The renewable energy market for 2023 appears to be to be trending upwards and there are many factors that are contributing to this positive outlook.
Based on the 2023 Renewable Energy Industry Outlook from Deloitte, despite increasing costs and delays in projects the growth rate is expected to increase in 2023, driven by the demand and record-breaking flood of clean energy incentive programs in the Inflation Reduction Act (IRA).
Renewable energy is gaining momentum, but the boosts come from a variety of regions.
The growth of production of clean energy components has faced a difficult time with supply chains however, increased access to domestic markets could ease supply chain bottlenecks. The new cleaner hydrogen economics could open up new avenues for renewable suppliers. Equity in energy will be seeing newly developed paths thanks to new avenues for equity due to the Inflation Reduction Act (IRA) and its focus on encouraging renewable companies to seek opportunities for communities with low incomes. Renewable energy companies are focused more and more on reducing cyber-related risks. The offshore wind continues to solve problems that could bring about rapid growth.
What is it that brought us to this Hope-filled Space to develop Renewable Energy in 2023?
In 2022, some promising developments were observed that are likely to continue through 2023.
- US renewable energy generation and capacity increased, accounting for more than 23% of all electricity generated from January to August 2022, an increase from 21% during the same timeframe in 2021.
- Wind power and solar power were responsible in 69% the new capacity additions at utility scale from January through August 2022.
- The Inflation Reduction Act (IRA) has extended and expanded tax credits for renewable energy electric vehicles stand-alone storage green hydrogen, green energy-produced components, and many more.
- Funds started flowing out of the $1.2 trillion Infrastructure Investment and Jobs Act (IIJA) which is also called the Bipartisan Infrastructure Law, in order to fund grid modernization as well as green energy deployment and research.
- Regional transmission companies submitted their preliminary strategies for the distribution of energy (DER) to join wholesale markets in accordance with Federal Energy Regulatory Commission Order 2222.
- US Electric vehicle sales could have reached a peak that could reach 6.3 percent of light-duty car sales in the first quarter of 2022.
The latest trends on Renewable Energy for 2023
Five trends could be able to boost the growth of renewable energy through 2023 and in over time.
Domestic manufacturing. Rising clean energy component production could reduce supply chain problems in the future. US manufacturing isn’t able to meet the demands of the renewable energy sector for components that are clean and supported by sustainable and secure supply chains within the country. IRA rewards have prompted the announcement of new plant developments and significant investments, and it’s expected to increase by 2023. Although this could be positive news for supply chains that supply renewable energy in the near future however, it’s important to note that many of those working in the renewable sector are likely to face at the very least two more years of difficulties.
Graphics from Deloitte
New clean hydrogen economics. The long-running interest in green hydrogen exploded with the IRA’s passage of the law in august 2022. The law’s $3-per-kilogram tax credit for qualified “clean” hydrogen may be competitive with higher emission “gray” hydrogen across a large portion of the nation. Although issues like the lack of infrastructure make hydrogen in some cases uneconomic but new IRA-driven economics may allow renewable energy producers and developers to gain in 2023.
Graphic by Deloitte with data provided by Rhodium Group
The concept of equity in Energy. The IRA helps encourage renewable energy companies to explore opportunities in communities with low incomes. Up to now, the renewable energy revolution has concentrated on the wealthier Americans and has enjoyed incentives like credit for solar panels on rooftops and electric vehicles, but poorer communities have been left out. But the outreach to low-income communities is likely to increase in the next year, since federal policies incorporating environmental justice provisions could encourage renewable energy developers to venture into these areas.
Does the business you work for has plans to develop renewable energy projects for communities with low incomes or assist clients with lower incomes obtain renewable energy? Graphic by Deloitte
Security. One sign that the renewable energy sector is growing is that it’s becoming at risk of cyberattacks in the words of Deloitte. Cyber-attacks are predicted to rise by 2023, and possibly beyond. This is as the transition to clean energy is progressing, with a focus on the utility scale as well as distributed renewable energy sources. Renewable developers and utilities are also expected to keep hiring cybersecurity professionals due to the growing shortage of skilled cybersecurity professionals.
Graphics from Deloitte using information from (ISC)2
Offshore Wind Industry. By mid-2022, the US offshore wind development pipeline had risen to 40 gigawatts (GW) of potential power generation capacity in 12 states. At present, only 42 megawatts (MW) of the capacity is operational, approximately 1 GW of it is in construction, and nearly 19 GW is currently in the permitting stage. An additional 20 GW are currently in the siting and planning stages and is likely to take a few more years to build. The next couple of years could be crucial in solving the challenges that hinder growth.
US offshore wind pipeline pipelines by the state (as as of May 2022) Graphics from Deloitte using information taken from US Department of Energy
Motors to Renewable Energy for 2023
In 2023, the drivers for the growth of renewables are among the most powerful that the sector has ever seen according to the Deliotte report, which includes favorable policies, competitive costs and an increasing demand.
- Cost-competitiveness. While renewable energy costs could continue to increase at times in 2023 due to the ongoing supply chain issues however, solar and wind are likely to remain the most affordable sources of energy in the majority of areas because the costs of fuel for conventional energy sources have been increasing more rapidly than renewable energy costs.
- Federal policies on clean energy. Among other supportive features that are included, the IRA extends solar and wind tax credits to projects that are constructed before 2025. It also grants technology neutral credits to at minimum 2032. It is predicted that the law will increase the number of 525-550 billion dollars of new US energy sources that are clean and efficient for utility scale in 2030.
- State policies on clean energy. Twenty-two states and the District of Columbia are targeting 100 100% renewable energy or 100% carbon-free electric power typically via green energy mandates or incentives. These have a target date between 2040-2050.
- Decarbonization of utility. As of October 2022, 43 out of 45 largest US investors-owned utilities have made commitments to reduce their carbon emissions. the promotion of renewable energy is one of the main strategies they employ to meet these commitments.
- Renewable procurement for corporate use. With a record 11 GW of US renewable energy installations by 2021 and the US is expected to surpass the 2022 mark. More than 380 businesses around the world have pledged to 100 percent clean power by signing in the RE100 Renewable Electricity Initiative, a jump from 200 in the year 2019.
- People want greater solar. Residential solar demand is increasing faster than ever before and is up 35% in the first quarter of 2022 year on year in response to the rising cost of electricity and power outages caused by weather.
- It is clear that the private market is taking note. Private investment in renewable energy hit a record of $10 billion during the last year. It is likely to continue because investors are attracted to clear returns on technology that is that are backed by tax credits for 10 years that include direct payment options.
In general, as the sector moves into 2023, growing demand and appealing long-term incentives are generating strong stimuli. Naturally, an uncertain economy currently has some challenges but the goal is on the horizon and is it is possible to achieve.