Clean Energy Projects Show Regional Variability

The renewable energy industry is exploding with new opportunities. In the next five years alone, we can expect to see as much global renewable capacity growth as we have in the past 20 years. In the United States, much of this will be driven by the Inflation Reduction Act (IRA) and its hundreds of billions of dollars allocated to tax credits for clean energy projects, domestic manufacturing support, new labor standards, and other significant investments.

Until now, the U.S. hadn't experienced such a sweeping and actionable national clean energy initiative. 2022 saw supply chain challenges, clogged interconnection queues, and policy and regulatory obstacles that delayed development and construction through the end of the year. But with the commencement of the IRA and other federal and state climate and energy policies, renewable technologies are poised for a 2023 rebound.

The pace and technological focus of renewable energy development across the country has varied widely by geographic region. The American Clean Power Association (ACP) recently released a market report detailing concentrations of projects in the development pipeline, ranging from only one megawatt (MW) of capacity to upwards of 600 MW. At present, solar projects dominate across the board, particularly clustered in the mid-Atlantic and upper-Southeastern U.S. The New England area holds promise for offshore wind, while California is set to explode with energy storage development. Texas on its own will host numerous solar, energy storage, and onshore wind projects. And the Midwest, though a bit less concentrated, shows potential for onshore wind and solar.

Credit: American Clean Power Association, November 2, 2022

These projects are already in the works. As more funding and clean energy standards enter the picture, however, what trends can we expect to see? California, for example, is targeting a zero-carbon economy by 2045. Will energy storage development continue to grow? It seems likely, particularly given the IRA‚ new energy storage investment tax credit (ITC) and other incentives. In California's race to a clean economy, battery storage systems will be key to removing polluting natural gas peaker plants from the grid. For example, in 2022 the California Public Utilities Commission (PUC) approved 1.6 gigawatt (GW) of battery energy storage systems that will help replace generation from multiple natural gas plant retirements. As the supply chain recovers, these types of projects will be pivotal in supporting a clean energy transition.

Storage incentives and extended wind tax credits are also projected to support early wind growth markets in New England. Though land use and permitting challenges have hindered the region's solar development in the past few years, the Northeastern U.S. leads the way in offshore wind development. The largest operation in the country, located off the coast of Massachusetts, is already under construction and slated to come online this year. Nearly every New England state already has their own climate law in place, and the IRA will drive those plans forward. In particular, its advanced manufacturing production credit will likely draw wind suppliers to the area.

It remains to be seen, however, how the rest of the East Coast will fare with offshore wind. Though some projects are underway, the Southeast and Mid-Atlantic states have hit many developmental roadblocks. The IRA removed a Trump administration moratorium on offshore wind leasing, and federal targets and funding are poised to spur new activity. But as of right now, solar leads the way for the region's clean growth and likely will continue. Among other factors, the expanded solar ITC, statewide legislation, and actionable carbon planning will build on previous supportive mechanisms. For example, North Carolina's rapid solar growth was driven by a renewable portfolio standard and federal energy legislation, and has continued to grow and evolve through state-level executive, legislative, and regulatory action.

Texas presents an interesting case given its stand-alone electricity grid, managed by the Electric Reliability Council of Texas (ERCOT). In the past few years, ERCOT has battled weather extremes, intense demand, and technological issues which significantly impacted its ability to power the state. Despite arguments otherwise, renewables performed very well through challenges as other fuel sources fell short. The state currently has many pending wind, solar, and energy storage projects of varying capacity and will likely continue to capitalize on these technologies to meet growing demand and resilience needs. The IRA will only continue to drive these advancements, particularly when it comes to tax credit bonuses and incentives. Texas has an abundance of siting and socioeconomic factors that meet criteria for increased ITC rates and will spur further clean growth.

Though planned renewable projects are fewer and farther between in Midwestern states, this won't likely be the case for long. Since the IRA passed, utilities have jumped to propose renewable capacity additions and include clean energy in their near-term portfolios. Incentives from the new legislation mean that solar, wind, and battery storage are now much more economical. Companies have noted that IRA credits make clean energy much more affordable and will provide both utilities and their companies significant savings in the coming years.

While we don't yet have all of the answers or know just how much regions will evolve post-IRA, it is clear that the U.S. is on the cusp of exciting market transformation. Though many still face internal obstacles to clean energy proliferation, across the country, states are noticing all that the IRA has to offer. As always, Leyline will stay abreast of new developments and seek opportunities to drive this green transition.

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