Understanding the Renewable Energy Landscape
Renewable energy has emerged as a critical solution in the fight against climate change and global warming. Throughout history, humans have harnessed the power of natural resources, such as the sun, wind, and water, to meet their energy needs. Over time, the evolution of renewable energy technologies has transformed the global energy landscape, diversifying the world’s energy supply and paving the way for a more sustainable future.
The story of renewable energy begins in ancient times, when the Greeks and Romans utilized burning mirrors to light torches by harnessing the power of the sun. In the 18th century, the first solar collector was invented, and solar cells soon followed in the early 1900s. The 1950s marked a significant turning point, as the International Solar Energy Society was established, and further research and development into solar energy gained momentum across various industries.
The energy crises of the 1970s propelled the growth of the solar industry, as countries sought to reduce their dependence on fossil fuels and invested in solar technology as an alternative energy source. Since the 1990s, continued innovation in energy production and supportive government policies, such as tax incentives, have fueled the expansion of the solar energy industry and its widespread adoption.
Wind energy has a similarly long history, with the use of simple windmills for mechanical purposes dating back centuries. In the late 19th century, electrical engineers began harnessing wind power to generate electricity, and the first commercial-scale wind farms were installed in California in the 1980s. Today, wind turbines around the world produce more than 2,100 terawatt hours (TWh) of electricity annually, with offshore wind farms playing an increasingly important role in global electricity generation.
Hydropower, which harnesses the energy derived from flowing water, has also been utilized since ancient times, primarily for mechanical applications such as grinding wheat. The late 19th century saw the development of hydroelectric power stations, and the post-World War II era witnessed a surge in hydropower projects worldwide. Today, the two largest hydroelectric projects in the world are the Itaipu Dam in South America and the Three Gorges Dam in China.
Geothermal energy, which stems from the Earth’s internal heat, has been harnessed for various purposes since the Paleolithic period, including bathing in hot springs. The first commercial use of geothermal energy occurred in 1830, and the world’s first geothermal power plant was built in Italy in 1904. Advancements in technology have the potential to expand the utilization of geothermal energy in more locations, making it a valuable component of the renewable energy mix.
Bioenergy, derived from organic materials such as plants and animals, has also been used by humans throughout history, primarily for cooking and heating through the burning of wood. The development of biofuels, such as ethanol and biodiesel, has gained traction in recent decades, particularly as a result of the 1970s energy crises and the need to reduce reliance on fossil fuels.
As the world continues to transition towards a more sustainable energy future, the evolution of renewable energy technologies and the growing demand for clean energy solutions have never been more evident. The pursuit of renewable energy is not only driven by the need to combat climate change but also by the potential economic and societal benefits it can bring, including job creation, energy security, and improved air quality.
Renewable Energy Trends and Challenges
In recent years, the renewable energy landscape has experienced both remarkable progress and significant challenges. While the solar market has witnessed a remarkable surge, the wind energy sector has faced a more complex set of obstacles.
Solar Energy Shines Bright
The utility-scale solar capacity additions in the United States have outpaced other generation sources, reaching almost 9 gigawatts (GW) between January and August 2023, a 36% increase from the same period in 2022. Additionally, small-scale solar generation has grown by 20% during this time. By the end of 2023, the U.S. Energy Information Administration expects utility-scale solar installations to more than double compared to 2022, setting a new record of 24 GW.
Wind Energy Faces Headwinds
In contrast, the wind energy sector has encountered a series of challenges, including project input, labor and capital cost pressures, interconnection and permitting delays, and transmission limitations. As a result, only 2.8 GW of wind capacity came online during the same period, down 57% from the previous year. Despite these obstacles, renewable energy’s share of U.S. electricity generation remained level at 22%.
Overcoming Hurdles
The combination of federal investments flowing into clean energy and the growing demand for decarbonization from both public and private entities have never been stronger. These forces could enable renewables to overcome the hurdles caused by the seismic shifts needed to meet the country’s climate targets. The uplift and obstacles shaping the year ahead have set the stage for a variable-speed takeoff across renewable technologies, industries, and markets.
