The Friday Report: October 9th, 2020 - Energy Edition
Quick wrap up of a few hot topic newsworthy stories in the supply chain logistics industryTop Trends Transforming the Energy Industry
We live in an era of significant upheaval. While many industries are undergoing digital transformations, the energy industry is undergoing a different kind of transformation, one from fossil-based fuels to renewable energy.
Here are some of the major trends impacting the U.S. power sector:
- The traditional utility business model is transitioning to be replaced by a distributed energy network.
- With the declining use of energy, renewable energy is projected to continue to expand.
- The successful transition of the energy industry is dependent on digital transformation.
- Adoption of 100% clean energy goals by states is fueling the shift towards renewable energy.
- Shift in rates of electrification of vehicles and buildings continues to increase.
- U.S. utility companies shift their focus towards grid modernization and grid hardening.
- State regulatory models are increasing.
- Tech leaders are developing new solutions in the energy space.
- Interest in the optimization of energy storage installations continues to ramp up.
- Pending action in the courts will decide state-wholesale market conflicts.
- Questions about the future use of natural gas have been increasing.
- The continued decline in long-term coal use is likely to impact various sectors.
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Renewable Energy Industry Poised for Continued Growth
What drove the growth of renewable energy in 2019?
- Escalating capacity factors
- Decreasing renewable energy costs
- Increased competitiveness of battery storage
Most market segments increased demand for renewable energy. In general, consumer sentiment proved to be positive. In 2019, residential energy consumption increased 6 percent while commercial energy consumption increased 5 percent. Short-term solar and wind energy is projected to grow; 95.5 percent of the new generation capacity is anticipated to come from wind and solar energy.
With respect to current U.S. energy policy, the Production Tax Credit (PTC) eligibility with respect to new wind builds expires along with that of the solar Investment Tax Credit (ITC) which begins step down in 2020. These tax credits have been instrumental in driving continued growth with respect to solar and wind growth in the renewable energy sector. The solar industry has requested an extension of the ITC but the wind industry has yet to make a similar request.
The cost to import solar panels has dramatically decreased. This has served to offset the impact of existing tariffs. Looking forward, if tariffs are increased, this may impact new projects. The lower cost of renewable energy is fostering competition and is opening the door to new opportunities. With various factors pushing the need for increased resiliency, renewables and storage may take a more prominent role.
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Global Transition to Renewable Energy Likely Slowed by COVID-19
According to a report from the International Renewable Energy Agency (IRENA), “Renewable Capacity Statistics 2020”, renewable energy “accounted for 72 percent of all power expansion” in 2019. Solar and wind technologies accounted for 90% of the renewable energy additions in 2019.
In 2020, however, the picture is muted. The lockdown experienced during the 2020 worldwide pandemic slowed renewable energy supply chains and impacted projects that were already in the works. Projects including wind farms cannot be executed during dangerous weather conditions typically encountered on a seasonal basis, such as monsoons and hurricanes.
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