Editor’s Note: EarthTechling, always looking to bring you interesting cleantech reading, is proud to repost this article courtesy of partner American Enterprise Institute for Public Policy Research. Author credit goes to Benjamin Zycher.

Also, references to (Note) in this piece refer to supporting materials found at the end of the article.

Despite widespread political support and large direct and indirect subsidies from both the federal and state governments, renewable electricity—wind and solar power, in particular—produces only 3.6 percent of US power generation. This small market share suggests inherent limitations that can be overcome only at very high cost. This first in a three-part Outlook series discusses these limitations.

Key points in this Outlook [PDF]:

• Political and policy support for renewable electricity—wind and solar power, in particular—is long-standing, substantial, and bipartisan.
• Despite this support, wind and solar power have exhibited poor outcomes in terms of market competitiveness with power generation using such conventional fuels as coal and natural gas.
• This weak performance results from three inherent characteristics of wind and solar power: their unconcentrated energy content, siting limitations and high transmission costs, and low availability and intermittency.
• These alternative energy sources will not go mainstream so long as barriers such as high associated costs for land, capital, transmission, and backup capacity persist.

Renewable electricity—wind and solar power, in particular—receives very large direct and indirect subsidies from the federal and state governments. This policy support is far larger than that enjoyed by such conventional electric generation technologies as coal, natural gas, nuclear fuels, or hydroelectric facilities. Moreover, a majority of states have mandated some form of guaranteed market shares for renewable electricity. This political support for renewable power is substantial, broad-based, bipartisan, and long-standing.

Nonetheless, renewable electricity—particularly, wind and solar power—has very high costs, and this is likely to remain true for the foreseeable future. As a result, these sources have achieved only small market shares. Renewable electricity generation from all nonhydroelectric sources was only 3.6 percent of total US generation in 2010. The Energy Information Administration estimated in 2007 that the proportion in 2030 would be that very same 3.6 percent but this year has increased that projection to 11 percent.

It is not clear what changes in important parameters have yielded that increase in the projected market share over the course of only a few years. As I will discuss in detail in this series of three Outlook essays, no sound rationale, whether economic or technological, can explain this change in the official wisdom. To the contrary, both economic and technological factors strongly suggest that wind and solar power will remain uncompetitive; heavily dependent on subsidies, both direct and indirect; and small relative to the electricity market as a whole.

Energy policies in the United States for decades have pursued energy sources defined in various ways as alternative, unconventional, independent, renewable, and clean in an effort to replace such conventional fuels as oil, coal, and natural gas. These long-standing efforts have, without exception, yielded poor outcomes, in a nutshell because they must swim against the tide of market forces. That is why the only reliable outcome has been one disappointment after another, and there are powerful reasons to predict that the same will prove true with respect to the current enthusiasm for renewable electricity. In this Outlook, I will look at the inherent limitations of wind and solar power generation—that is, the reasons they are likely to remain uncompetitive without very large subsidies and other policy support, or even with such support.

Policy preferences for renewable electricity at both the federal and state levels are substantial, as direct and indirect financial subsidies and other forms of support.(Note 1) The relative magnitudes of the federal subsidies for various forms of electricity, as estimated by the Energy Information Administration, are instructive.(Note 2) As previously mentioned, nonhydroelectric renewable power generation for 2010 was 3.6 percent of all generation, but it received 53.5 percent of all federal financial support for the electric power sector. Wind power, providing 2.3 percent of generation, received 42 percent of such support. This combination of substantial policy support and meager market competitiveness suggests the presence of important impediments to the growth of renewable power.

The technical literature reveals several such problems that have not received widespread attention in the popular discussion.

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