(The author is a Reuters columnist. The opinions expressed are his own)
By Gerard Wynn
LONDON, Sept 10 Some western U.S. states have already made full use of their best locations for large-scale wind and solar power generation, creating opportunities for neighbouring states that still have suitable sites and for small-scale solar generation.
Renewable resources are bountiful in theory - a few tens of square kilometres of desert could supply enough solar power for the world's electricity needs - but that is before taking practicalities into account.
After accounting for proximity to demand centres and physical limits in rugged or environmentally sensitive territory, the best sites are already taken in California, Oregon, Utah, and Washington, according to a report by the National Renewable Energy Laboratory (NREL), which focused on 11 western U.S. states.
The cost of exploiting renewable power will rise in these states relative to exports from neighbouring regions, which therefore have an opportunity.
An important limitation was that the study considered only large-scale projects and ignored, for example, roof-top solar.
The completion of projects at the best large sites could prompt a drive towards distributed solar power generation, as costs for modules fall.
The NREL focus was on western states as a region with well-documented renewable energy resource planning.
The NREL report, "Beyond Renewable Portfolio Standards", measured "prime-quality renewable resources" by state.
It set a high bar for prime quality, as wind resources with an annual capacity factor of 40 percent or better, compatible with strong, steady winds; and regions with solar direct normal insolation (DNI) of 7.5 kilowatt hours per square metre per day or better, equivalent to the sunniest desert regions.
The United States has no federal targets to install or generate renewable power.
Demand is driven instead by state-level targets for a certain portion of electricity consumption to be met from renewable sources, in the form of renewable portfolio standards (RPS), plus various federal and local financial incentives.
At present, some 29 out of 50 states plus Washington DC have mandatory RPS, the last of which expire in 2025.
Utilities have preferred prime, in-state resources so far.
Once these are exhausted, and to limit costs, utility planners and regulators are expected to shift to out-of-state resources rather than resort to lower quality, in-state options.
"California, Oregon, Utah, and Washington have already developed most (if not all) of their easily developable prime-quality in-state renewable resources," the report, published last month, found.
"Their less productive renewable resources could be sufficient to meet the balance of their forecasted 2025 requirements, but the cost is likely to be higher than the cost of renewable power developed prior to 2012."
The study calculated whether unsubsidised renewable power transported from so far under-exploited states would be cost-competitive with natural gas in destination markets in 2025, after taking into account higher transmission costs.
The year 2025 was chosen as the time when all current RPS mandates will have expired, leaving renewables entirely unsupported, assuming that present federal tax credits are phased out.
The study assumed that all-in gas-fired power costs remained unchanged, and that solar power costs fell by a third and wind by a fifth, while transmission costs doubled (reflecting the need to upgrade and construct new capacity).
It generated some very detailed results, down to the most competitive routes to market for individual sources of renewable power.
For example, it calculated that wind power imported from Wyoming could out-compete natural gas in destination markets including Nevada, Utah, Arizona and California.
Despite having surplus prime resources, Montana wind power exports may not be cost-competitive because of "the cost of transmission through the rugged forests that dominate the western part of the state", it said.
The NREL report shows that unsubsidised wind power can compete with natural gas by 2025, in certain western states and under various assumptions.
And it highlights the opportunities for particular states such as Wyoming, which presently ranks fifth in cumulative wind capacity among the 11 western states studied, according to the American Wind Energy Association.
The report found that solar power might still need subsidies of some kind in more than a decade's time.
But that finding depends on assumptions which can be challenged.
The NREL study ran a sensitivity analysis demonstrating that if solar costs were just 10 percent below its reference, it would be cheaper than natural gas in several markets.
And that was still far less ambitious than the U.S. Department of Energy's so-called "sunshot" initiative, which aims for a full installed cost for large-scale solar of $1 per watt by 2020 compared with nearly $3 now.
"This is more than twice as aggressive as the cost reductions tested in this sensitivity analysis," the NREL study said, without explaining why it had modelled a cost much higher than the sunshot target.
Another gap was in residential solar generation, which the NREL study did not consider.
According to the U.S. solar trade body, the Solar Energy Industries Association, utility-scale (over 1 megawatt) and commercial projects each account for about 40 percent of cumulative installed solar capacity, and residential roof-top the remaining fifth.
The utility-scale segment is growing fastest.
But the residential market has seen the steadiest quarterly growth and could leapfrog the others in time, depending on the availability of finance and incentives.
The German solar market, the world's largest, illustrates its potential.
Germany pays incentives, or feed-in tariffs, which are higher per kilowatt hour for smaller projects. There is no exact equivalent in the United States.
According to a study by the Climate Policy Initiative think-tank, some 85 percent of German installed solar capacity was on roof tops as of 2010. (Reporting by Gerard Wynn; Editing by Anthony Barker)