Key factors driving renewable energy development last year — strong demand, declining costs, gains in battery storage technology and grid operators’ growing ability to handle renewables— are poised to continue into 2019, according to consulting firm Deloitte.
“In 2018, the U.S. renewable energy sector remained remarkably resilient, gaining ground despite uncertainty about the effects of federal tax reform legislation and a spate of new import tariffs,” Marlene Motyka, Deloitte’s US and Global Renewable Energy leader and a principal in Deloitte Transactions and Business Analytics LLP, said in a recently released report.
Utility-scale wind and solar accounted for 8 percent of U.S. generation in the first three quarters last year, up from 7 percent in the year-ago period, according to the report.
Looking at the demand for renewables, voluntary procurements made up 52 percent of utility-scale solar projects in development and 73 percent of projects announced in the first half of last year, the report said.
The demand is partly driven by corporations seeking out renewables, the report said, noting companies bought nearly 5,000 megawatts of renewables through mid-October last year.
Looking ahead, renewable developers may try to speed up their projects to take advantage of federal tax credits that are being phased down, suggesting a favorable outlook for this year.
“Developers may hasten to begin solar project construction by year end to qualify for federal tax credits before the investment tax credit for solar falls from 30 percent to 26 percent and expedite the in-service dates for wind projects before the production tax credit for wind phases out entirely in 2020,” the report said.
However, federal trade policies will likely create headwinds for renewable development.
There is a 30 percent import tariff on crystalline-silicon solar cells and modules, and tariffs on imported steel, aluminum and inverters from China, the report noted. The steel and aluminum tariffs could increase the levelized cost of energy from new U.S. renewable facilities by 3 percent to 5 percent, according to the consulting firm.
The report sees three trends that will likely support renewable development this year.
First, local, state and federal policies are helping the renewables market, according to Deloitte.
Some states, for example, are sharply expanding their renewable portfolio standards and also setting goals for 100 percent renewables.
Also, more than 200 mayors have adopted a goal of sourcing all their communities’ electricity from renewables by 2035, according to the report.
“Strong demand and renewable development at the state, municipal, and community levels are ushering in growth and opportunities, which may well provide a strong cushion against any potential federal and trade policies impacting competitiveness of renewables,” the report said.
At the same time, federal and state policies are supporting battery storage, which adds value to renewables and promotes further growth, the consulting firm said, adding that the Federal Energy Regulatory Commission a year ago directed grid operators to adopt rules to allow energy storage to fully participate in their markets.
“Across many states, policy makers are designing new rates (tiered and time-of-use) to drive solar-plus-storage growth, the way net metering drove distributed solar in the past,” the report said.
Federal and state policies are also giving offshore wind development a boost at a time when the technology’s costs are falling and offshore wind farms are being built in Europe, according to Deloitte.
Second, renewable procurement and project investment is expanding among current buyers and spreading to new groups such as smaller companies, oil and gas companies and asset management firms, the report said.
“Climate change, corporate social responsibility, falling renewable costs, and the drive to diversify have renewed many oil and gas companies’ interest in the renewable energy sector,” the consulting firm said.
Also, asset managers are starting to create portfolios of distributed commercial and industrial renewable projects, as well as community renewable projects, according to Deloitte.
Third, the report noted that emerging software and digital applications are supporting renewables. They are supporting, for example, peer-to-peer renewable energy trading, tracking the origin of renewable energy certificates and paying for electric vehicle charging through blockchain technology, the consulting firm said.
“Unlike previous renewable sector innovations based largely on material and design improvements, these innovations enable the renewable sector to open new business and revenue models based on integrated data and platform analytics,” the report said.
The report is available here.
