Navigating the Renewable Revolution: Opportunities and Obstacles in 2024
As the renewable energy industry reaches new heights, it’s time to take a closer look at the policy updates that are shaping the landscape. 2024 is poised to be a pivotal year, with a series of legislative actions and regulatory changes that will either propel the sector forward or create additional hurdles.
Let me be your guide as we dive into this rollercoaster ride of renewable energy policy. Fasten your seatbelts, folks, because it’s going to be an exhilarating journey!
Soaring Solar and Struggling Wind
In a bifurcated renewable landscape, the solar market has been the real shining star, with utility-scale capacity additions outpacing other generation sources by a whopping 36% in the first eight months of 2023. Small-scale solar also saw a remarkable 20% surge. Meanwhile, the wind sector has faced some sweeping challenges, with only 28 GW of new capacity added – a 57% plunge from the previous year.
This dichotomy has been driven by a perfect storm of headwinds, including supply chain constraints, labor shortages, interconnection delays, and transmission limitations. While the Inflation Reduction Act (IRA) and the Infrastructure Investment and Jobs Act (IIJA) have provided a much-needed boost, the industry is still grappling with the seismic shifts required to meet the country’s ambitious climate targets.
“The tandem push of federal investments and the pull of decarbonization demand have never been stronger. But these forces are also unleashing a variable-speed takeoff across renewable technologies, industries, and markets.” – Carolyn Amon, Deloitte Research Center for Energy and Industrials
Powering Ahead with Policy Tailwinds
The IRA and IIJA have been game-changers, catalyzing a staggering $227 billion in announced public and private investments in utility-scale solar, storage, wind, and hydrogen. This historic injection of capital has been a lifeline for the industry, with $100 billion already materialized and an additional $82 billion poured into distributed renewables and heat pumps.
The impact has been particularly profound on the solar and storage sectors, which have captured the lion’s share of this investment. In fact, a record 72 GW of standalone solar was added to the interconnection queue just a month after the IRA was passed – more than the preceding 11 months combined! And venture capital funding for solar and storage has continued to grow, even as the broader VC industry has slowed down.
But it’s not all sunshine and rainbows. The wind sector has faced the brunt of these headwinds, with a 35% drop in investment over the past year. Permitting challenges and cost pressures have been the primary culprits, leading to record curtailments and lengthy project delays.
Hydrogen Hype and Heat Pump Hurdles
While the IRA and IIJA have set the stage for a new green hydrogen economy, the industry is still waiting with bated breath for Treasury guidance on the tax credits that could make this fuel source truly competitive. Exports could play a key role in resolving demand uncertainty, but the industry will have to keep a close eye on developments in the seven selected hydrogen hubs as they move into the design and planning phase.
On the other hand, the much-touted energy efficiency surge has yet to materialize, with heat pump deployments only growing by a measly 1% over the past year. Final DOE guidance on direct customer rebate programs could be the catalyst needed to unlock this potential, alongside the US Climate Alliance’s ambitious goal of installing 20 million heat pumps by 2030.
Transmission Turmoil and Permitting Pandemonium
One of the most significant constraints on renewable deployment has been the lack of transmission capacity. Insufficient grid infrastructure has driven up congestion costs by a staggering 72% in 2022, hampering the industry’s ability to capture the full benefits of low-cost renewables.
But help may be on the way. The IIJA and IRA have poured billions into initiatives aimed at accelerating high-voltage transmission line permitting and funding key interregional grid projects. We’ll be keeping a close watch on the DOE’s release of additional Transmission Facilitation Program funding and FERC’s interconnection rule compliance plans in the coming year.
“Capturing the full customer benefit of low-cost renewables hinges on transmission. Interregional and regional transmission would need to more than double and quintuple respectively to meet high clean energy growth projections by 2035.” – Marlene Motyka, Deloitte US Renewable Energy Leader
And then there’s the thorny issue of local and state restrictions on renewable projects. Over the past year, we’ve seen a surge in contestations and opposition, with wind projects facing the longest delays of up to 16 months. Generative AI could be a game-changer here, helping developers assess community sentiment and automate permitting and siting processes.
Reshoring the Renewable Supply Chain
The IRA has also ignited a domestic clean energy manufacturing renaissance, with companies announcing a staggering $91 billion in investments across over 200 projects. This is a striking reversal from the U.S. import dependence for 85% of solar supply just a year ago.
Solar is leading the charge, with planned projects that could more than triple the country’s module capacity in 2024 and meet domestic demand before 2030. Storage is also on a similar trajectory, with announced projects driving almost eightfold growth in battery manufacturing capacity.
But it’s not all smooth sailing. The wind supply chain remains more reliant on imports, with Chinese manufacturers capturing 70% of turbine orders in the first half of 2023. And the burgeoning green hydrogen industry is still grappling with the dominance of low-cost manufacturing regions like China.
“Announced manufacturing and generation projects across solar, storage, wind, and clean hydrogen plants and their supply chains anticipate the creation of 72,557 annual construction jobs over five years and 24,193 annual operations and maintenance jobs over the lifetime of the plants.” – Kate Hardin, Deloitte Research Center for Energy and Industrials
Powering the Workforce of the Future
As the renewable energy sector ramps up production, one of the biggest challenges will be finding and training the right workforce. The industry is already facing a half-million construction worker shortage, and the skills gap is only widening.
Deloitte’s research has identified critical skill gaps across core roles in the renewable energy industry, from electrical engineering and manufacturing processes to computer science and automation. And with the rise of generative AI, the demand for tech-savvy talent is only going to intensify.
But the good news is that the IRA and IIJA have provisions to help address these workforce challenges. We’re expecting to see more renewable developers and utilities tapping into the $54 billion in IIJA and IRA funding available for green workforce development. And the final guidance on prevailing wage and apprenticeship requirements could be a game-changer in creating a pipeline of renewable energy apprentices.
Busting the Resilience Myth
One of the most persistent myths about renewable energy is that it’s not as resilient as traditional power sources like natural gas and nuclear. But the experience of the past year has shown that renewables can be the real resilience champions, especially when paired with storage.
During extreme weather events like Winter Storm Elliott, renewable generation like wind power helped keep the grid running when other sources failed. And in the summer, batteries discharging in the evening played a crucial role in avoiding blackouts in Texas, even as solar and wind generation covered more than a third of the demand load during the day.
“Shifting seasons and states, in the summer, thermal plant outages unexpectedly went above the 11,000 MW red line which, according to the Electric Reliability Council of Texas, could put its grid at risk.” – Jim Eiting, Deloitte US Power Utilities & Renewables Leader
As the frequency and intensity of these extreme weather events continue to rise, renewables are proving to be a vital component of the grid’s resilience. And with the help of generative AI, developers are using predictive analytics to further enhance the reliability of renewable resources.
Embracing the Renewable Renaissance
2024 is shaping up to be a pivotal year for the renewable energy industry, with a confluence of policy updates, technological advancements, and market forces that will either propel the sector forward or create additional obstacles.
From the historic investments of the IRA and IIJA to the resurgence of overlooked renewable resources like geothermal and renewable natural gas, the renewable energy landscape is in a state of constant evolution. And as the industry navigates these challenges and opportunities, one thing is clear: the renewable revolution is here to stay.
So, let’s strap in and get ready for the ride of a lifetime. The future of renewable energy is unfolding before our very eyes, and I can’t wait to see what 2024 has in store. Remember, you can always visit Firewinder to stay up-to-date on the latest renewable energy solutions and innovations.