Renewable Energy 2000: Issues and Trends is the second in the Energy Information Administration's (EIA's) biannual series of reports on renewable energy issues. This year's edition discusses four topics:

Government Incentives, Mandates, and Programs. This article defines, describes, and evaluates (according to their own objectives) Federal and selected State financial incentives and regulatory mandates, and the financial aspects of Federal research and development programs.

Financial incentives as defined here may reduce production costs, boost markets, or transfer economic resources so as to lower buyers' prices or increase sellers' receipts. Federal financial incentives generally take the form of tax credits and production incentives, such as a 1.5 cents-per-kilowatthour payment to investors and investor-owned utilities for electricity from wind and closed-loop biomass plants, and a 1.5 cents-per-kilowatt-hour incentive to certain generators for electricity from biomass, geothermal, wind, and solar sources. There are also a number of Federal tax subsidies for alcohol fuels.

Federal mandates include the Public Utility Regulatory Policies Act of 1978, which boosted renewable energy by requiring electric utilities to buy electricity from certain small power plants using renewable fuels. The utilities were required to buy the electricity at their avoided costs, which have sometimes been very favorable to nonutility generators.

The Department of Energy and other Federal agencies fund research and development efforts for renewables. Solar energy has benefitted most over the last two decades, but R&D funding for all renewable technologies has fallen sharply since the late 1970s.

Federal and State support for renewables appears to have helped reduce renewable generating costs and boosted production. Renewables' future has not been thereby ensured, however, partly because of sharp declines in natural gas-fired generation costs.

Photovoltaic Industry Trends. Worldwide shipments of photovoltaic (PV) cells and modules rose over 200 percent between 1992 and 1999, to 201 peak megawatts. Globally, the market is dominated by the United States and Japan, though most U.S. manufacturing capacity is owned by German and British firms. Additional trends include industry consolidation and the predominance of export markets in U.S. shipments. Demand is increasingly globalized, boosted by aid from development agencies and banks.

PV technology development is focused on cost-effectiveness. The U.S. National Photovoltaics Program, which received about $66 million in FY2000, aims to make PV electricity available at 6 cents per kilowatthour.

Near-term growth in the global PV market could reach the range of 15 percent to 25 percent per year, especially if existing heavy subsidies for PV programs in Japan and Germany continue and further cost reductions in PV technology are achieved.

Environmental Regulations and Waste Combustion Facility Costs. Municipal waste combustion (MWC) facilities bum waste that might otherwise be landfilled, converting it to energy and a smaller volume of residue ash. Growth in the MWC industry has declined notably in recent years, partly because tighter environmental regulations have helped raise capital costs.

An EIA study of 174 MWC facilities, 102 of which were still operating in 1998, revealed that newer facilities had higher capital costs per ton of waste consumed than plants built in earlier years. This escalation of costs correlated significantly with successive eras of tighter environmental regulation. However, larger plants, particularly those of the "mass burn" type, showed important scale economies: capital costs decreased as design capacity increased. So far, these plants have tended to accommodate regulatory changes within their capital bases rather than cease operations.

Wind Energy Developments. In 1999, industry sources identified more than 900 megawatts (MW) of new wind energy capacity, and projected another 395 MW for 2000. The continued decline in wind generation costs, interest in low-carbon energy, and a number of Federal and State incentives have helped sustain interest in wind power.

Wind turbine technology has improved significantly in recent years, supported in part by Federal research and development funds. Current designs benefit from advances in rotor airfoils, power control electronics, aerodynamic controls, and wind characterization capabilities. New turbines can be customized for particular sites and even for particular locations within a site. Turbine sizes are moving toward maximum outputs of over 1 MW.

Federal tax incentives and research support continue to bolster wind energy as the electric power industry restructures, as do State incentives such as net metering, accelerated depreciation, tax exemptions, grants, and loans. Consumers provide additional support as they embrace green pricing programs for renewable energy.