Optimism Is Warranted in the Power Industry in 2022 and Beyond
Opportunities are everywhere in the power industry these days. Not only are wind and solar energy seeing explosive growth, but also several other technologies are showing real signs of promise. Battery energy storage systems and microgrids have become mainstream grid components. Advanced nuclear power designs and hydrogen-based energy schemes have progressed beyond concepts and into real brick-and-mortar projects. The worldwide focus on climate change has developers of carbon capture and storage (CCS) technologies licking their chops, with serious deployment of CCS systems almost assured if the world is to meet goals aligned with the Paris Agreement.
The movement to electrify everything also provides opportunity for power companies having the proper vision to capitalize on the trend. With the innovative mindset that is prevalent in academic institutions and research labs around the world, there are sure to be new technologies yet unheard of coming to light as the decade progresses. Yes, there is plenty for the power industry to be excited about as we head into the new year.
2021: A Year of Recovery
The COVID-19 pandemic threw the world for a loop in 2020. The U.S. Bureau of Economic Analysis (BEA), an agency of the U.S. Department of Commerce, reported that the real gross domestic product (GDP) decreased by 3.5% in the U.S. in 2020 compared to 2019. The decrease would have been worse had it not been for increases in federal government spending, including nondefense consumption expenditures led by services supporting the Paycheck Protection Program. The world GDP decreased similarly, down 3.4%, according to data reported by The World Bank.
However, there has been an uptick in GDP in the first three quarters (Q1, Q2, and Q3) of 2021. The BEA reported real GDP increased 6.3% in Q1, 6.7% in Q2, and 2.1% in Q3. Preliminary numbers for Q4 and the full year won’t be revealed until late-January 2022.
The solar energy sector experienced an even more pronounced recovery in 2021. The Solar Energy Industries Association (SEIA) reported in mid-September that residential solar installations were up 46% in Q2 2021 compared to the previous year. Commercial and community solar (Figure 1) installations also increased year over year by 31% and 16%, respectively, and utility-scale solar set a record for second-quarter installations with 4.2 GWdc added. SEIA said the U.S. officially surpassed 3 million solar installations during the second quarter, and the solar industry accounted for 56% of all new U.S. electric capacity additions in the first half of 2021.
The solar industry will very likely continue to set annual installation records in the U.S. until 2024 when the solar investment tax credit (ITC) is phased out for residential systems and decreases to a permanent 10% credit for commercial installations. In fact, Wood Mackenzie, a Verisk business and partner of SEIA, predicts that the U.S. will average more than 29 GW of new solar capacity additions annually through 2026. However, this is far short of the 80 GW of solar additions SEIA says are needed annually to reach President Biden’s 2035 clean energy targets.
There was also notable growth in wind energy installations across the U.S. in 2021. The American Clean Power Association (ACP) reported that, through September, the industry had added 37 projects in 18 states totaling 7,248 MW, an increase of 15% compared to the first three quarters of 2020…