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Grid permitting and supply chain uncertainty remain challenges in the US

The United States is at a pivotal moment in its role as a global leader in clean energy, according to David Crane, Under Secretary for Infrastructure at the US Department of Energy. Speaking at the BloombergNEF (BNEF) Summit in New York, Crane's remarks resonated with leaders from the clean energy sector. They highlighted six key challenges facing the industry, emphasizing the significant hurdles that need to be overcome to ensure the successful deployment of renewable energy.

Siting, permitting, and grid challenges

According to the BNEF report, siting, permitting, and grid issues are at the forefront of concerns for clean power expansion. Participants at the summit noted that these factors are major constraints on the pace of new renewable energy projects. The grid itself faces significant challenges related to siting and environmental permitting. Industry and government representatives have proposed solutions, such as implementing shot clocks, streamlining processes, designating pre-approved zones, engaging communities, and increasing staffing. However, these measures are still in the early stages and are inconsistently applied across different regions.


Source: BloombergNEF


Supply chain uncertainty

Supply chain uncertainties threaten the effectiveness of domestic tax credit add-ons, the report highlighted. In addition, it also states that, despite generous tax incentives,  industry experts warn that localizing supply chains will not happen overnight and may never be fully achievable for some sectors, like solar energy. Developers are concerned about the eligibility of their projects for domestic tax credit add-ons due to the complexities involved in proving US-based activities.

Negative pricing concerns

According to BNEF, developers are facing a potential rude awakening with negative pricing issues. With the rise in renewable energy projects and the introduction of production tax credits for solar, there are growing concerns about negative pricing. Attendees at the summit warned that the business models for renewables might need to adapt, potentially resembling those of gas peaker plants, where most revenue is earned during a few hours each year. This situation presents opportunities for battery storage solutions and necessitates risk-sharing agreements with offtakers.

Tax credit transferability

BNEF also notes that the industry is taking tentative steps toward tax credit transferability. US renewable energy players are eager to leverage this mechanism to handle the surge in planned projects that will generate tax credits. However, the market for tax credit transferability is still in its infancy. Hybrid deals, combining transferability with traditional power purchase agreements and raising debt based on transferability deals, were of particular interest to summit participants.

Clean firming capacity

On the other hand, the report states that clean firming capacity is becoming a critical focus area due to new Environmental Protection Agency regulations on coal and gas emissions, state and corporate net-zero goals, and rising power demand. Despite this, technologies providing clean firming capacity struggle to compete because of high costs and non-supportive market designs.

Load growth impacts

The growth in load demand is influencing utilities' near-term decisions. After years of stagnation, load growth in the US is being driven by electric vehicles, data centers, cryptocurrency mining facilities, and manufacturing. Predicting the impact of this change is challenging; for instance, data center demand will vary significantly based on application and semiconductor innovation. This new load is also pressuring renewables, grid development timelines, and firming capacity requirements.

In summary, while the US clean power sector is at a critical juncture, overcoming these challenges will require coordinated efforts from industry and government to ensure a sustainable and reliable clean energy future.


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