Renewable Energy Deployment and Cost Trends
As the renewable energy industry navigates these challenges, several key trends have emerged, shaping the outlook for the sector in the coming year.
Deployment Highs
The Energy Information Administration expects renewable deployment to grow by 17% to 42 GW in 2024, accounting for almost a quarter of electricity generation. This estimate, however, falls below the low end of the National Renewable Energy Laboratory’s assessment, which suggests that the Inflation Reduction Act (IRA) and the Infrastructure Investment and Jobs Act (IIJA) could boost annual wind and solar deployment rates to 44 GW to 93 GW between 2023 and 2030, with cumulative deployment of new utility-scale solar, wind, and storage reaching up to 850 GW by 2030.
Cost Lows and Highs
While the long-term trend of declining renewable costs has been impressive, a temporary rise in costs could occur in 2024. High financing, balance of plant, labor, and land costs have outweighed the reductions in commodity and freight prices, pushing up the levelized costs of energy (LCOEs) for wind and utility-scale solar, especially projects with trackers that account for 80% of installed solar capacity. Inflation and interest rates have also disproportionately impacted offshore wind, leading to a 50% rise in its LCOE from 2021 to 2023.
However, the IRA’s investment tax credits and production tax credits have made utility-scale solar and onshore wind, including projects paired with storage, competitive with the marginal costs of existing conventional generation. Projects claiming the maximum available credits could capture the world’s lowest solar and wind LCOEs, potentially increasing the prevalence of negative prices in wholesale electricity markets.
Renewable Energy Adoption and Drivers
The renewable energy landscape is being shaped by a variety of factors, including state and federal policies, corporate commitments, and the growing demand for clean energy.
State and Federal Policies
Twenty-nine jurisdictions, representing around half of U.S. electricity retail sales, have mandatory renewable portfolio standards, and 24 jurisdictions, including two new states in 2023, have zero greenhouse gas (GHG) emissions or 100% renewable energy goals spanning 2030 through 2050. These policies are expected to require 300 terawatt hours (TWh) of additional clean electricity by 2030. Complementing state goals are the 56 individual and 28 parent utilities with carbon reduction targets that serve 83% of U.S. customer accounts, with 25 utilities committing to either an 80% carbon reduction or an 80% share of clean generation by 2030.
Corporate Commitments
In the first 10 months of 2023, 30 companies joined the RE100 initiative, a global corporate effort to procure electricity entirely from renewables, growing the membership to 421. Around a quarter of the members are headquartered in the United States, and a bulk of their upcoming commitments have a 2025 target date. Some corporations are also driving decarbonization throughout their supply chains. Following a record-breaking year, corporate renewable procurement saw the number of transacting customers increase by 31% between the first half of 2022 and the first half of 2023, with big technology companies accounting for most of the procured capacity.
Growing Demand for Clean Energy
The tandem push of federal investments and the pull of decarbonization demand from public and private entities have never been stronger. This has set the stage for a renewable energy takeoff, with deployment highs, cost lows, and widespread adoption driven by state and federal policies as well as corporate commitments.
Overcoming Renewable Energy Challenges
While the renewable energy industry has made significant strides, it continues to face a range of challenges that must be addressed to ensure a successful transition to a more sustainable energy future.
Transmission Constraints
Insufficient transmission capacity has emerged as a major constraint, driving up congestion costs by 72% in 2022 to $20.8 billion. Interregional and regional transmission would need to more than double and quintuple, respectively, to meet high clean energy growth projections by 2035. The IIJA and IRA programs and grants could start tackling transmission issues in 2024, including the Department of Energy’s plans to accelerate high-voltage transmission line permitting and the $3.9 billion in grants from the Grid Resilience and Innovation Partnerships Program.
Manufacturing and Supply Chain Challenges
The renewable energy industry has also faced challenges related to manufacturing and supply chains. While the IRA has catalyzed a domestic clean energy manufacturing revival, with companies announcing $91 billion in investments for over 200 manufacturing projects, there are concerns about meeting the domestic content requirements for tax credits and addressing supply chain bottlenecks.
