernier said.
Surprise States
Some states – such as California and Hawaii – have maintained their positions near the top or the bottom of the rankings. But others have jumped way up or down the list. “The ability for states to move up or down in the index, it doesn’t necessarily happen year-to-year, but if you take a longer-lens view of it, you can see where certain states have changed over time,” Bernier said.
Illinois, for example, had virtually no renewable power generation installed a few years ago. “It was very low in our rankings,” Bernier said. On the latest “All Renewables” index, it ranked seventh overall, and second in wind.
New Jersey, on the other hand, “would have been one of our top solar states at one point in time”, Bernier said. It no longer appears in the top ten of the long-term solar index, with an All Renewables index ranking of 16. “You used to be able to get $200-300 a REC [Renewable Energy Credit], and it’s not even close anymore.”
And the state with the most wind generation capacity in the US, with 1,826 megawatts installed last year for a total of 12,212 MW, also has “the most untapped solar potential in the country”, according to the report.
“Texas has been slow in developing solar because it’s been such a good wind market,” said Bernier. “It is obviously quicker and easier to develop 100 MW of wind than 100 MW of solar,” but “we expect that to change because there’s starting to be more of a focus on smaller projects for grid-related issues, and with solar, you can make it closer to the user”.
Bernier explained that Texas has experienced grid problems related to the intermittency of wind. “Solar has fewer intermittency problems – you can get half-second spikes, but in general, if it’s a sunny day, it stays sunny for a while, and even if it’s not sunny, you’re getting some sun,” he said. “You have much more predictable electricity generation, and i think there will be increasing focus on that.”
“It takes a lot of 5-10 MW projects to equal a 300 MW windfarm, but it is a trend that we’re seeing happening.”
