The renewable energy sector is ready to branch out
Rapid technology improvements and decreasing 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, increased shipping costs, and rising prices for key commodities, capacity installations remained at an all-time high. Wind and solar capacity additions rose 33% through October 2021 over the prior year.
In 2022, renewable energy growth is poised to accelerate, as concern for climate change and support for environmental, social, and governance (ESG) considerations grow and demand for cleaner energy sources from most market segments accelerates. Additionally, the Biden administration's vision to fully decarbonize the US economy is helping spur activity in the renewable sector that will likely drive future growth.
Below are five trends that will likely 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-duration storage. Renewable energy industry stakeholders are considering investments in these technologies, which can eventually help to confidently integrate variable renewables such as wind and solar into the electric grid. For an industry that has largely focused on solar and wind, private investment and pilot projects combined with federal research support could help expedite commercialization of these emerging technologies.
In 2022, as renewable energy penetration on the grid increases, green hydrogen development is expected to grow, owing to its potential to act as long-duration and seasonal storage of fuel available on-demand to generate power. Interest is also high in a host of evolving mechanical and battery storage technologies offering long-duration energy storage options and supporting the grid.
Solar champions new configurations
After an 85% cost decline over the past decade, solar photovoltaic (PV) systems are among the most cost-competitive energy resources. As it flexes its competitive muscle, the solar industry will likely explore new configurations and business models. Pairing storage with solar offers cost synergies, operational efficiencies, and the opportunity to reduce storage capital costs with the solar investment tax credit.
Second is the expansion of community solar projects to new markets in the United States. With more than half of US households unable to purchase rooftop solar due to lack of sufficient sun, credit access, or homeownership, these programs, where available, allow residential customers to enjoy the benefits of shared solar power. And third is exploring floating solar photovoltaics (FSPV) projects either separately or as hybrids with hydro.
Transmission infrastructure is becoming a key priority, especially for offshore wind
Transmission development is expected to be an important part of the industry's agenda in 2022. In fact, 76% of the power and utility respondents to a recent Deloitte survey are either planning or depending on new transmission projects to boost renewable energy access.
Policy and regulatory support, investments, and innovation will likely help unlock progress, which has often been stymied by siting and permitting delays. Transmission projects, especially interregional, have so far remained a major challenge for renewable growth as they face difficulty in gaining regulatory approval from every state they cross and can face refusal from landowners, and opposition from environmental groups.
About 844 GW of proposed capacity—90% of which is renewables or energy storage—is stuck in transmission interconnection queues. Enhancing the capacity of existing lines and building new lines could be key in solving the transmission challenge. In fact, 76% of the power and utility respondents to a recent Deloitte survey are either planning or depending on new transmission projects to boost renewable energy access.
Supply chain strategies continue to evolve
The industry is likely to continue to evolve supply chains, as profits have suffered recently amid logistics-related cost pressures and US-China trade tensions. In 2021, the solar industry remained under pressure and prices increased year over year for the first time in seven years due to supply shortages of components, raw materials, and labor as well as rising shipping costs. In 2022, US renewable energy developers will likely continue to seek alternative suppliers, including domestic manufacturers; reassess supply needs; and develop substitutes to help alleviate these pressures.
Many solar installers and developers will likely also ramp 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 critical to sustainable growth
In 2022, end-of-life (EoL) management strategies for products and materials are likely to capture attention, as early installations approach the end of their useful life. This could help reduce waste, increase resource security, and provide additional financial value as well as sustainability credentials. As solar, wind, and battery installations are expected to climb to new highs, waste generation will also likely soar and require urgent solutions. By 2030, decommissioned PV modules could total 1 million tons of waste, and there could be 80 metric kilotons of lithium-ion batteries (LiBs) to recycle in the United States.
Industry stakeholders, regulators, and policymakers have started exploring solutions for extending the life and increasing the performance, recovery, and reuse of products and materials. The case for building a circular economy for batteries involves deeper collaboration among industries and between businesses and policymakers.
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The industry will likely benefit as fresh capital becomes available, the transmission process is streamlined, and new technologies are commercialized. For further insights, read the full Deloitte 2022 renewable energy industry outlook.
