As we enter 2022, the clean energy industry is poised to gain even more ground than in 2021. According to the International Energy Agency (IEA), the expansion of renewable capacity in the United States is expected to be 65 percent greater from 2021-2026 than it was from 2015-2020. This capacity addition is the result of four factors: economic competitiveness of solar PV and wind; supportive national and international policies (i.e., returning the United States to the Paris agreement), federal tax credits, corporate procurement, and acceptance of offshore wind. The bulk of the expansion is due to solar PV and the remainder is from wind energy.
In addition to the large renewable capacity expansion, there are several policies and trends that will be front and center his year:
Critical Role of Transmission Infrastructure: Typically, renewable generation facilities are sited on remote parcels of land where the resource is plentiful and there is sufficient space to accommodate turbines or panels. Wind and solar facilities require at least ten times as much land relative to coal and natural gas plants. In many cases, the generation facility has been sited independent of any transmission consideration. Due to the high proportion of demand located elsewhere, and often beyond the reach of the legacy grid infrastructure, there is a clear need for modern transmission. President Biden’s infrastructure law offers significant support for high-voltage electricity transmission and renewable energy, with 22 major transmission projects planned to expand and improve the nation’s electrical grid.
End of Life Strategies will be front and center as early projects near the end of their useful life. The estimated end of life for a solar panel is 25 years. Normally decommissioning is addressed as a contractual matter between developer and landowner, but counties and increasingly states want to have more certain policies in place. Given the 24-year average lifespan of solar PV modules, the N.C. Department of Environmental Quality (DEQ) estimates that approximately 8.5 million PV modules will be decommissioned between 2036 and 2040, with another 8.2 million in the five years after. This represents a disposal of 364,000 tons over a ten-year period. Under North Carolina’s HB 951, by March 2022, the DEQ must develop a plan to ensure adequate financial resources for the decommissioning of utility-scale solar projects. This plan will be subject to legislative review and approval.
Next Generation Clean Energy Technologies such as hydrogen and long duration energy storage are gaining ground. Back in July, the U.S. Department of Energy launched an effort to lower the costs of long-duration energy storage by 90 percent by 2030 as part of its Energy Earthshot Initiative. Once renewables reach a 60 to 70 percent market share of bulk power systems, long duration energy storage (more than six hours) will be catalyzed "as the lowest-cost flexibility solution." However, technology costs need to drop significantly, in line with the cost reductions in other renewable technologies spurred by more research and market knowledge. Los Angeles aims to become the first major city in the country to commit to creating a North American market for green hydrogen. Together with the Los Angeles Department of Water and Power and other key partners, the Green Hydrogen Coalition recently announced the launch of HyDeal LA. This initiative seeks to bring together developers, green hydrogen off-takers, EPC companies, and investors to launch the commercialization of the technology at scale. More of these kinds of projects may occur in 2022.
New Solar Energy Combinations: After an 85 percent cost decline over the past decade, solar PV systems are among the most cost-competitive energy resources in the market. The year 2022 could see new business and project configurations such as floating solar PV modules (like the one at Ft. Bragg in North Carolina) and expanding community solar projects to new markets.
Offshore Wind Moves Forward: There will be a big increase in offshore wind lease sales in 2022, in part to meet the Biden administration's 30 GW by 2030 goal for the sector. The Bureau of Ocean Energy Management (BOEM) could hold as many as three offshore wind lease sales in 2022. A 1.6-GW lease sale for waters off the coast of North Carolina is on deck for 2022 and a Wilmington East lease sale would be held in the spring of 2022. Improving turbine technologies and larger turbines are harnessing the strong wind available in the deep sea, which in turn is attracting more offshore wind farm development. Companies such as Ørsted and Vestas are developing wind projects in deep water and creating technologies to endure the the climactic challenges forthcoming.
The year ahead, however, does have major challenges for solar PV and wind expansion. At the top of the list is the extension of the ITC, which ended December 31, 2021, and PTC, which ends in 2024. Investors and developers have been able to significantly improve the economics of renewable energy projects by "monetizing" the federal production tax credit. This stands to be lost after the deadlines. Second, the costs of raw materials such as polysilicon, steel, and aluminum may postpone utility scale solar projects. Semiconductors required for solar inverters and battery storage have also been hard hit by the global chip shortage and are expected to continue through 2022. The International Trade Commission recently decided that tariffs must continue for the U.S. crystalline silicon PV cells industry, which has put upward pressure on prices despite the industry adjusting for those price increases. Finally, rising shipping costs and delays are expected to continue well into 2022. Ports are jammed and moving larger component parts such as blades within the United States is challenged by trailer demand that exceeds supply.
This year will be exciting as more clean energy deployment dots the U.S. landscape. It is important to continue to focus on the supportive policies, regulations, and investments and drive a smooth upward trajectory of progress, especially in the face of the aforementioned challenges.