In recent years the renewable energy industry in the US has gone from being a bit player to a rising star in electricity generation. At a time when many conventional forms of generation, including coal and nuclear, are finding it increasingly hard to attract investment, wind and solar are seen as safe bets by financiers.
Until now, much of this investor interest has been driven by generous tax credits, which have helped renewables to compete against traditional generation sources and grow in volume. This growth, in turn, has helped to drive down renewable energy prices to a point where tax credits are no longer required for wind and solar plants to be competitive. The phasing out of credits now happening in the US market marks a key transition point for the renewables sector, as it will demonstrate how wind and solar can truly compete at scale within electricity generation.
This transition is far from straightforward, however. Keeping costs down in a tax credit-free market will require careful operation and maintenance (O&M) of wind and solar plants. The intermittent nature of these renewable technologies means that as they increase in scale, they pose an increasing problem for grid integration. Part of this problem can be addressed through asset management, but increasingly there is a need to integrate energy storage with renewables to give wind and solar plants a measure of dispatchability.
This report provides a brief overview of some of the key asset management, energy storage, grid integration and O&M trends and issues in US renewables, today and into the future.
The state of the industry
This century has seen renewable capacity ramping up across the US, to become a major component of the electricity system. According to the American Wind Energy Association (AWEA), for example, US wind power has more than tripled over the past decade, making it the largest source of renewable generating capacity in the country, with 54 000 turbines nationwide.
The US wind industry grew by 9% in 2017, adding more than 7 GW of new capacity. The first half of 2018 saw an extra 1 GW-plus being added, bringing the total combined capacity operating in 41 states plus Guam and Puerto Rico to more than 90 GW. Solar installations have similarly soared over the last decade, helped by a 70% fall in installation costs since 2010.
The Solar Energy Industries Association (SEIA) says prices in the second quarter 2018 were at or near their lowest historical level across all market segments. An average-sized residential system has dropped in cost from more than $40 000 in 2010 to nearly $17 000 today, before incentives, says the SEIA. Meanwhile, utility-scale prices now range from $28 to $45/MWh, competitive with all other forms of generation. The decreasing cost of wind and solar has enabled renewables to overtake all other forms of generation in terms of new capacity additions this decade. Since 2010, an average of 48% of annual additions have been in renewables, followed by 40% in natural gas.
The evolution of tax credits
US renewables has so far been strongly influenced by the availability of tax incentives. For wind projects, for example, the Production Tax Credit (PTC) has been a valuable tool in helping developers unlock capital. The PTC was created in 1992 and “helped launch the wind industry as we know it,” says AWEA. Growth in US wind has been strongly correlated with certainty over the PTC, with boom-bust cycles of development corresponding to the availability of the credit. In December 2015, Congress agreed to a stable, final phase-out of the PTC to be completed by 2019.
Nevertheless, thanks to the establishment of a manufacturing base that has helped drive US costs down by 67% in the last seven years, growth in the wind industry is expected to remain strong when the PTC is fully phased out. “Because the PTC has been successful in helping establish a reliable, competitive domestic industry, wind will continue to expand capacity and deliver economic benefits for Americans and their communities,” says AWEA.
As with wind, growth in US solar has been closely linked to the availability of an incentive, in this case the Investment Tax Credit (ITC). The ITC is a 30% tax credit for solar systems on residential and commercial properties, which has helped annual installations to grow 16 times since 2006, according to the SEIA.
In December 2017, Congress elected to keep the ITC as part of the Tax Cuts and Jobs Act. This long-term extension of the ITC, through to 2021, is expected to support continued long-term investments in solar. Specifically, the SEIA expects the roughly 53 GW of solar energy cumulatively installed in the US at the end of 2017 to reach more than 100 GW by the end of 2022, with employment in the sector nearly doubling, to 420 000 jobs, in the same time period.
The introduction to this report is published here with permission.
Contact Ben Moss, New Energy Update, firstname.lastname@example.org
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