In a divided landscape for renewable energy, the solar sector experienced positive growth in 2023, while the wind industry encountered substantial challenges. The latter faced difficulties stemming from factors such as increased project costs, labor and capital constraints, delays in interconnection and permitting, and limitations in transmission capabilities. Simultaneously, there was a gradual improvement in the supply chain situation, coinciding with the implementation of significant clean energy and climate regulations.
Within the United States, the period from January to August 2023 witnessed utility-scale solar capacity additions outpacing other generation sources, reaching nearly 9 gigawatts (GW) — a notable 36% increase compared to the same timeframe in 2022. Small-scale solar generation also exhibited growth, expanding by 20%. On the contrary, only 2.8 GW of wind capacity was added during this period, reflecting a substantial 57% decline from the previous year. Consequently, renewables accounted for slightly over half of the added capacity, down from two-thirds in the preceding year. Despite these changes, the share of renewable energy in total US electricity generation remained constant at 22%. Looking ahead to the close of 2023, the US Energy Information Administration anticipates utility-scale solar installations to more than double compared to 2022, reaching a record-breaking 24 GW, with wind capacity increasing by 8 GW.
The synergy of federal investments in clean energy and the growing demand for decarbonization from both public and private entities has never been more pronounced. As we enter 2024, these combined forces have the potential to help renewables overcome the challenges posed by the transformative shifts necessary to achieve the country’s climate targets. The dynamics of progress and obstacles shaping the upcoming year have positioned the renewable energy sector for a variable-speed ascent across various technologies, industries, and markets.
Regulatory Impacts on Renewable Landscape: Historic Investments and Challenges
The Investment Infrastructure and Jobs Act (IIJA) and the Infrastructure Investment and Jobs Act (IRA) have played a pivotal role in shaping the renewable energy sector. These legislative measures have ushered in historic investments, introducing new programs, grants, and tax credits to expedite the deployment of established and emerging renewable technologies.
Financial Landscape: Catalyzing Investments in Solar, Storage, Wind, and Hydrogen
Over the past two years, the IIJA and the IRA have been instrumental in catalyzing an impressive $227 billion in announced public and private investments in utility-scale solar, storage, wind, and hydrogen. This financial boost has materialized into $100 billion in investments, with an additional $82 billion allocated to distributed renewables and heat pumps.
Solar and Storage Dominance: Impacts on Investment and Venture Capital
Utility-scale solar has emerged as a frontrunner, capturing the lion’s share of both announced and actual investments, reaching $92 billion and $52 billion, respectively. The IRA’s influence is particularly notable, with a record 72 GW of standalone solar added to the interconnection queue in the month following its passage. Despite a general industry slowdown, venture capital funding for solar and storage increased during the first three quarters of 2023.
Hydrogen’s Potential: Bridging the Gap between Announced and Actual Investments
The IIJA and the IRA have set the stage for the takeoff of a new green hydrogen economy. However, there exists a significant gap between announced and actual investments, reflecting uncertainties surrounding pending Treasury guidance on tax credits for green hydrogen. The potential success of hydrogen investments hinges on forthcoming guidance and its alignment with global approaches.
Wind Challenges: Declining Investments and Project Delays
Wind investments have faced challenges, experiencing a 35% drop over the past year due to higher costs and permitting issues. Wind projects are grappling with prolonged delays, and offshore wind encounters capital requirements, long development timelines, and contract challenges. Despite setbacks, the industry anticipates adaptation and evolution in 2024.
Anticipated Developments in 2024: Evolution and Adaptation
The renewable energy sector is poised for further evolution in 2024, marked by key developments such as the start of operations at Vineyard Wind, construction of the largest offshore wind project in Virginia, and coordinated procurement efforts in northeastern states. The industry is expected to adapt to challenges, with potential shifts in agreements, project economics, and a focus on onshore grid connections in energy communities.
Energy Efficiency Landscape: Striving for Targets and Initiatives
Investments following the IRA have fallen short of ambitious targets for energy efficiency, particularly in heat pump deployments. The industry anticipates potential growth in 2024, driven by final DOE guidance on state administration of direct customer rebate programs and initiatives from the US Climate Alliance.
In conclusion, the renewable energy sector faces a dynamic landscape in 2024, influenced by federal investments, regulatory impacts, market dynamics, and emerging technologies. Each subsector—solar, storage, hydrogen, wind, and energy efficiency—presents unique challenges and opportunities as the industry strives for sustainable growth and adaptation.
Transmission Challenges: IIJA and IRA Initiatives
Transmission Barriers
Renewable deployment faces hurdles due to insufficient transmission capacity, resulting in a 72% rise in congestion costs to $20.8 billion in 2022.
Government Initiatives
The IIJA and IRA introduce measures in 2024 to address transmission challenges, including expediting high-voltage transmission line permitting and allocating grants for grid resilience.
