Renewable Energy Industry Outlook 2017
“My Take” by US Renewable Energy leader, Marlene Motyka
Throughout 2016, renewables effectively competed against fossil fuel generation in power markets and for procurement contracts across the United States and around the world. It’s clear that renewable energy resources have outgrown the "alternative" label. Will renewables sustain their competitive edge throughout 2017? How are global and domestic markets evolving as a result of these changing dynamics?
- Growth drivers that propelled renewables
- Other trends projected for 2017
- What's next in 2017
- Additional resources
- Get in touch
How would you describe the growth drivers that propelled renewables into the mainstream?
Due to the declining costs of solar and wind technologies as well as the anticipation of a more carbon-constrained future, today the global growth of renewable energy is increasingly driven by voluntary procurement by utilities and corporations. We’ve seen an especially rapid decline in the global levelized cost of electricity (LCOE) of solar photovoltaic (PV) generation as well as onshore and offshore wind.
These improving economics are empowering many customers to seek greater control over their energy choices, and a movement toward localized energy procurement seems to be underway. We’re seeing many municipalities across the country take advantage of community choice aggregation (CCA) policies, and community solar has taken off too. It is this strong demand from customers and communities that seem to have allowed renewables to shed the “alternative” label and transition into mainstream resources.
What other trends are projected for 2017?
Corporate renewable procurement generated quite a buzz in 2016. Low-priced power purchase agreements (PPAs) give companies price certainty, and consumers are often demanding corporate social and environmental responsibility. The energy industry views direct procurement by corporate buyers as a viable growth driver at a time when federal policies previously expected to stimulate growth, such as the Clean Power Plan, have been called into question.
Utilities are rolling out programs that provide customers with the option to consume renewables. Programs range from providing residential customers with utility-owned solar panels to allowing “self-consumption,” or “self-supply” as they call it in Hawaii, through grid-tied, but customer-owned, solar and storage systems. And as more consumer choice is demanded, it’s likely that consumer preference for renewable energy will continue to propel growth.
The US energy storage market certainly matured, demonstrating more robust demand and more dynamic, customer-cited applications. State-level mandates for energy storage deployment and the synergies achieved by coupling storage with intermittent renewable resources seem to be driving the market.
Renewable developers and utility holding companies are employing global diversification strategies to increase returns. Government-led auction programs and tenders have proven to make global diversification attractive for renewable developers. We’ve also seen European energy companies set up shop in innovation hubs around the United States to invest in the Internet of Things and data analytics technologies, especially those that enable more effective integration of distributed, renewable resources into the grid.
How are markets evolving to support or promote these developments? On a global scale, the prevalence of government-led auctions has brought more competition and resource diversity into the fold. And in the United States, energy markets are adapting to the growth of distributed energy resources.
What's next in 2017?
Despite ripples of uncertainty, whether related to US tax policy or commitments to fighting climate change, the positive momentum achieved by the renewable energy sector will likely not abate. Large corporations may keep flexing their buying power and I expect that as the industry becomes increasingly comfortable with corporate renewable procurement, we’ll see more contracts signed by small- to medium-size companies. The declining cost of energy storage should enable further penetration of variable, renewable resources, and what’s really become evident is that the underlying driver for each of these market trends is customer demand for renewables. As in past years, in 2017, I expect that the marketplace will innovate in unexpected ways to give consumers what they want: clean, affordable renewable energy.
2017 regulatory trends in energy
The 2016 election results may, over time, reshape the energy industry’s regulatory landscape. Some key regulatory areas, such as derivatives oversight, renewable energy tax credits, and environmental protection, face uncertainty. And time will tell how these events may impact the industry. The issues included in this year’s report provide a starting point for an important dialogue about future regulatory challenges and opportunities.
In today’s rapidly evolving marketplace environment, key business issues are converging with impacts felt across multiple industry sectors. What are the key trends, challenges, and opportunities that may affect your business and influence your strategy? Look for more perspectives and insights from some of Deloitte’s forward thinkers.