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2019 Renewable Energy Industry Outlook

Strong fundamentals bolstered by three enabling trends

The renewable energy sector remained remarkably resilient in 2018, gaining ground despite uncertainty about new tax and tariff policies. The fundamental drivers of this growth appear poised to continue. But we also see three trends coming into sharper focus that look likely to shape growth in 2019. Read about how these trends can help drive long-term growth in Deloitte's 2019 Renewable Energy Outlook, a take from Marlene Motyka, US and Global Renewable Energy leader, Deloitte Transactions and Business Analytics LLP.

My take: Marlene Motyka

Looking ahead: Strong fundamentals bolstered by three enabling trends in 2019

In 2018, the US 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. Output from utility-scale wind and solar capacity topped 8 percent of total US electricity generation through the third quarter of 2018, compared with 7 percent for the same period in 2017.1

We see the fundamental drivers of this growth poised to continue in 2019, but we also see three trends coming into sharper focus that are likely to shape renewable growth in the coming year. Those trends include emerging policies that support renewable growth, expanding investor interest in the sector, and advancing technologies that boost wind and solar energy’s value to the grid, asset owners, and customers.

Some of the core fundamentals that drove growth in 2018 were declining costs of wind and solar generation, advances in battery storage technology, and grid operators’ growing expertise and expanding toolset for integrating intermittent renewable power into the grid.2 And, perhaps most significant, was robust demand from most market segments. Utilities demonstrated strong “voluntary demand,” as opposed to the demand driven by policy mandates we’ve seen in the past. Voluntary procurement represented 52 percent of utility-scale solar projects in development and 73 percent of projects announced in the first half of 2018.3 This demand was partly driven by corporations’ rapidly growing appetite for renewables. As of mid-October 2018, corporations had purchased nearly five gigawatts (GW) of renewables through a variety of procurement routes.4

Demand from consumers was also robust in 2018, and the findings of the Deloitte Resources 2018 Study demonstrate some of the sentiment behind these trends. More than half of all residential survey respondents (53 percent) indicated that it is extremely or very important to them that part of their electricity supply comes from renewable sources, trending upward since 2013.5 And about half (48 percent) of business respondents are working to procure more electricity from renewable sources.6

Tax and trade policies will likely continue to impact renewable growth

Potentially accelerated project schedules ahead of tax credit phasedowns suggest a favorable outlook for renewable growth in 2019, while tariffs could continue to create headwinds. Developers may hasten to begin solar project construction by year end to qualify for federal tax credits before the investment tax credit for solar falls from 30 percent to 26 percent and expedite the in-service dates for wind projects before the production tax credit for wind phases out entirely in 2020.

Federal trade policy will likely continue to create headwinds, specifically the 30 percent import tariff on crystalline-silicon solar cells and modules, and tariffs on imported steel, aluminum, and inverters from China. The solar tariff is scheduled to decline five percent annually, eventually falling to 15 percent in year four, and may delay or cancel some projects, particularly utility-scale ones. Steel and aluminum tariffs could increase the levelized cost of energy for new US renewable plants by an estimated three to five percent.7 However, exclusions on finished goods and geographic exemptions for Mexico and Canada may blunt the overall project cost impact.

Three trends likely to shape renewable growth in 2019

Against the backdrop above, three additional trends appear poised to strengthen renewable energy growth prospects in 2019: Emerging policies, expanding investment interest, and advancing technologies.

Energy and industrials trends in 2019

To help think about what is important in the energy and industrials landscape, Deloitte’s Energy, Resources & Industrials industry leaders give their unique and individual perspectives on what to watch out for in 2019, for all segments of the Oil, Gas & Chemicals; Power & Utilities; and Industrial Products & Construction sectors. The annual release of these outlooks is timed to give food for thought as we go into a new year.

Discover more insights for the Energy, Resources & Industrials Industry.

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Look again

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.

Discover more Industry Outlooks.

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