A Look at the Renewable Energy Sector with Deloitte's Marlene Motkya

 

 

 

 

 

 

 

 

 

 

 

Marlene Motyka, who is the U.S. and Global Renewable Energy Leader at Deloitte, joined us on the Engineering Influence podcast to discuss her firm's recently released  2021 Renewable Energy Outlook report. Motyka authored the report, which highlights several trends that point towards huge growth in the sector.

Click here to download Deloitte's 2021 Renewable Energy Outlook report.

Click here to download Deloitte's Utility Decarbonization Strategies study.

 

Host:

Welcome to the Engineering Influence podcast, brought to you by the American Council of Engineering Companies.

The rapid expansion of renewable energy generation will be a pivotal factor in slowing climate change. Over the past few decades, solar and wind energy technologies and production have made tremendous advances, but we may be on the cusp of truly dynamic change.

Deloitte recently released its 2021 Renewable Energy Outlook, which highlights several trends that point towards huge growth in the renewable energy sector. The author of that report, Marlene Motyka, who is the U.S. and Global Renewable Energy Leader at Deloitte, has joined us on the program to discuss the current state and future prospects for renewable energy.

So let's get into it.

There have been reports in recent months that solar and or wind generation have achieved cost parity with carbon-based generation. Is this true? And if so, what is the impact?

Motyka:

The answer to your first question is yes. Over the past decade as the Levelized Cost of Energy (LCOE) has decreased over 70% for wind and 90% for utility-scale solar, these renewables have achieved cost parity with carbon-based generation across most of the world. And they've done so while also increasing technology efficiency and capacity factors. And these deep price declines and technology improvements are continuing. Really the impact is hard to overstate. Today it means that new wind and solar are more cost-effective to build than new fossil fuel plants and the LCOE ranges for solar photovoltaic or PV and onshore wind are below that of natural gas and below the cost of running many coal plants. And new-build renewables are also increasingly becoming competitive with the cost of running existing natural gas and nuclear plants and are on track to undercut them in the next few years.

Motyka:

So as a result, we think the energy transition is on the cusp of really rapid acceleration, even in states without renewable portfolio standards, because of the low cost resulting from market fundamentals and tax incentives. So we hear a lot about decarbonization and really what we're saying is it's affordable. And despite the pandemic and federal policy headwinds in 2020, renewable deployment was surging. U.S. PV capacity deployments hit record highs in 2020, and are expected to do the same in 2021. And onshore wind in 2020 also recorded the largest capacity additions since 2012, while offshore is really poised to take off in the coming years.

Host:

So to your point, that federal policy can have a big impact on the renewable energy market. In the year-end spending bill, Congress extended the tax credits for solar, wind, and other renewable energy technologies. How will that affect the market?

Motyka:

We got a year-end little treat here--we tend to sometimes have that with regard to these tax incentives for the renewable space--but really surpassing most industry expectations. The two-year extension of the 26% investment tax credit or ITC could provide a significant boost to the outlook for solar deployments as could the maintain 60% production tax credit for wind through the end of 2021 for onshore wind deployments. And the extensions may also provide the biggest boost to offshore wind starts, which are now eligible for a 30% ITC for projects that start construction before the end of 2025. So besides boosting solar and onshore and offshore wind deployments, these extensions could also ease concerns about missing deadlines due to pandemic related supply chain disruptions that happened in 2020 and also provide additional certainty for investments in domestic manufacturing and recycling as well as port facilities for the nascent offshore wind industry in the U.S. On top of that, the stimulus package had additional billions of dollars for funding for renewable R&D and grid modernization, and that could really help accelerate technology innovation and the deployment of hybrid platforms that include emerging renewables, such as marine power, as well as emerging storage technologies.

Host:

The Biden Administration has expressed its intention to support renewable energy. Is that going to have an impact over the next few years?

Motyka:

There's been a lot of buzz about this topic, and with the Democratic Senate and House control, the Biden Administration will have a window of opportunity to really usher in some ambitious clean energy legislation. They don't have a filibuster-proof majority, so the Administration may need to integrate its decarbonization and clean energy targets into a broader infrastructure stimulus package, but the Congressional Review Act and simple majorities will allow for reversals of many of the previous administration's regulatory rollbacks, executive decisions to streamline permitting and provide regulatory support for renewables, creation of a clean energy standard, establishment of a new Green Bank, and as most people may be aware, the U.S. rejoining the Paris Accord. In any case, I think the Biden Administration's commitment to decarbonization is going to really turbocharge the cost, customer, and sub-federal forces that have really been driving clean energy investment and deployment over the past four years.

