Renewable revolution

Adam_Haughton_New_Energy_SolarAdam Haughton12 October 2018

If the seemingly wilful evolution of renewable energy has taught us anything, it’s that you can’t stop change. The uptake of renewables is a movement driven by everyone – from households to entire communities, cities, states, corporates and utilities. While many factors underpin this trend, the obvious drivers are still applicable – economics, the environment, public health, renewable resource supply, and state policies and initiatives.1

Communities engaging in local renewable energy projects provide their residents with opportunities to develop, deliver and benefit from sustainable energy.2 In particular, the rise of community solar programs has enabled residents to invest in local sustainability initiatives and power their homes with renewable solar energy, regardless of the feasibility of installing panels on their own rooftops. Community solar capacity in the US almost doubled between 2016 and 2017, surging from 347 megawatts (MW) to 743 MW.3 Utilities and developers alike can customise these offerings to best match consumer preferences in the local markets.4 Greentech Media anticipates that from 2019, 500 MW of community solar projects could be installed annually across the Country.5

In the same vein, cities that commit to setting renewable energy goals often seek to reduce both energy prices and dependence on fossil fuels. Most of these cities view the transition as an opportunity for socio-economic development, rather than an obligation.6 Data suggests that as of 2018, more than 100 locations are now powered largely by renewable energy – a number that has more than doubled since 2015.7 And more than 80 cities in the US have committed to 100% clean energy goals, with six currently powered entirely on energy from renewable sources: Aspen, Colorado; Greenburg, Kansas; Burlington, Vermont; Kodiak Island, Alaska and Rock Port, Missouri.8

At the state level, the number of renewable energy installations varies widely, driven largely by state-level priorities rather than the renewable resource in the region (e.g. sunshine or wind). Renewable Portfolio Standards (RPS) have historically been the primary driver of state renewable adoption in the last decade. From 2008 to 2014, 60–70% of new renewable energy capacity installed in the US was attributable to satisfying RPS obligations. However, in 2016, this figure dropped to 44%.9 While there are many factors driving this shift, notable is the decline in the levelized cost of energy for renewables, the associated rise in economic-driven utility and corporate procurement of power from renewable sources.    

In light of falling costs of renewable resources and mounting shareholder pressures to include sustainable factors in strategic decisions,10 power purchase agreements (PPA) and other clean energy contracting has continued to surge among businesses and corporations. Corporate PPA volumes for clean energy reached 5.3 gigawatts (GW) in the United States and 8.3 GW globally through August 2018. This is more than triple the number of corporate PPAs at the same point in 2017.11 Many of the earliest entrants to this market include some of the largest companies in the world: Facebook, Google and Amazon.12 In fact, Facebook is currently leading the pack in 2018, having contracted more than 1.2 GW worth of clean energy PPAs year to date. 

Likewise, utilities have also recognised the benefits of adopting renewable energy, working towards decarbonising existing plants and replacing retired plants with renewables. In the most recent example, Xcel announced it would retire major coal plants by investing in wind, solar and batteries to replace generation, thereby saving tax-payers up to $374 million.13 According to the utility’s vice president Jonathan Adelman, the motivation behind the shift is based largely on economics and customer expectations,14 while chief executive Ben Fowke added that time is running out for coal-fired power plants in the US.15 Over time, Xcel will replace 660 MW of coal with more than 1,800 MW of wind and solar.16 Meanwhile, Warren Buffet’s Berkshire Hathaway has also expressed interest in boosting its investment in renewable energies – a decision driven largely by “aggressive” city policies and its customers, who simply want more clean energy.17

While the future adoption of renewable energy remains to be seen, current trends and market projections for the US suggest a bright future for solar. Bloomberg New Energy Finance estimates that more than 100 GW of solar PV capacity will be added over the next 10 years18 – almost twice the 58 GW total installed capacity in the US today.19 Anecdotally, NEW is seeing new opportunities in both historically active solar states and new markets. Accordingly, our team anticipates its pipeline of investment opportunities to grow.

Based in the United States, Adam serves as Director for the New Energy Solar team.

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