A new renewable age for North America?

North America is currently in the midst of an energy transition, led by the rapid emergence of the region’s renewables industry. Decarbonisation will define the future of the continent’s power sector growth, fuelled by government action to combat climate change and the energy industry’s ambition to capitalise on nascent zero-emissions technologies. Over the past years, the US and Canada have reaffirmed their commitments to climate action with economy-wide emissions reduction targets, as well as a host of supportive policies to accelerate the deployment of zero-emissions technologies at the national and subnational levels. Governments in each market have set a target to reach net-zero emissions by 2050, with interim goals set for 2030 of 40 – 45% reduction from 2005 levels in Canada and a 50 – 52% reduction from 2005 levels in the US.

These targets and policies have set a path for North America to continue its power sector transformation and underpin BMI’s view that renewables will be the driving force behind the region’s power sector growth over the next decade. The renewables industry will play a critical role in North America’s energy transition, which requires a rapid acceleration of the deployment of solar, wind, and battery storage to meet decarbonisation targets. BMI believes that the competitive landscape is in the industry’s favour, as emissions targets and declining cost trends continue to make zero-emissions resources increasingly competitive in the North American market and reduce opportunities for investors in conventional energy sources. This will reshape the region’s energy mix over the next 10 years as increased investment flow to renewables leads to a sharp reduction coal-fired power and a stagnation of natural gas development.

North America’s renewables industry is set to transform the region’s power sector over the next decade, and BMI expects three key trends to characterise the sector’s next stage of development. The region’s inadequate grid infrastructure will be the main constraint to wind and solar growth, requiring the emergence of new zero-emissions technologies to facilitate the ongoing energy transition. Clean energy manufacturing will additionally play a key role over the next decade amid a push from governments to reshore renewable component manufacturing to capture economic growth and secure supply chains. This is all supported by policy that will catalyse non-hydro renewables expansion, as seen in the impacts to BMI’s wind and solar forecast after the implementation of the US Inflation Reduction Act (IRA) and Canada’s 2023 Federal Budget.

New technologies emerge in response to grid constraints

The next decade for the North American renewables sector will differ from its first of breakout growth as the industry incorporates new technologies and adapts to new challenges. While the previous 10 years of non-hydro renewables expansion was defined by solar and onshore wind deployment, new zero emissions technologies – including battery storage and green hydrogen – are expected to emerge as enablers of decarbonisation amid rising grid bottlenecks.

North America’s existing interconnection capacity is insufficient to facilitate the demand from developers to connect new wind and solar projects to the grid. This issue will be exacerbated in the coming years as newly enacted policies accelerate non-hydro renewables growth and further strain already backlogged interconnection queues. According to analysis from the Lawrence Berkeley National Lab, cumulative wind and solar capacity currently in interconnection queues across the US reached 294.9 GW and 932.8 GW in 2022, respectively. To put this into perspective, the US’ total installed wind and solar capacity was 140.9 GW and 114.5 GW during that same year. Backlogged queues create considerable risks for developers through costly project delays and thus threaten North America’s decarbonisation should these installations fail to connect to the grid.

Additionally, the region’s grid is currently not optimised for the dynamics of non-hydro renewables generation. Intermittent wind and solar generation peaks often mismatch those of demand, and the areas of highest resource availably tend to be far from highly populated demand centres. These dynamics and the region’s current insufficient energy storage and long-range transmission capacity result in high levels of wind and solar generation curtailments to balance the grid. California and Texas are two of the leading non-hydro renewable markets in the US, and their wind and solar expansions have been accompanied by growing curtailments. High curtailment is detrimental to the North American renewables industry as lost generation cuts into profit margins and adds uncertainties to project economics for investors.

While policy reforms to streamline interconnection processes and the construction of new long-range transmission capacity is currently underway, the impact of these initiatives will be realised over the longer term due to the timelines associated with regulatory proceedings, approvals, and construction. This is where BMI believes battery storage will emerge in its critical role for the North American renewables industry, as the technology scales rapidly to mitigate grid constraints and integrate growing intermittent generation. Battery storage deployment was limited up until 2021, but installations are expected to rise sharply during the next few years, supported by falling technology costs and expanding grid management use cases for developers.

Battery storage will not be the only new technology to emerge in the market to meet the industry’s challenges. As North America pursues green hydrogen development, the technology will enable further non-hydro renewables capacity growth by unlocking grid-constrained regions and reducing curtailed generation. Green hydrogen will increase demand for wind and solar generation as production scales up to advance the decarbonisation of industrial sectors and creates new offtakers for renewables developers.

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For more news and technical articles from the global renewable industry, read the latest issue of Energy Global magazine.

Energy Global's Winter 2023 issue

The Winter 2023 issue of Energy Global hosts an array of technical articles weather analysis, geothermal solutions, energy storage technology, and more. This issue also features a regional report looking at the future of renewables in North America, and a report from Théodore Reed-Martin, Editorial Assistant, Energy Global, on how Iceland utilises its unique geology for renewable energy.

Read the article online at: https://www.energyglobal.com/special-reports/21122023/a-new-renewable-age-for-north-america/