For example, the planned solar photovoltaic module capacity may not qualify for the full domestic content adder due to a lack of sufficient cell capacity. Similarly, the wind supply chain faces concerns about the competitiveness of domestic manufacturers compared to lower-cost Chinese imports. Addressing these challenges will be crucial for ensuring a resilient and self-sufficient renewable energy supply chain.
Workforce Development
As the renewable energy industry experiences rapid growth, the need for a skilled and trained workforce has become increasingly critical. The IRA, IIJA, and the Creating Helpful Incentives to Produce Semiconductors Act are expected to drive the creation of 19 million job-years, or around 3 million jobs per year, over their lifetime. However, the current half-a-million workforce shortage in the construction sector could constrain the buildout.
Furthermore, the industry faces the challenge of growing and (re)training a workforce with the right skills in the right places. Renewable energy jobs, particularly in wind turbine service and solar photovoltaic installation, are projected to be among the fastest-growing occupations in the coming years. Ensuring a sufficient pipeline of skilled workers, addressing skills gaps, and promoting diversity and inclusion in the renewable energy workforce will be essential for sustaining the industry’s growth.
Resilience and Reliability Perceptions
Despite the growing resilience of renewable energy resources, particularly when coupled with storage, there is a perception among industry stakeholders that renewables are less reliable than conventional power sources, such as gas and nuclear. This perception does not align with the recent experiences of extreme weather events and outages, where renewable energy sources have often outperformed their conventional counterparts.
Addressing this perception gap and showcasing the resilience and reliability of renewable energy systems will be crucial for gaining broader acceptance and support for the transition to a more sustainable energy future. Educating the public and stakeholders on the capabilities of renewable energy resources, especially when integrated with storage and other technologies, will be a key focus in the coming years.
Emerging Renewable Energy Technologies
As the renewable energy industry continues to evolve, several emerging technologies are gaining traction and offering promising solutions to the challenges the sector faces.
Enhanced Geothermal Systems (EGS)
While geothermal energy accounts for a small fraction of U.S. utility-scale generation, EGS could push its share past 6% by 2035, with a target cost reduction of 90% to $45/MWh. EGS uses technology from the oil and gas industry to create artificial reservoirs and access the omnipresent heat available below the Earth’s surface. The use of generative AI to assess seismic data and guide drilling has further driven down costs, and EGS can also provide long-duration storage and enable direct air capture.
Renewable Natural Gas (RNG)
RNG, which accounts for only 0.5% of the gas market, could grow tenfold by 2050 as usage expands to the power and heat sectors. The number of operational RNG plants has jumped from 230 in 2021 to 300 through the end of July 2023, with a pipeline of 481 plants planned or under construction. RNG production can prevent the venting of methane emissions from landfills and livestock operations, and it can also be used as a feedstock to produce biohydrogen and sustainable aviation fuels.
These emerging technologies, combined with advancements in solar, wind, and energy storage, are poised to play a crucial role in addressing the challenges facing the renewable energy industry and accelerating the transition to a more sustainable energy future.
Conclusion
The residential energy landscape is undergoing a profound transformation, with renewable energy sources taking center stage in the fight against climate change. The evolution of renewable energy technologies, from the harnessing of solar, wind, and hydropower in ancient times to the development of cutting-edge solutions like enhanced geothermal systems and renewable natural gas, has diversified the global energy supply and paved the way for a more sustainable future.
As the renewable energy industry navigates a complex landscape of deployment highs, cost fluctuations, and regulatory and market challenges, it remains steadfast in its pursuit of a cleaner, more resilient, and reliable energy system. By addressing key bottlenecks in transmission, manufacturing, and workforce development, and by embracing emerging technologies, the industry is poised to overcome these hurdles and accelerate the transition to a renewable-powered future.
At Volt Watt Electric, we are committed to providing our customers with the latest insights, practical tips, and in-depth expertise to help them navigate the evolving residential energy landscape. Whether you’re interested in energy-efficient appliances, smart home technologies, or sustainable energy solutions, our team of seasoned electrical experts is here to guide you every step of the way.
