Trends to watch in alternative energy
Firmly entrenched in the mainstream, alternative energy’s momentum accelerates
In recent years, there has been much discussion of alternative energy moving into the mainstream. While it hasn’t yet shed the “alternative” label, alternative energy’s shift to the mainstream is largely complete and likely irreversible.
Alternative energy’s momentum continues to accelerate
Despite continuing uncertainty over policy incentives and competition from historically low natural gas prices, alternative energy’s momentum continues to accelerate. In the case of wind and solar power, growth rates are regularly outpacing projections. Alternative energy sources still face the aforementioned roadblocks and perhaps a few emerging ones, but the industry continues to move forward and the overall outlook for growth is strong due to both longstanding and new trends.
In the following sections, we detail eight different alternative energy trends to watch and why.
Renewable acquisition activity gaining steam
In 2015, renewable energy assets continued to attract attention from Wall Street and other influential buyers, driving deal count up 42 percent from the prior year, to 163 deals. Total capacity acquired rose 17 percent, to nearly 19.7 GW. Renewable assets established a greater presence in publicly traded financial markets through YieldCo-related activity. Furthermore, large corporations eager to lock in future electricity rates entered into long-term contracts with solar and wind developers, boosting investor confidence in the sector.
Community solar broadens market for solar power
Community solar programs allow customers who do not own their homes or have strong credit scores, available capital, or adequate roof space to invest in solar power by sharing the resource with others in their vicinity. Each installation typically generates one to two megawatts (MW), making them large enough to tap project financing and other efficient sources of capital. Community solar has gained a foothold in the US market during the past five years and its growth shows no signs of slowing. In 2010, only two shared solar projects existed. By 2015, there were more than 50 projects across 19 states, with a combined capacity of more than 170 MW.
Grid integration advances help accommodate more renewables
Many wind, solar, and other variable alternative energy resources are not owned or controlled by utilities. As these intermittent resources are connected to the electric grid, utilities and system operators must integrate power output while balancing supply and demand in real time and avoiding unanticipated voltage fluctuations or circuit overloads that could trigger blackouts or other service disruptions. To address these issues, utilities are developing more accurate forecasting tools and planning processes, and adopting new technologies and applications such as grid automation, smart inverters, sensors, advanced analytics, forecasting, and electricity storage. With these improvements, utilities and grid operators can accept higher levels of renewable generation.
Renewable energy sees expanded role in resiliency
Renewables have changed ways of thinking about resiliency. While resiliency efforts used to focus on preventing outages, states and utilities are realizing that alternative energy sources can speed recovery times after an outage occurs. Many consumers and commercial users are incorporating wind, solar, and other alternative energy sources into their resiliency plans because these technologies, combined with energy storage, can provide electricity during outages as well as valuable grid services year-round.
EPA’s Clean Power Plan supports renewable growth
The Environmental Protection Agency’s Clean Power Plan (CPP), finalized in October 2015, calls for reducing greenhouse gas emissions from their 2005 level by 32 percent by 2030. The expansion of renewables is one of the plan’s three key pillars. This ruling and other environmental legislation is already affecting some corporations’ decisions about energy use by encouraging them to address carbon reduction sooner than they otherwise might because they believe a price on carbon is increasingly inevitable.
Corporations go all-in on renewable energy
According to Deloitte’s annual Resources Study, in 2015, companies began embracing more capital-intensive measures to energy management. Thirty-nine percent reported installing solar panels or other electricity-generating assets at their facilities and 26 percent said they had installed batteries to store electricity as a hedge against peak demand times, when prices are higher.
Regulatory reform driven by states
While the CPP will likely promote renewable growth, overall federal support for renewables has been inconsistent in recent years, and states have increasingly stepped in to fill the void. In 2014 and 2015, many states continued to expand their programs to encourage renewable energy development, and in some cases, states are developing new regulatory frameworks to accommodate changes in the traditional utility business model.
Fast growing companies focus on people to sustain growth
The days are dwindling when alternative energy companies were confined to startups. As the industry makes way for large, scalable enterprises, companies are starting to grapple with organizational questions tied to their exponential growth. The Deloitte Global Human Capital Trends 2015 Report has identified the preeminent people-related issues that keep energy executives up at night: learning and development, organizational structure, culture, performance management, and workforce readiness.