According to S&P Global, falling component costs, local manufacturing, and distributed energy are the top three trends in the renewable energy industry this year.
Continued supply chain disruptions, changing renewable energy procurement targets, and a global energy crisis throughout 2022 are some of the trends that are evolving into a new phase of the energy transition this year, S&P Global said.
After two years of being affected by supply chain tightening, raw material, and transportation costs will fall in 2023, with global transportation costs having fallen to pre-New Crown epidemic levels. But this cost reduction will not immediately translate into lower overall capital expenditures for renewable energy projects, S&P Global said.
Land access and grid connectivity have proven to be the industry’s biggest bottlenecks, S&P Global said, and as investors rush to deploy capital in markets with insufficient interconnection availability, they are willing to pay a premium for projects that are ready for construction sooner, leading to the unintended consequence of driving up development costs.
Another change driving up prices is the shortage of skilled labor, leading to higher construction labor costs, which S&P Global said, along with rising capital costs, could prevent a significant reduction in project capex prices in the near term.
PV module prices are falling faster than expected in early 2023 as polysilicon supplies become more abundant. This relief may filter through to module prices but is expected to be offset by manufacturers looking to restore margins.
Downstream in the value chain, margins are expected to improve for installers and distributors. this could reduce cost reduction gains for rooftop solar end users, S&P said. it is developers of utility-scale projects that will benefit more from lower costs. s&P expects global demand for utility-scale projects to intensify, particularly in cost-sensitive emerging markets.
In 2022, distributed solar solidifies its position as the dominant power supply option in many mature markets, and S&P Global expects the technology to expand into new consumer segments and gain a foothold in new markets by 2023. PV systems are expected to be increasingly integrated with energy storage as shared solar options emerge and new types of home and small business projects will be able to connect to the grid.
Upfront payments remain the most common investment option in home projects, although power distributors continue to push for a more diverse environment, including long-lease, short-lease, and power purchase agreements. These financing models have been widely deployed in the U.S. over the past decade and are expected to expand to more countries.
Commercial and industrial customers are also expected to increasingly adopt third-party financing as liquidity becomes a major concern for many companies. the challenge for providers of third-party financed PV systems is to contract with reputable off-takers, says S&P Global.
The overall policy environment is expected to favor increased distributed generation, whether through cash grants, VAT reductions, rebate subsidies, or long-term protective tariffs.
Supply chain challenges and national security concerns have led to an increasing focus on localizing manufacturing of solar and storage, particularly in the U.S. and Europe, where an emphasis on reducing reliance on imported natural gas has put renewables at the center of energy supply strategies.
New policies such as the U.S. Inflation Reduction Act and Europe’s REPowerEU are attracting significant investment in new manufacturing capacity, which will also cause a boost to deployment. S&P Global expects global wind, solar, and battery storage projects to reach nearly 500 GW in 2023, an increase of more than 20 percent over 2022 installations.
“Yet concerns persist about China’s dominance in equipment manufacturing – particularly in solar and batteries – and the various risks involved in relying too heavily on a single region to supply the required commodities,” S&P Global said.
Post time: Feb-24-2023