Solar and wind power are becoming more economically competitive with their fossil fuel competitors. Now, after the repeal of tax credits and other spending in the Lower Inflation Act, as well as the easing of individual state aid, US renewable energy capacity will accelerate in 2023, a new report says.
Domestic renewable energy growth will slow in 2022 amid rising input costs and supply chain disruptions, trade policy uncertainty, inflation, rising interest rates and delays in power sector interconnection.
While many of these challenges are likely to continue into 2023, business consultant Deloitte said in a forecast released Wednesday that renewable energy is likely to grow next year due to demand for IRAs and "greater incentives for clean energy." , the massive spending bill was signed by President Biden in August.
Key drivers of industry growth include economic competition, federal and state clean energy policies, utility decarbonization, corporate purchases of renewable energy, solar and private housing investment, the report said.
Rising demand in 2023 could exacerbate supply chain constraints and interconnection bottlenecks, raise prices and extend project timelines, consultants said.
And constraints on transmission, the movement of clean energy produced from electricity to businesses and homes, could hold back growth until capacity is significantly increased, forecasters warn.
Moreover, the U.S. stimulus is largely based on a domestic jobs-only position, which President Biden is using to sell the bill to a thinly divided Congress. The U.S. faces resistance from its global trading partners, which do not want to be left out of the U.S. renewable energy deal, and meeting growing demand without globalization will be a challenge, Deloitte analysts said.
But the following trends and opportunities could help the industry overcome growth hurdles in 2023 and lay the groundwork for faster growth in 2024 and beyond.
Marlene Motika, co-author of the Deloitte report, said renewable energy developers often design projects that require consent and years of planning. This means that the IRA will likely put more projects into the planning stage next year, with work already underway, and the US can expect many projects to be operational by 2025-2026.
In particular, offshore wind has a significant construction time. The "key provision" of the IRA is the Energy Investment Tax Credit (ITC), which offers up to a 30% credit for projects starting in 2026, Atlantic Council analysts wrote at the time of the transition.
To receive full credit, projects must meet the student's salary and employment requirements. In addition, the IRA is open to leasing additional land in the eastern Gulf of Mexico and along the Atlantic coast of North Carolina, South Carolina, Georgia and Florida, which the Trump administration previously banned.
The Deloitte report details growth forecasts in the following areas:
Increasing production of clean energy components can reduce supply chain disruptions over time. US production does not currently meet the renewable energy sector's needs for clean energy components supported by secure domestic supply chains. The IRA fueled stimulus growth that will continue to accelerate in 2023.
Offshore wind solves the challenge of unlocking rapid growth. By mid-2022, 12 states have more than 40 gigawatts (GW) of potential US offshore wind capacity. Currently, the operational capacity is only 42 megawatts (MW), about 1 GW is under construction, and about 19 GW is under approval. Another 20 GW is under deployment and planning and will likely take several years to develop.
A new clean hydrogen economy could pave the way for renewable energy providers. After the IRA expires in August 2022, interest in green hydrogen has exploded. A production tax credit (PTC) of US$3 per kilogram of eligible "clean" hydrogen could make it competitive with higher-carbon "grey" hydrogen. Larger than the area of the Earth. Gray hydrogen is produced by steam methane reforming of natural gas or methane, but without the involvement of greenhouse gases produced in the process.
IRAs help encourage renewable energy providers to take advantage of opportunities in underserved communities . Enrollment among low-income and disadvantaged populations is likely to increase next year. About 44% of American families are defined as low-income, and this group could benefit the most from clean energy savings because their "energy burden," or the share of household income spent on energy, is 8.6%, about 3.5 times. The national average can be as high as 30%.
The renewable energy industry is focused on developing cyber risk management . Cyber threats are expected to increase in 2023 and beyond as the clean energy transition focuses on utilities and distributed renewables. The industry is preparing for a growing wave of distributed, often digitally controlled, third-party and collective grid-distributed energy sources, about half of which are solar systems.
Additionally, the growth projections for renewables are driven in part by expectations that investment in traditional fossil fuels will decline. This point of view has even been shared many times by the International Energy Agency, the representative of the oil industry.
IEA executive director Fatih Birol emphasized his belief that the golden age of natural gas is over.
Birol, who first spoke about this last year and recently, said that renewable energy capacity is replacing some gas demand in developed countries and that developing countries will not invest heavily in gas import infrastructure when gas prices are much higher than average. -Equal. In fact, the IEA's World Energy Outlook 2022 report predicts a peak in global demand for fossil fuels by the end of the decade.
Birla argues that 2022-2023 will be a turning point for the energy transition as energy security becomes a political priority. This means more countries will look to domestic renewable energy options they can control, relying less on global oil and gas markets. Combined with new industrial policies and climate commitments, this could accelerate the energy transition, he said.
