Author: Iulia Gheorghiu Published: 01/16/20 Utility Dive
DEEP DIVE ‘ element of excitement and momentum” around renewable energy procurement, one analyst said.
Renewable energy resources have become a bigger part of the grid in recent years, competing with traditional generation sources. With flat load growth, falling costs and the expansion of the energy storage sector, this trend is only expected to rise.
While onshore wind is more economic than utility-scale solar in many areas of the U.S., analysts say solar could become increasingly competitive with wind.
“In 2020, this competition will likely evolve further to encompass not just renewable versus traditional resources, but also renewables in competition with each other,” Marlene Motyka, partner of Deloitte’s US Renewable Energy division, told Utility Dive.
The solar and wind energy industries receive a lot of optimism from analysts based on current growth trends for deployment and decreasing prices across the sector.
But the lack of new federal subsidies for clean energy has disappointed many environmental advocates, and the federal trade policy updated at the end of 2019 remains the strongest headwind for wind and solar energy.
“The headwind will continue into 2020 as well as impacts from the stepdown of the national tax credit,” Motyka said.
A strengthening domestic economy may encourage continued renewable energy development, however.
“In 2020, there’s sort of a ‘come on in, the water’s warm’ element of excitement and momentum.”
Senior Manager, LevelTen Energy
“There’s been this looming concern about the recession,” Reed Smith renewable energy partner Brendan McNallen told Utility Dive. “Maybe six months ago, there was a feeling that [a recession] is very likely,” but now that sense “is abating a bit.”
However, he added, development may be stymied by uncertainty from the presidential election.
“Both sides … have pretty different views of renewable energy in the national energy mix,” McNallen said, which is becoming a headwind “against additional development.”
Despite the politicization of renewable energy incentives, the market has expanded in the past year, showing a “real maturation of the [commercial and industrial (C&I)] procurement space,” LevelTen Energy Senior Manager Ben Serrurier told Utility Dive.
The record-breaking year “marks a turning point in who is buying clean energy and the sophistication of those buyers,” he said. “In 2020, there’s sort of a ‘come on in, the water’s warm’ element of excitement and momentum.”
Tax credit reform didn’t shake out new renewables incentives
National tax credits have been key drivers for wind and solar growth in the U.S. renewable energy market. Several advocacy groups continue to lobby for extensions and new clean energy credits after the annual spending bill approved in December left out a number of renewable energy provisions.
The budget included a one-year extension for the wind production tax credit (PTC), although some analysts have argued a short extension will not provide investment certainty.
Efforts to extend the investment tax credit (ITC) for solar were unsuccessful, causing the credit step-down to begin in 2020.
The majority of renewable energy developers think power purchase agreement (PPA) prices for solar and wind will decrease or stay the same in 2020, LevelTen’s Serrurier said.
“In 2020, the entire sector is going to be focused on that final PTC hurdle and getting these massive projects over the line.”
Wind Analyst, BNEF
In 2019, competition from other renewable projects was the leading factor on PPA pricing factors, he said. Only 15% of developers, as surveyed by LevelTen, said the phasedown of federal tax credits had an impact.
For 2020, the phase down of the tax credits are expected to play a greater role.
“They’re sort of connected,” Serrurier said. “When you look towards 2020, competition from other renewable projects … and the phaseout of the tax credit are tied [as developer concerns].”
The phasedown is expected to cause “a rush for projects to get grandfathered in,” he said.
For onshore wind, at least 19 GW is expected to come online in the U.S., according to the U.S. Energy Information Administration’s (EIA) most recent short-term outlook.
“In 2020, the entire sector is going to be focused on that final PTC hurdle and getting these massive projects over the line,” BNEF Wind Analyst Rachel Shifman told Utility Dive.