After a Bumpy Year, Renewable Energy Looks Poised for Boom Times

Pure Addition of Akshay According to the International Energy Agency, electricity grew to an estimated 352 GW of capacity in 2022, up from 286 GW last year. IEA raises its five-year capacity expansion forecast Its biggest annual growth ever, up nearly 30% this year, is buoyed by supportive policies and a renewed appreciation for energy security. What’s more, by early 2025, the IEA said it expects renewable energy to be the largest source of electricity in the global electricity mix, surpassing coal.

Promoting the IEA’s improved approach: First is the global energy crisis caused by Russia’s invasion of Ukraine that has prompted European countries to improve their energy security and build more renewable energy capacity within their borders to replace Russian fuel imports. inspired to try. and second, more supportive renewable policies in Europe, the US, India and China.

Here’s a look at solar and wind installations, power-purchase agreements and other advances in renewable energy last year, as well as expectations for 2023 and the years ahead.

solar

Utility-scale solar is the cheapest option for generating electricity. and with the cost of the commodity rising in price Electricity, the IEA said, will be on pace to overtake coal as the largest share of electricity capacity globally by 2027, and natural gas by 2026.

India and the US are making efforts to make more solar components within their borders, but the IEA said China will still be the dominant player with $90 billion in investments from 2022 to 2027. Nevertheless, investment in solar manufacturing in India and the US combined will reach approximately $25 billion. The IEA said that from 2022 to 2027, there is a sevenfold increase compared to the previous five years.

US solar industry ramps up capacity In fits and starts this year due to the trade deadlock. A dispute over tariffs between the US and China significantly slowed solar installations in the US, leading to President Joe Biden reduce impact In part by signing an executive order in June that halts additional charges for two years. Shipments and equipment orders resumed, but supplies remained constrained and prices were higher than usual. seperately in june Enforcement of the Uyghur Forced Labor Prevention Act Further supplies were affected and more equipment was held up at ports.

Trade issues played a key role in the decline According to Wood Mackenzie, new U.S. solar capacity installations will total about 15.7 GW in 2022, up from 24.1 GW in 2021. Still, the energy-research firm expects growth to recover next year.

Wood Mackenzie analyst Michelle Davis points to the August passage of the climate-and-spending bill, called the Inflation Reduction Act, as a boon for the solar industry, though she said the legislation’s benefits will probably be short-lived. will not be seen until at least 2024 because of current supply constraints.

But supply difficulties should abate sometime next year, Ms Davies said, after importers work through various new requirements. “The industry will return to growth next year,” he said. “While the timing is still uncertain, volumes are expected to pick up.”

Air

Wind installations picked up pace this year as the industry struggles with inflation, permitting, grid infrastructure and supply-chain disruptions from the COVID-19 pandemic.

The IEA estimates that worldwide wind capacity will almost double from 2021 to 2027, with offshore projects accounting for a fifth of the growth. But additions to onshore wind projects will not break the annual record set in 2020 until closer to 2027 as they continue to face long permitting times and poor grid improvements.

In the US, Wood Mackenzie analysts project that wind-power capacity added in 2022 was in the range of 12.6 GW, down significantly from 2020’s 18 GW. Despite that slump, this year’s growth was strong and the climate-and-spending bill should provide long-term stability, notably the extension of a 10-year tax credit for wind power, Power for America at Wood Mackenzie and said Luke Lewandowski, director of renovations.

Still, Wood Mackenzie said it expects new installed wind capacity to fall 10% quarterly in 2023 as developers, manufacturers and others in the industry await guidance from the US Treasury on tax credits. In the longer term, developers will seek to maximize the tax credit and install substantial additions in 2028 before the credit is phased out. Begins in 2032.

power-purchase agreement

Historically, power-purchase agreements or PPAs have reduced prices The so-called levelized cost of energy as well as the comparable cost of projects. But the prices companies are paying for long-term renewable-energy deals in the US have risen because of inflation, supply-chain problems, the risk of solar tariffs and new regulations on forced labor.

According to consulting firm Bain & Company, the average US market price for PPAs over a nearly 20-year period for both wind and solar is expected to increase from about $30 per MWh in the same period in 2020 to about $46 per MWh in the third quarter of 2022. It’s been an hour. Coal and gas prices also rose, helping to drive up the cost of renewable energy.

For solar, PPA prices are likely to remain high next year, thanks largely to uncertainty after the US Commerce Department found four major Chinese solar-cell makers US tariffs bypassedsaid Aaron Denman, who leads the US utilities and renewables practice at Bain.

But climate and spending bill support for solar industry growth should reverse recent spikes in PPA costs, he said. According to Bain, PPA pricing is unclear before 2030.

In the case of wind, Denman said, inflation, supply-chain problems and rising interest rates have helped send US PPA prices for such projects up nearly 60% over the past two years.

“We have seen projects renegotiated, but projects are unlikely to proceed unless the previously agreed terms can be renegotiated,” Mr Denman said, pointing to the case of

vanguard Inc.,

Which recently halted a wind project off the coast of Massachusetts.

grid

Long waits for permits and permissions to build new grid infrastructure to capture more renewable energy remain a challenge.

By this year, a record 1,400 gigawatts of total generation and storage capacity are seeking interconnection to the grid, far exceeding the current US generation capacity of 1,200 gigawatts, according to the Lawrence Berkeley National Laboratory, part of the US Department of Energy. ,

No significant progress has yet been made to speed up the process, and politics is a big culprit, The effort to overhaul permitting by Sen. Joe Manchin (D., W.Va.) has hit roadblocks after both progressives and conservatives opposed the measure for different reasons.

energy storage

The downward trend in battery pack prices reversed this year, but energy storage units that help better conserve wind and solar power are still spreading fast.

The average price of lithium-ion battery packs is set to rise from $141 per kilowatt hour in 2021 to $151 per kilowatt hour in 2022, according to data-provider BloombergNEF, after declining for more than a decade. Higher raw material and component costs drove up battery prices, but the firm said costs are expected to start falling again in 2024 as more mining and refining comes online.

Nevertheless, the US grid is slated to grow to 7,828 MW of battery storage capacity by October 2022, up from 4,752 MW at the end of 2021. Noel Bakhtian, executive director of the Berkeley Lab Energy Storage Center.

Battery storage is getting a boost from the passage of the climate and spending bill, as well as a separate infrastructure-investment bill amid a national focus on securing supply chains, he said.

“The next few years are looking more promising than at any other time in history for expanded energy-storage deployment, which is critical to meeting our global climate goals,” Ms. Bakhtian said.

write to dieter holger at dieter.holger@wsj.com