The renewable energy industry continues to grow in the new year, bolstered by national and international climate change policies. Clean energy progress may accelerate through provisions in the recently approved Infrastructure Investment and Jobs Act, as well as the Build Back Better Reconciliation Act, which is still being considered by Congress. Internationally, COP26 finalized the Paris Agreement "rulebook," which will outline an international carbon market. In addition, countries committed to a fossil-fuel phasedown. With these supportive policies in place, what are the estimates for renewable energy deployment this year and what clean energy trends will we see? This article answers both of those questions.
Renewable Energy Capacity Outlook
The International Energy Information Agency (IEA) Renewable Energy Outlook forecasts an average global renewable energy capacity of 305 GW per year between 2021 and 2026, an expansion of 60 percent, compared to the last five years. Over the same period, United States renewable capacity alone is expected to be 65 percent greater than the previous five years. In almost all countries, the cost of utility-scale solar PV is the lowest cost resource for new electricity generation, especially with the continued rise in natural gas prices.
U.S. Renewable Energy Capacity Growth
Despite the global pandemic, supply chain disruptions, increased shipping costs, and rising prices for commodities, U.S. capacity installations remained at an all-time high in 2021. For example, solar and wind added 13.8 GW of capacity in the first eight months of 2021 - up 28 percent over the same period in 2020.
The S&P Global Market Intelligence Energy Outlook estimates deployment for 2022 of 44 GW of solar and 27 GW of wind, as well as more than 8 GW of battery storage. Looking beyond 2022, according to the IEA, the U.S. renewable energy capacity is expected to add more than 200 GW from 2021 to 2026. This progress will be driven by three main factors: State-level clean energy targets (renewable energy portfolio standards, energy storage procurement mandates), federal tax incentives, and corporate renewable energy procurement.
Solar PV comprises 75 percent of the expected growth, with the remaining 25 percent from wind energy. 2021 was a banner year for offshore wind, as the first large-scale offshore wind farm received approval; installed offshore wind capacity is forecast to reach almost 8 GW by 2026. However, without new target areas for offshore wind development, President Biden's 30 GW of new offshore wind by 2030 target will be challenging to meet.
Key Renewable Energy Trends to Watch in 2022
There are several trends to watch in the clean energy industry over the coming year. These include:
Green hydrogen helps to achieve reductions in CO2 emissions in energy-intensive sectors like steel, chemicals, and aviation. But production costs must be cut to make it economical for countries worldwide. The U.S. Department of Energy issued a request for information on hydrogen demonstrations to understand the needs and challenges of this technology as well as what regions would be best suited for hydrogen projects. 2022 may see movement in this technology.
As demand for renewables grows, long-duration storage becomes more critical. After years of cost declines, lithium-ion dominated short-duration storage, but new funding in long-term energy storage could see other storage technologies gain market share. As energy markets evolve, investors will expand funding from short-term applications to longer-duration solutions.
Federal funding for infrastructure investment contains $73 billion for the electric grid, the single largest federal power investment ever. Energy storage will also play a critical role. As the energy storage industry is moving away from what Canary Media calls "its scrappy entrepreneurial phase," it is turning toward infrastructure and grid investment. The early companies who figured out how to build successful smaller batteries suddenly need far more capital and are attracting more investors. Energy storage will replace much-needed transmission upgrades, especially as long-duration storage performance improves.
4. Renewable energy developers will search for domestic suppliers to mitigate the supply-chain pressures, component shortages, and rising labor and shipping costs.
The World Economic Forum estimates that 58 percent of utility-scale solar projects could be postponed in 2022 or cancelled altogether due to supply-chain problems. Successful and resourceful developers will be looking at home to mitigate the probability of project delays.
States like North Carolina legislated a solar decommissioning study to address questions such as whether panels can be used as they near their end of life, and whether land can be safely returned to its original use (i.e., agriculture or farming) after hosting a facility. Expect more of these discussions in other states as renewable energy projects age.
2022 will be a record year for clean energy deployments. Leyline Renewable Capital provides development-stage capital for promising renewable energy ventures, and we look forward to working with developers to invest in game-changing projects that benefit our global climate. To learn more about how our financing is building the bridge to a clean energy future, contact us or sign up for our newsletter.