After a strong 2018, the U.S. renewable energy sector is expected to see its value to the grid, companies and customers grow in 2019, according to a recent outlook from consulting firm Deloitte.
Federal and state mandates, a growing investor base and technology advancements will be three new drivers to push clean energy costs down and boost renewables' value, said Marlene Motyka, Deloitte's U.S. and global renewable energy leader and principal for Deloitte Transactions and Business Analytics LLP. The sector will still see some familiar issues in the new year, for example as solar and wind project developers race to have their energy facilities qualify for their respective tax credits before they drop down in value in 2020.
"In 2018, the U.S. renewable energy sector remained remarkably resilient, gaining ground despite uncertainty about the effects of federal tax reform legislation and a spate of new import tariffs," Motyka said in Deloitte's 2019 renewable energy industry outlook. "Output from utility-scale wind and solar capacity topped 8% of total U.S. electricity generation through the third quarter of 2018, compared with 7% for the same period in 2017."
Policy support will be particularly essential for energy storage and offshore wind development. The Federal Energy Regulatory Commission's Feb. 15 order to have regional transmission organizations and independent system operators create market rules to improve energy storage resources' grid participation and more state mandates will help fuel battery storage deployment in 2019. But as more states embracing solar-plus-storage projects, Motyka said hybrid projects' growing grid presence may require greater coordination from federal and state regulators. Meanwhile, both federal and state governments are embracing offshore wind as integral to the grid through additional lease sales, research and development funding, and flexibility in permitting.
Established corporations such as Alphabet Inc. and Apple Inc. have been the center of the attention around corporate procurement, where nonutility customers buy clean energy through power purchase agreements or offset fossil fuel usage with renewable energy certificates. Going into 2019, Deloitte predicts renewables will be a more attractive investment to a wider range of parties, such as smaller corporate buyers, oil and gas companies, and asset management firms.
"Larger companies are joining with smaller companies to develop new wind and solar projects," Motyka said. "One global technology giant designed a procurement instrument to reduce weather-related risks from renewables, making them a safer investment for 'small' corporate buyers. And some large corporations have also started imposing sustainability standards on their supply chain participants, a trend that brings more companies into the market and is expected to grow in the future."
Both utilities and households are expected to reap the benefits from technology in 2019. Digital solutions at the distribution level and behind the meter are starting to emerge in the electricity sector, such as more peer-to-peer renewable energy trading, tracking renewable energy credits' history and paying for electric vehicle charging on blockchain.
While renewable energy growth is looking good for 2019, there are still some headwinds from 2018 that will carry over into the new year, Deloitte said. Project developers will keep an eye on federal trade policy, specifically with the 30% import tariff on crystalline-silicon solar cells and modules, and the duties on imported steel and aluminum. The solar tariff is scheduled to decline in value by 5% annually before phasing out after 2021 and may particularly hurt the development project pipeline for utility-scale solar plants. According to Deloitte, steel and aluminum tariffs could increase the levelized cost of energy for new U.S. renewable plants by 3% to 5%, but the exclusions on finished goods and the exemptions for Mexico and Canada may mitigate the tariffs' effect.