Motyka:

I think another thing to point out is the Biden Administration's appointment of a Democratic chair for the Federal Energy Regulatory Commission (FERC) would also have a significant impact on the power sector's decarbonization by 2035. A shift in FERC could brighten the prospects for rulings supportive of clean energy resources, ability to clear energy markets, and states seeking greater deployment of renewables. It could also facilitate the buildout of transmission that really will be needed to integrate higher shares of renewables on the grid. And finally, FERC will be key to reshaping electricity markets to ensure resource adequacy, grid, reliability, and limited price volatility, amid the planned rapid increase of renewable penetration and the corresponding fossil fuel plant retirements

Host:

In your report, you highlight the increasing size of offshore wind turbines, up to about 14 megawatts. Can we expect to see ongoing technological advances in both solar and wind to make them even more cost-competitive?

Motyka:

Yes, I think we can. While solar and wind are already both mature technologies, we can expect to see ongoing technological advances that will make them even more cost-competitive. When we look at solar, bifacial solar recently achieved cost competitiveness with single-side solar modules and could soon overtake them. And there's also optimization of tilt angles and ground reflectants that are expected to further drive costs down.

Motyka:

Second, new materials that can absorb a broader range of solar spectrum could push efficiency past the upper bounds for silicon cells. And these include silicon cells layered with perovskite, which are nearing commercialization, and other cells using multiple non-silicon materials. In addition, there are innovative inverter technologies that are enabling more flexible grid, enhanced deployments of solar power.

Motyka:

Third, I'd like to point out California's new home solar requirements, which are driving innovation and partnership between solar developers, builders, and roofers to commercialize building-integrated PV that really hits the sweet spot between efficiency, affordability, and aesthetics.

Motyka:

And then on the wind side, you know, the wind industry really hasn't hit a point of diminishing returns yet on increased scale. And you mentioned 14-megawatt turbines, so with wind bigger really is better. And with larger turbines, you're able to really drive down manufacturing and maintenance costs, but at the same time increasing revenue, and there's been a lot of material innovation, which is continuing to enable these larger turbines. And then also we have floating wind technologies that are maturing and becoming increasingly competitive

Host:

And touching on floating wind technologies. What can we expect in that arena?

Motyka:

That's really exciting. So just briefly, floating offshore wind uses semi-submerged structures that are tethered to the seabed rather than fixed to it with foundations. And the advantage of floating offshore wind plants is that they can be deployed at depths beyond the 165-foot limit for fixed foundation offshore wind. Most offshore wind resources are actually located beyond this point, including much on the West Coast. The ability to deploy floating offshore wind opens much more generation capacity for the U.S. And also deployment and deeper waters further from the shoreline could also yield higher capacity factors. Another advantage of floating wind platforms is that they could host other technologies. Currently, developers are exploring enhanced structures that could lower costs via hybridization of floating platforms with complementary tidal wave and ocean thermal energy generation, as well as floating solar generation. So a lot of exciting things happening there.

Host:

Another area that sounds pretty exciting is hydrogen and power-to-x. In your report, you did a pretty deep dive into that. What does this bode for the future?

Motyka:

Yeah, there's been a lot of discussion about hybrid hydrogen. It's really kind of just popped up, I would say, in the last year in full force. Hydrogen and power-to-x technologies are going to play a significant role in closing the last 20% of the decarbonization gap, which we expect around the 2040 timeline. That's when heating and industrial sectors are really expected to transition away from natural gas, and the transportation sector to transition away from oil. So they're expected to increasingly refuel with electricity. For example, you'll see heat pumps replacing gas furnaces in buildings and advanced electrothermal technologies replacing gas in industrial processes. And in areas where electrification is least feasible, green hydrogen is one of the only solutions right now that can help decarbonization of all the remaining hard to abate sectors, from heavy industry to long-haul transportation.

Motyka:

Green hydrogen is also one of the few solutions to renewable integration challenges at high levels of penetration. So when we think about renewable penetration that's needed to cross that last 20% threshold, there's going to be integration challenges that are much greater for renewables. So significant overbuild and curtailment of renewables may occur without large-scale seasonal storage to capture excess renewable production, which can be used when renewable production drops off for long periods of time. And hydrogen could seasonally store renewables in liquid, gas, and chemical conform and convert that back to power when needed. There are really no commercially operational hydrogen power plants in the world yet, but utilities are looking to cost-effectively start retrofitting some gas plants to partially or fully run on hydrogen. Also, islanded green hydrogen can support an energy system as greater economy-wide electrification strains grid capacity.

Motyka:

So we talked about offshore wind and as deployment increasingly moves offshore and into deeper water, hydrogen pipelines could supplement high voltage transmission to bring the energy onshore and might really be the most cost-effective energy carrier in areas where there is high grid congestion, such as along some of the East coast. And just last weekend, the European Commission granted a consortium, which is being led by Orsted, 5 million euros to help develop desalinization and electrolysis systems for an offshore wind deployment to produce green hydrogen. So that's really exciting. And I think there's a lot of interesting things to come with hydrogen and with renewables supporting green hydrogen.

