The rise of renewables has coincided with the decline in coal-fired generation, as the focus on carbon emissions intensified, especially over the last decade. (ddp)

CIO expects renewables' growth to continue and even accelerate its upward march, supported by incentives provided by the Inflation Reduction Act (IRA), declining costs, and improvements in battery storage technologies.

The rise of renewables has coincided with the decline in coal-fired generation, as the focus on carbon emissions intensified, especially over the last decade. However, natural gas remained the largest source of US electricity generation and even increased its share to around 40%. Natural gas is poised to remain the dominant source of electricity for the foreseeable future given its abundant supply and high reliability, though we expect renewables to continue to have the greatest share of new generating capacity.

The share of nuclear energy has stayed flat; however, there have been some important developments. On 31 July, the Vogtle Unit 3 nuclear plant commenced commercial operation and is now serving customers in the state of Georgia. Vogtle Unit 4 is expected to start commercial operations by 1Q24. The Vogtle 3 and 4 plants (co-owned by Georgia Power, Oglethorpe Power, MEAG Power, and Dalton Utilities) are finally seeing the light of day after many years of delay and billions of dollars of cost overruns. There is some new impetus for nuclear power given its low carbon-emission profile, very high reliability, relatively new technological innovations, and policy incentives. However, in our view, a meaningful nuclear renaissance is unlikely given the negative public perception, a history of cost overruns, and significant regulatory hurdles.

Coming back to renewables, its surging share in the energy mix has been driven by the rapidly increasing share of wind and solar generation.

  • The IRA outlined alternatives for taxpayers who want to buy or sell their energy tax credits and allows tax-exempt entities (such as municipal electric utilities) to receive a refundable payment in lieu of the tax credit—an incentive that was not available to them prior to the IRA. However, until recently, there was some confusion about how these incentives would be applied.
  • The IRS recently proposed rules for green energy tax credits provided under the IRA. The rules provide much-needed clarity and will help spur significant investments in renewable energy by public power entities, which have lagged behind corporate utilities in this regard and should meaningfully accelerate their carbon transition progress.

We expect the growth in renewables to be further enhanced as improvements in grid capacity and advances in smart-grid and battery-storage technology address the most important challenge with regard to renewable power: their intrinsically intermittent nature. The declining costs of renewable power, increased reliability through technological advancements, and renewables' leading position in terms of low carbon emissions should continue to increase their competitiveness along the key dimensions of energy: affordability, reliability, and sustainability.

Main contributor - Sudip Mukherjee

Original report - Renewable energy: Upwards and onwards, 3 August 2023.