U.S. Once Again Leads in Renewable Energy Investment

The U.S. was the world leader in renewable energy investment last year, edging out China, which had held that role since 2009, according to a new report from Ernst and Young. Investors sank $55 billion into clean energy in 2011, up 30% from a year earlier, with record levels of support going to wind and solar power. The domestic wind industry was particularly busy, as developers rushed to take advantage of federal loan guarantees and the Treasury Department’s Section 1603 cash grant program before they expired at the end of December, the report says. Overall, some 6.8 gigawatts (GW) of onshore wind power were installed last year, bringing total installed capacity close to 50 GW. Solar installations totaled 1.7 GW.

The pace of development is expected to slacken this year. The scheduled expiration at the end of December of another critical incentive for wind power, the federal production tax credit (PTC), could “stop the wind industry in its tracks,” the report says. The key PTC incentive provides a $0.02 tax credit for each kilowatt-hour produced over ten operating years. Since 1999, the PTC has been halted on three occasions: in 1999, 2001 and 2003, leading each time to a dramatic drop in installations — of 93%, 73% and 77%, respectively, the report says.

State Outlook More Upbeat

Despite waning support at the federal level and uncertain macroeconomic conditions, several states have poured investment into renewable-energy infrastructure that is poised to grow their wind and solar sectors in the near future, says a companion report from Ernst and Young.  The report ranked California at the top of the list of states with an overall market environment deemed favorable for the growth of renewable energy, followed by New Mexico, Colorado and Hawaii. Massachusetts and Texas tied for fifth place.  Other states in the Northeast making it into the top ten were Maine, New York and Pennsylvania.

The report’s findings on solar power shone a light on Massachusetts, which stood near the top of the pack of states most promising for growth in that sector, tying Hawaii for second place after California. Though the New England state is not as sunny as some of the others in the top five, a variety of state-level initiatives, including efforts to foster research and development along with manufacturing facilities, make Massachusetts a market that is likely to see further expansion of solar energy, the report says.

Going forward, prospects are expected to be less favorable for solar markets in New Jersey and Pennsylvania, which have boomed in recent years but whose markets for solar renewable-energy credits (SRECs), a key financial incentive, have collapsed in the last year due to oversupply. As a result, New Jersey’s SREC spot price slid from over $600 in 2010 to around $200 now, while Pennsylvania’s fell from an average price of $300 to around $50. Prices in Maryland and Delaware have also dropped, though not as dramatically. In recent months, lawmakers in Pennsylvania and New Jersey have introduced bills intended to support falling SREC prices and save solar industry jobs.

“Barring legislative change to RPS [Renewable Portfolio Standards], Pennsylvania and New Jersey are likely to see substantially reduced activity in coming years while demand catches up with supply,” the report says.

— By Rona Cohen

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