Renewable energy developers' project queues have grown by nearly 12% to 110.4 GW since the middle of 2023, according to new data from S&P Global Market Intelligence.
While most of the gains have gone to the nation's largest developers, those companies were likely to post growth with or without the aid of the Inflation Reduction Act, according to Adam Wilson, renewable energy analyst for S&P Global Market Intelligence. The IRA has helped smaller developers weather the industry's current storms, Wilson said.
However, Wilson said interconnection backlogs and grid constraints mean at least some of the projects currently in the works will never be built.
There's no doubt that the IRA has spurred enthusiasm among wind and solar developers, according to S&P Global Market Intelligence. But whether the U.S. grid can absorb the coming influx of development remains another question.
The 10 largest U.S. developers plan to build 110,364 MW of new wind and solar projects over the next five years, according to S&P Global Market Intelligence, but the majority of these projects remain in early stages of development. Just 15% of planned wind and solar projects are under construction, and 13% are considered to be in advanced stages of development, according to S&P Global Market Intelligence.
This trajectory seems likely to remain the norm for the next three to five years, Wilson said. Grid expansion projects are underway in the U.S., but they haven't kept pace with developers' burgeoning plans. Developers, meanwhile, have no reason to curtail their plans for growth, Wilson said.
Although the nation's largest developers have absorbed most of the benefits of the IRA simply because of their size, most of these companies would have continued to plan new wind and solar projects regardless of whether that law extended tax incentives for developers, Wilson said. Where the IRA has made the most difference, he said, is among smaller developers — the kinds of companies that could not afford to gamble on new projects amid rising costs and backlogged interconnection queues without the assurance that federal incentives are here to stay for the long-term.
The effects of the IRA also vary across regions of the U.S., Wilson said. In states where large numbers of wind and solar projects are already operational, market saturation has served to decrease energy prices, slim down profit margins and create a new set of market prerogatives for energy developers. In California, for example, the majority of new solar farms are now built with batteries, Wilson said.
But the IRA has unlocked new growth in the Midwest and in the Southeast — areas that have to date lagged in their adoption of renewable energy, but now seem poised to catch up, Wilson said.
With limits on interconnection still in play, Wilson said renewable energy has become, for the developers, a numbers game. Companies know that many of their early-stage projects will not be built, but also that they only need to build a fraction of what is in their queue to meet their growth targets. And this is not, Wilson said, a numbers game that everyone is going to win.
“It's musical chairs,” he said. “Some projects right now are going to be left without a seat because there is too much capacity going online, and not enough transmission to accommodate it.”