Shaping the Future of Renewable Energies

Despite hurdles, increased investments and corporate support signal positive momentum for a transformative 2024, renewable energy saw contrasting growth in solar and challenges in wind in 2023.

FREMONT, CA: In 2023, the renewable energy sector saw significant solar industry growth and challenges in wind power. The latter struggled with growing project expenses, labour problems, capital constraints, delays in obtaining permits, and gearbox limitations. Concurrently, historic clean energy and climate regulations were implemented, and supply chain bottlenecks started to ease.

The unprecedented decarbonisation demand from the public and private sectors and increased federal investments in clean energy came together. These dynamics could enable renewables to overcome challenges as 2024 draws near, leading to the profound changes needed to achieve aggressive climate goals and causing a shifting trajectory across renewable technologies, markets, and industries.

Deployment Highs: The share of energy generated from renewable sources is anticipated to constitute approximately 25 per cent of the total by 2024, representing a 17 per cent growth to reach 42 GW. The implementation of the Inflation Reduction Act (IRA) and the Infrastructure Investment and Jobs Act (IIJA) provisions in Europe may lead to an increase in annual wind and solar deployment rates, ranging from 44 GW to 93 GW between 2023 and 2030. The cumulative deployment of new utility-scale solar, wind, and storage is projected to reach up to 850 GW by 2030.

Cost Lows: Although there was a brief increase in the cost of renewable energy in 2023, which contradicted the general downward trend and competitive advantage, lower prices for commodities and goods were countered by higher financing and a balance of plant, labour, and land costs. Since trackers account for 80 per cent of installed solar capacity, this led to higher levelized costs of energy (LCOEs) for wind and utility-scale solar projects.

Offshore wind was disproportionately impacted by inflation and interest rate fluctuations, which resulted in a 50 per cent increase in its LCOE. The availability of production and investment tax credits, particularly for utility-scale solar and onshore wind projects with storage, puts them in a competitive position relative to the marginal costs of currently operating conventional generation, even though this trend may impede historical LCOE declines in 2024.

Projects may attain the lowest solar and wind LCOEs globally by optimising available credits. It is predicted that the use of production tax credits will lead to a greater number of instances of negative prices in wholesale electricity markets.

Decarbonisation Demand Pull

By 2030, it is estimated that policies such as clean energy and renewable portfolio standards will require 300 terawatt hours of clean electricity. Moreover, state objectives are met by 56 separate utilities and 28 parent utilities with carbon reduction targets, which service 83 per cent of customer accounts. By 2030, twenty-five utilities have pledged to reduce carbon emissions by 80 per cent or increase the share of clean generation by 80 per cent. The IRA's tools for enabling market participation support the projected increase in renewable investments in 2024.

Thirty companies joined the RE100 initiative in the first ten months of 2023, bringing the total number of members to 421. By 2025, about 25 per cent of the companies hope to produce electricity through renewable sources. A lot of individuals are keeping their promise to decarbonise supply chains.

Between the first half of 2022 and 2023, corporate renewable procurement saw a 31 per cent increase in transacting customers, with major technology firms leading in capacity acquisition. This trend is anticipated to pick up steam in 2024 as these businesses use generative artificial intelligence to meet carbon-matching and round-the-clock goals; this could lead to a rise in the demand for clean electricity in data centres. More companies are expected to participate in the developing tax-credit transfer market in 2024 to promote renewable energy sources.

Ahead of COP28, 131 multinational corporations with a combined annual revenue of almost $1 trillion notably pushed governments to phase out fossil fuels by 2035, demonstrating corporate support for climate action and accelerating the energy transition.

By 2024, the effects of historically high investments in renewable infrastructure should be more obvious. Expanding transmission and providing regulatory support for renewable energy could help alleviate grid constraints. Additionally, increased manufacturing could provide the groundwork for developing a domestic clean energy sector with more robust supply chains to facilitate the deployment of solar, wind, storage, and green hydrogen. Building, running, and maintaining these new-generation manufacturing facilities will require a skilled workforce over the next few years. As the share of renewables in power generation increases and the range of available technologies expands, perceptions of their potential to improve grid resilience may begin to align with reality.