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Market headwinds persist through 2023 for rapid deployment of renewables, report says

A Deloitte survey of power executives found that 56% of respondents believe it would take two to three years to ease supply chain constraints in the U.S. clean energy market.

Despite a market crippled by rising costs, supply chain disruption, trade policy uncertainty, inflation and interconnection delays, renewable energy deployments are expected to accelerate in the coming next two years, supported by the Clean Energy Inflation Reduction Act incentives.

In Deloitte’s 2023 Renewable Energy Outlook, the global consultancy group says market headwinds are expected to persist for most of 2023, with growth expected to be unlocked in 2024.

The United States added 5.7 GW of utility solar projects and 7.5 GW of wind power in the first eight months of 2022, down 26% and 8%, respectively, from the comparable period by 2021. Still, solar and wind capacity accounted for 70% of new capacity added, with the share of U.S. electricity generation from renewables dropping from 21% to 23% year-over-year. ‘other.

Drivers of renewable energy growth in 2023 include:

  • Cost competitiveness. While the cost of renewables may continue to rise temporarily in 2023 due to supply chain challenges, wind and solar are likely to remain the cheapest energy sources in most regions as Fuel costs for conventional generation have risen faster than renewable energy costs.
  • Federal Clean Energy Policies. Among other support provisions, the IRA extends solar and wind tax credits for projects whose construction begins before 2025 and technology-neutral credits until at least 2032. Projections suggest the law will boost 525-550 GW of large-scale clean new energy by 2030.
  • National clean energy policies. 22 states and the District of Columbia are aiming for 100% renewable energy or 100% carbon-free electricity with target dates between 2040 and 2050.
  • Decarbonization of public services. As of October 2022, 43 of the 45 largest investor-owned utilities have pledged to reduce their carbon emissions, and promoting renewable energy is one of their key strategies.
  • Corporate Renewable Purchases stimulated a record 11 GW of clean power installations in 2021 and is expected to surpass it in 2022. More than 389 global companies have committed to 100% clean power by joining the RE100 renewable electricity initiative, compared to 200 in 2019.
  • Residential solar demand is growing faster than ever, up 35% in the first half of 2022 year-on-year, as households respond to rising electricity prices and weather-driven blackouts.
  • Private investment. Investments in renewable energy reached a record $10 billion last year. This could continue as investors are drawn to transparent returns on mature technologies backed by 10-year tax credits with direct payout options.

Bottlenecks hold back growth

U.S. manufacturers produced 5 GW of solar modules in 2021, well below the 20 GW of solar capacity needed in the same year, according to Deloitte. One of the main pillars of the IRA is to encourage domestic manufacturing of solar panels, production of advanced batteries, components for offshore wind turbines and various other products to fuel the independence of the energy transition in the United States .

Two months after the IRA was passed, Deloitte calculated that $28 billion in new manufacturing investment in the solar, battery and electric vehicle manufacturing verticals had already been announced. Enel and First Solar are committed to building solar manufacturing capacity, expanding additional factories and developing a supply chain from raw materials to modules.

While this is good news for the renewable energy supply chain, a Deloitte survey of power industry executives found that 56% of respondents said it could take two to three years to complete. ease supply chain constraints.

Energy equity

With 44% of US households defined as low-income, the IRA encourages the development of projects such as community solar to provide greater access to cost savings from co-located solar development.

Clean energy projects eligible for the 30% IRA investment tax credit can add 10% to 20% bonus credit if the project is located in an “environmental justice” area.

In another Deloitte survey, 46% of power executives said their company plans to build renewable energy projects in low-income communities in the coming years.

Offshore wind

The offshore wind market has grown to over 40 GW of generation capacity located in 12 states, with 1 GW currently under construction and 19 GW in the licensing phase.

With a further 20GW of offshore wind in the siting and planning phase, the next few years could be crucial to unlocking renewables growth under the IRA’s funding and tax incentives and the bipartisan Utilities Act. 2021 infrastructure.

In 2023, the industry is expected to face challenges such as financing and construction risks, transmission network upgrades and a shortage of vessels and port infrastructure to support the deployment of offshore wind projects. Over the past two years, 10 domestic manufacturing facilities have been announced at East Coast ports, while IRA tax credits could spur additional investment in offshore wind.

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