Reshoring Clean Energy Manufacturing
Domestic Manufacturing Revival
Clean energy production experiences a $91 billion reshoring boost, fostering a domestic manufacturing revival driven by IRA tax credits and demand from renewable developers.
Solar and Storage Surge
Announced projects signal a significant expansion in solar and storage capacity by 2024, challenging the industry’s prior import dependence.
Balancing Incentives
The reshoring strategy involves new domestic polysilicon capacity and manufacturing plants, with a focus on balancing incentives, pricing, and addressing global overcapacity concerns.
Trade Rules and Guidance Impact
Enforcement of trade rules, the Uyghur Forced Labor Prevention Act, and final Treasury guidance on the domestic content adder are anticipated in 2024, influencing trade dynamics and industry reshaping.
Storage and Battery Manufacturing
Announced projects forecast an eightfold growth in battery manufacturing capacity by 2024. Challenges include record lithium-ion battery imports, highlighting dependence on imports for key components. Uyghur Forced Labor Prevention Act enforcement could boost domestic supply chain development.
Wind’s Offshore Challenges
Concerns arise due to little capacity change planned in 2024, especially offshore. China dominates the global wind market, raising worries about infrastructure development and capacity additions. Meeting Biden’s offshore wind target may require a substantial investment in manufacturing facilities and vessels.
Hydrogen Electrolyzers and Critical Minerals
Electrolytic hydrogen is in early stages, with the US expecting 9 GW of manufacturing capacity by 2024. Critical mineral demand rises due to the IRA, highlighting supply constraints and China’s export controls. Domestic content requirements for electrolyzers may be prompted in 2024.
Renewable Energy Reshoring Trends
Companies engage in strategic reshoring ventures, forming partnerships for a stake in the emerging domestic supply chain. Supply chain digitalization enhances transparency, efficiency, and awareness of competitor demand. Initiatives for end-of-life management and recycling address sustainability and critical mineral recovery.
Reskilling the Workforce
Clean energy jobs grow by 10%, with 3.3 million jobs, emphasizing a need for workforce growth and retraining. Wind turbine service technicians and solar PV installers project the fastest-growing occupations by 2032. Challenges include a workforce shortage, a growing skills gap, and underrepresentation of women and minorities.
Workforce Unlocking Strategies
Developers are expected to implement equity, quality, agility, and comity strategies to address the workforce bottleneck. The US Treasury’s final guidance on prevailing wage and apprenticeship requirements is anticipated in 2024. Greater uptake of funding from IIJA and IRA programs for green workforce development is expected.
Renewables as a Resilience Strategy
Renewables, especially coupled with storage, emerge as a resilience strategy amid extreme weather events. Survey misperceptions exist, with more concern about the resilience of renewables compared to supply chain challenges. Renewables prove effective in generating electricity during extreme weather, challenging the perception of their resilience.
Challenges in Gas Reliability
Gas reliability challenges surpass renewables during extreme weather events. Winter Storm Elliott causes record outages, with natural gas infrastructure issues impacting the Eastern Interconnection. Gas plants, accounting for 46% of PJM capacity, drive 70% of forced outages.
Nuclear Reliability Concerns
Nuclear faces rising reliability issues due to climate change impacts on operations. Shutdowns during hot weather alerts contribute to a 25% rise in total nuclear capacity outages in 2023. Unplanned nuclear outages total 31 from January to October 2023.
Renewables and Storage Resilience
Renewables paired with storage emerge as resilient alternatives to gas and nuclear. Wind generation aids during Winter Storm Elliott, preventing blackouts with 49 GW of forced outages. Batteries play a crucial role in Texas, avoiding blackouts during peak demand, with solar and wind covering a third of ERCOT’s load.
Distributed Renewables and Storage
Distributed renewables contribute during electricity conservation, with residential storage systems activated. Utilities subsidize residential battery installations, creating AI-orchestrated aggregations for peak demand. Generative AI enhances solar power forecasting, mitigating extreme weather and cyberattacks.
Technological Resurgence: Underground Renewables
Geothermal and Renewable Natural Gas (RNG) redefine renewable capabilities. Enhanced Geothermal Systems (EGS) aim for 6% of US utility-scale generation by 2035, with breakthrough announcements in 2023. RNG project development accelerates, growing tenfold by 2050, driven by demand from various sources.
Expectations for 2024
Climate legislation effects to intensify with finalized tax credit guidance and more IRA grant funding. Solar and storage deployments to soar, onshore wind to recover, and offshore wind and green hydrogen to establish a foothold. Clean energy manufacturing renaissance to enhance domestic supply chains, emphasizing the need for a bigger and smarter grid. Signposts include US Treasury guidance on hydrogen, IRA and IIJA funds impact on workforce development, and grid reform actions.
