Renewable energy for 2023 seems on the upward swing, and there are several factors contributing to this optimistic stance.
According to the 2023 Renewable Energy Industry Outlook from Deloitte, despite rising costs and project delays, growth measurements will likely accelerate in 2023, powered by demand and the record-breaking influx of clean energy incentives in the Inflation Reduction Act (IRA).
The boosts for renewables are coming from disparate areas.
Rising clean energy component manufacturing has had a tough time with supply chains, yet increased domestic access can alleviate bottlenecks. New clean hydrogen economics should open avenues for renewable providers. Energy equity is seeing new pathways due to the Inflation Reduction Act (IRA) and its emphasis on spurring renewable providers to pursue opportunities in low income communities. The renewable energy industry is focusing more and more on managing cyber risk. And the offshore wind continues to address challenges that has the potential to unlock rapid growth.
What Brought Us to This Hope-Filled Space for Renewable Energy for 2023?
In the year 2022, several promising developments emerged that will likely carry forward into 2023.
- US renewable generation and capacity rose, accounting for over 23% of electricity generated from January through August, 2022, up from about 21% in the same period of 2021.
- Solar and wind power accounted for 69% of new utility-scale capacity additions from January to August 2022.
- The Inflation Reduction Act (IRA) extended and expanded tax credits for renewables, electric vehicles, stand-alone storage, green hydrogen, clean energy manufactured components, and more.
- Funds began to flow from the $1.2 trillion Infrastructure Investment and Jobs Act (IIJA), also known as the Bipartisan Infrastructure Law, to support grid modernization and clean energy research and deployment.
- Regional transmission organizations submitted initial plans for distributed energy resources (DER) to participate in wholesale markets under Federal Energy Regulatory Commission Order 2222.
- US electric vehicle sales may have approached a tipping point, rising to 6.3% of light-duty vehicle sales in H1 2022.
Trends in Renewable Energy for 2023
Five trends have the potential to accelerate growth in renewable energy for 2023 and the longer term.
Domestic manufacturing. Rising clean energy component manufacturing could ease supply chain snags over time. US manufacturing doesn’t currently meet the renewable energy sector’s needs for clean energy components supported by secure and sustainable domestic supply chains. IRA incentives have already spurred new plant announcements and significant investment, and that’s likely to gain steam in 2023. While this may spell good news for renewable energy supply chains in the longer term, it should be said that many in the renewable industry will continue to see at least a couple more years of challenges.
New clean hydrogen economics. Long-sizzling interest in green hydrogen ignited with the IRA’s enactment in August 2022. The law’s $3 per kilogram tax credit for eligible “clean” hydrogen could make it price-competitive with higher carbon “gray” hydrogen in much of the country. While challenges such as lack of infrastructure still make hydrogen uneconomic for some uses, new IRA-driven economics could open avenues for renewable energy developers and producers to benefit in 2023.
Energy equity. The IRA helps spur renewable providers to pursue opportunities in low-income communities. Until now, the clean energy transition has focused mainly on more affluent Americans, who have benefited from incentives such as tax credits for rooftop solar or electric vehicles, while many low-income communities were left behind. But outreach to low income communities could accelerate in the coming year as federal policy with environmental justice provisions may further incentivize renewable developers to expand into these areas.
Cybersecurity. One sign that the renewable energy industry is maturing is that it’s increasingly the target of cyberattacks, according to Deloitte. Cyber threats are expected to rise in 2023 and beyond as the clean energy transition progresses, focusing on both utility scale and distributed renewable energy resources. Utilities and renewable developers are also expected to continue staffing up cybersecurity departments amid a growing gap in qualified cybersecurity talent.
Offshore wind industry. By mid-2022, the US offshore wind project development pipeline had grown to more than 40 gigawatts (GW) of potential generating capacity across 12 states. Currently, just 42 megawatts (MW) of capacity is operational, about 1 GW is under construction, and almost 19 GW is in the permitting phase. A further 20 GW is in the siting and planning phases and will likely take many more years to develop. So, the next few years could be critical for addressing challenges to unlock that growth.
Drivers for Renewable Energy for 2023
Moving into 2023, drivers for renewable growth are some of the strongest the industry has seen, according to the Deliotte report, including competitive costs, supportive policies, and burgeoning demand.
- Cost competitiveness. While renewable energy costs may continue to rise temporarily in 2023 due to ongoing supply chain challenges, wind and solar will likely remain the cheapest energy sources in most areas, as fuel costs for conventional generation have been rising faster than renewable costs.
- Federal clean energy policies. Among other supportive provisions, the IRA extends wind and solar tax credits for projects that begin construction before 2025 and technology-neutral credits through at least 2032. Projections suggest the law will spur 525 to 550 GW of new US utility-scale clean power by 2030.
- State clean energy policies. Twenty-two states and the District of Columbia are targeting 100% renewable energy or 100% carbon-free electricity, often through clean and renewable energy mandates and incentives, with target dates between 2040 and 2050.
- Utility decarbonization. As of October 2022, 43 of the 45 largest US investor-owned utilities have committed to reducing their carbon emissions, and boosting renewables is one of their key strategies for meeting those commitments.
- Corporate renewable procurement. With a record 11 GW of US clean energy installations in 2021, the US is set to exceed that in 2022. More than 380 global businesses have committed to 100% clean electricity by joining the RE100 renewable electricity initiative, up from about 200 in 2019.
- Citizens want more solar. Residential solar demand is growing faster than ever, up 35% in H1 2022 year over year, as households react to rising retail electricity prices and weather-driven power outages.
- The private sector takes notice. Private investment in renewables hit a record high of $10 billion in the past year. That could continue, as investors are attracted by transparent returns on mature technologies backed by 10-year tax credits with direct pay options.
Overall, as the industry heads into 2023, increasing demand and enticing, long term incentives are creating strong stimuli. Of course, the uneven economy right now poses some rough sailing, but the destination is in sight and achievable.
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