The renewable energy sector is ready to diversify
Rapid technological improvements and falling costs of renewable energy resources, along with the increased competitiveness of battery storage, have made renewables one of the most competitive energy sources. Despite supply chain constraints, rising shipping costs and rising prices for major commodities, capacity installations remained at an all-time high. Wind and solar capacity additions increased by 33% through October 2021 compared to the previous year.
In 2022, the growth of renewable energy is set to accelerate, as concerns about climate change and support for environmental, social and governance (ESG) considerations increase and demand for energy sources of most market segments is accelerating. Additionally, the Biden administration’s vision to completely decarbonize the U.S. economy is helping to drive activity in the renewable energy sector that will likely drive future growth.
Here are five trends that are likely to impact the industry in 2022:
Growing interest in next-generation clean energy technologies
Activity is heating up in technologies such as green hydrogen, advanced batteries and other forms of long-term storage. Stakeholders in the renewable energy industry are considering investing in these technologies, which can eventually help to confidently integrate variable renewables such as wind and solar into the power grid. For an industry that has largely focused on solar and wind power, private investment and pilot projects combined with federal research support could help accelerate the commercialization of these emerging technologies.
In 2022, as the penetration of renewables on the grid increases, the development of green hydrogen is expected to grow, due to its potential to act as long-term and seasonal fuel storage available on demand to produce electricity. Interest is also high in a host of evolving mechanical and battery storage technologies offering long-lasting, grid-enabled energy storage options.
Solar champions new configurations
After an 85% drop in costs over the past decade, solar photovoltaic (PV) systems are among the most competitive energy resources. As it flexes its competitive muscles, the solar industry will likely explore new configurations and business models. Combining storage with solar offers cost synergies, operational efficiencies and the opportunity to reduce storage capital costs through the Solar Investment Tax Credit.
Second, the expansion of community solar projects into new markets in the United States. With more than half of U.S. households unable to purchase rooftop solar due to lack of sufficient sunlight, access to credit, or home ownership, these programs, when available, allow residential customers to enjoy the benefits of shared solar power. And third, exploring floating solar photovoltaic (FSPV) projects either separately or as hybrids with hydropower.
Transmission infrastructure is becoming a key priority, especially for offshore wind
Transmission development is expected to be a big part of the industry agenda in 2022. In fact, 76% of power and utility sector respondents to a recent Deloitte survey are planning or dependent on new projects of transmission to stimulate access to renewable energies.
Political and regulatory support, investment and innovation will likely help unlock progress, which has often been hampered by localization and permitting delays. Transmission projects, especially inter-regional ones, have so far remained a major challenge for renewable energy growth as they struggle to gain regulatory approval from every state they pass through and can face refusal from landlords. land rights and opposition from environmental groups.
About 844 GW of proposed capacity, 90% of which is renewables or energy storage, is tied up in transmission interconnector queues. Improving the capacity of existing lines and building new lines could be key to solving the transmission problem. In fact, 76% of electricity and utility sector respondents to a recent Deloitte survey are planning or relying on new transmission projects to boost access to renewable energy.
Supply chain strategies continue to evolve
The industry is expected to continue to evolve supply chains as earnings have recently suffered from logistics cost pressures and trade tensions between the United States and China. In 2021, the solar industry remained under pressure and prices rose year-over-year for the first time in seven years due to shortages in the supply of components, raw materials and labor as well than increased shipping costs. In 2022, US renewable energy developers will likely continue to seek alternative suppliers, including domestic manufacturers; reassess supply needs; and developing substitutes to help alleviate these pressures.
Many solar installers and developers will likely also step up their compliance monitoring activity as they try to adhere to the Solar Energy Industries Association’s Solar Supply Chain Traceability Protocol, a set of guidelines intended to trace the origin of solar materials.
The circular economy is essential for sustainable growth
In 2022, end-of-life (EoL) management strategies for products and materials should gain attention as the first installations approach the end of their useful life. This could help reduce waste, increase resource security, and provide additional financial value and sustainability credentials. While solar, wind and battery installations are set to reach new heights, waste generation is also likely to soar and require urgent solutions. By 2030, decommissioned photovoltaic modules could total 1 million tons of waste, and there could be 80 metric kilotons of lithium-ion (LiB) batteries to be recycled in the United States.
Industry stakeholders, regulators and policy makers have begun to explore solutions to extend life and increase performance, recovery and reuse of products and materials. The case for building a circular economy for batteries involves closer collaboration across industries and between business and policy makers.
The industry will likely benefit as new capital becomes available, the transmission process is streamlined and new technologies come to market. For more information, read the full Deloitte 2022 outlook for the renewable energy sector.