Host:

One of the challenges has been that solar only works when the sun shining and as such a lot of focus has been on storage. It has been considered to be the missing link for the expansion of renewable energy. Where are we with storage right now?

Motyka:

Yeah, I think there's been a lot of evolution, but there's more to come here. And the surge of renewables on the grid required to reach the decarbonization goals that we're seeing being set will require energy storage. And that will allow for system flexibility. But the capacity of storage is going to need to grow exponentially from where it currently is to support the record levels of renewable deployment we expect.

Motyka:

And when we look at current energy storage deployment, there are dominated by two technologies. The first is electrochemical lithium-ion battery technology and mechanical Pumped Hydro Storage (PHS). And these two technologies in some ways are kind of at the opposite ends of the spectrum when you look at energy storage options. So on the one hand, you have dynamic lithium-ion battery technology, which can competitively provide four-hour storage almost anywhere and is experiencing rapidly falling cost, increasing density, and other material and chemical advances, so that's great. But, meanwhile Pumped Hydro Storage is a long-standing, but geographically constrained, technology with higher stable costs that's recently seen an uptick in deployment as it can provide longer duration storage. And sub-sea PHS is a new frontier that some offshore wind developers are starting to explore.

Motyka:

But in between these two types of energy storage technologies are a host of evolving mechanical and battery storage technologies offering hourly, intra-day, inter-day, and even weekly storage. This will help support the grid in many different ways, but I think a key is that we have to see the opening of additional revenue streams to support the use cases of energy storage. So energy storage can be responsible for primary response. It can be used for energy arbitrage, peaker replacement, secondary response, and even support distribution and transmission deferral, but to really help accelerate the deployment of these storage technologies, we need the markets to compensate these technologies for the value that they're adding to the grid,

Host:

On that, how does that happen? How do you expect the market to compensate?

Motyka:

Well, the FERC is going to be key to that. They've set out some guidelines that talk to us about the Regional Transmission Organizations (RTOs) needing to create structures and pricing signals that will allow battery storage and other types of distributed energy resources to be compensated for the services they add. And it will take time for this to unroll, but we expect this to continue to evolve. And as I mentioned earlier with the fact that the Biden Administration can put a Democrat in place to lead FERC, we think that will continue to support the rollout of these technologies

Host:

Looking farther into the future, in 2019 renewables accounted for about 17.6% of U.S. power generation. Where do you see that number going over the coming years?

Motyka:

I think there's interesting times to come here. When we look at this combination of plummeting cost, technology innovation, government, and utility targets, corporate and citizen demand for renewables, the ITC and PTC extensions that I mentioned earlier, and the new administration, we're really going to see unprecedented, renewable investment and growth, because everybody's going to be moving towards this common goal to fully decarbonize the economy by 2050, and the targets that are going to be required to meet those goals are going to result in record annual deployments of wind and solar because that's really going to be the bulk of U.S generation that's going to be built by mid-century.

Motyka:

Deloitte recently issued a report on utility decarbonization. And we said in that study without other decarbonization solutions, these renewables would need to be able to meet three to eight-times peak demand to ensure adequate generation when the sun and wind resources availability is at its lowest, even with storage in the mix, and total capacity additions may need to surpass total existing generation capacity to make up for the coal share that needs to be replaced as well as planned and retiring natural gas.

Motyka:

And I do want to point out that over 280 companies across the globe have pledged to have 100% of their electricity from renewable energy sources no later than 2050. So all of this is coming together and I think to sum it up, I see very large growth in renewables in the coming years and in the longer term as well.

Host:

And finally, funding is moving into renewable energy with funding coming from large oil and gas producers. Does this mark a turning point for the renewable energy market?

Motyka:

You pointed out oil and gas companies and we see them being poised to leverage their deep expertise in offshore environments and bring that to the U.S. Offshore wind industry, which is really just starting to evolve and grow. This could provide them relatively stable revenues, but also lower their carbon footprints. And we think also oil companies could be well-positioned to hybridize offshore wind projects with green hydrogen production. And this could be a new industry area for the oil industry to leverage their existing expertise. But with the broad goals from the Biden Administration related to clean technology and decarbonization of the economy, I think there's an expectation that investment in the renewable sector will increase and attract new players across the globe with a variety of different backgrounds and coming from different industry sectors. So I think no doubt, there's going to be some really interesting times ahead, and this is going to be a very interesting industry sector.

Host:

You sound pretty optimistic about it. I would say

Motyka:

I do. I'm very excited.

Host:

That's great and that's a great place to stop. I appreciate your taking the time to speak with us.

Motyka:

Thank you very much. I appreciate the time.