The US has retaken the top position in EY’s Renewable Energy Attractiveness Index (RECAI) for the first time since 2016.
The US jumped to the top of the rankings because of a short-term extension to the Production Tax Credit and projected long-term growth in offshore wind, with plans to invest $57 billion and install up to 30GW by 2030.
China slipped to second due to reduced demand from Covid-19, as well as government policy to wean the market off subsidies and toward a competitive market. France jumped from fourth to third place, with awards of 1,4GW for wind and solar developers as the country opts to shift its energy mix away from nuclear.
Despite the pandemic affecting renewables projects in the short term, in the long term declining costs and technological advancements will continue to drive growth in the sector.
2019 saw the US add 9.1GW in wind energy capacity to create an overall 105.6GW, while 13.3GW of solar entered operation, bringing the total solar capacity to 77.7GW. The two sources together accounted for two-thirds of new generating capacity in 2019, with the rest mostly made up by natural gas.
In January, before Covid-19 impacted North America, the US Energy Information Administration (EIA) forecast a record year, with 18.5GW of wind and 13.5GW of solar going online. The predicted surge, especially for wind, was tied to the fact that projects started in 2016 needed to be operational by year-end to qualify for the Production Tax Credit. The federal tax incentive is worth 24/MWh for 10 years.
Covid-19 will cause disruption in the near term, with the EIA revising its 2020 forecasts for wind and solar utility-scale capacity additions by -5% and -10%, respectively.
Delays because of disrupted supply chain shipments and crew working issues mean that some firms will be struggling to qualify their projects for the Production Tax Credit. They will, as such, ask the government whether Covid-related exceptions will be given.
The long term prognosis for renewables in the US remains positive, however. One powerful driver is the clean and renewable energy targets set by a number of states. Thirteen states, including New York and California, have set 100% goals or mandates by between 2040 and 2050.
Meanwhile, falling costs and improved performance, as well as growing sustainability concerns from ratepayers and corporate buyers, means that utilities are favoring renewables for new capacity additions, according to the EY report.
Persistent low natural gas prices from an economic slowdown could shift more investment to natural gas, but the report says the extent is still unclear. You should keep an eye on the changing electricity plans and make sure you’re connected to secure and affordable ones. The EIA projects that renewables will increase to 38% of power supply in 2050, while natural gas will drop slightly from 37% to 36%, and coal will drop from 24% to 13%.
The industry will have to deal with the current impacts of Covid-19 first. Lobby groups are asking Congress for a part of the stimulus funding, highlighting concerns over job losses. The Solar Energy Industry Association says that half of the 250,000 jobs in the solar sector could be affected, while the American Wind Energy Association says that 35,000 wind energy jobs are at risk.