Accelerating renewable energy buildout faces big hurdles, even with Inflation Reduction Act: developers
National models indicate the Inflation Reduction Act may help the United States cut its greenhouse gas emissions by about 40% by 2030, but renewable energy developers are warning there are a range of challenges that could keep those estimates out of reach.
The hurdles include the “three-headed monster” of clogged interconnection queues, permitting delays and a congested transmission system, according to Devin Hartman, director of energy and environmental policy at the R Street Institute.
Organizations estimating the effects of the IRA on carbon emissions acknowledge those real-world issues.
In a report released Aug. 23, Energy Innovation found the IRA’s climate and clean energy provisions could help cut U.S. greenhouse gas emissions 37% to 43% below 2005 levels by 2030 compared with a 25% reduction under a business-as-usual scenario. The Biden administration aims to cut U.S. carbon emissions by 50% to 52% by the end of this decade.
The energy policy group found that by 2030 there would be 795 GW to 1,053 GW of operating wind and solar in the United States, with “clean electricity” providing 75% of all electricity under a “moderate” scenario.
Last year, about 32,300 MW of wind as well as utility-scale and rooftop solar came online, bringing their total installed U.S. capacity to 226 GW, according to the Energy Information Administration.
Energy Innovation’s moderate scenario envisions the U.S. having 877 GW of wind and solar by the end of this decade. Reaching that amount would require adding 81.4 GW a year on average, roughly 2.5 times the pace of last year.
The group warned its assessment doesn’t account for factors that could limit clean electricity deployment.
“In particular, the modeling assumes that necessary transmission will be built, interconnection delays are addressed, supply chains provide the necessary materials to deploy these levels of clean electricity, and a sufficient workforce can supply the labor,” Energy Innovation analysts said in their report.
Success hinges on states, local governments
In a factor not mentioned in the report, state and local governments will play a major role in how effective the IRA is at spurring clean energy deployment, according to renewable energy developers and advocates.
“It's really important that everyone understand how contingent that capacity expansion is going to be on state-level decision making,” Tyler Norris, Cypress Creek Renewables vice president of development, said.
In many regions, state utility commissions will have a significant effect on determining the future resource mix through their rulings on utility resource plans and rate cases, according to Norris.
“The success or failure of the Inflation Reduction Act rests at public service commissions because if the utilities are not making good decisions and the commissions are not regulating appropriately, then those states are going to be left behind,” Simon Mahan, Southern Renewable Energy Association executive director, said.
The national models estimating how much carbon emission reductions the IRA may achieve are helpful, but they don’t take into account issues such as county moratoria on solar and wind farms or state processes that devalue solar, according to Mahan.
“Those models are based almost entirely on economics, not on politics or sociological activities that are going on locally,” Mahan said. “It's just going to be really critical that the folks that have been so engaged at the federal level don't rest on their laurels and say the job is done.”
In some states, the process of developing long-range utility resource plans will be a focus for groups like the SREA, according to Mahan. IRP processes vary, Mahan said, noting Alabama, for example, lacks a public process, preventing stakeholders from offering suggestions as plans are developed and reviewed.
Aligning state policies with the IRA is a two-part process, according to Pari Kasotia, senior director and head of policy for DSD Renewables, a company that develops commercial and industrial projects as well as community solar.
First, states need to set top-level goals, such as expanding their renewable portfolio standards, she said.
Second, they need to make sure their permitting and generation interconnection processes are timely and efficient, she added.
“A number of states, I'm sure, have already started to think about what that alignment looks like, but I think policymakers and policy advocates will be doing a lot more work in making sure that alignment is there,” Kasotia said.
The IRA, coupled with high natural gas and other costs, is making rooftop solar combined with energy storage less expensive than utility rates across the country, according to John Berger, CEO of Sunnova, a residential solar company.
That will lead to pitched battles at state utility commissions over rules ranging from net metering to allowing customers to shop for power from non-utilities, Berger said.
“Congress certainly didn't unknowingly set us up for an absolute Big Bang in consumer choice and regulatory discussions with the passage of this bill,” Berger said. “The regulatory framework is going to change and have to change fundamentally on a state-by-state basis. It's going to be a war.”
Getting onto the grid
The interconnection process is another top challenge in expanding the pace of adding clean energy to the grid.
“There has to be a huge shift in how much renewable energy gets added to the grid every year to meet the goals under the IRA,” Kasotia said. “And in order to do that, that has to be aligned with the state policies and processes on how quickly you can get through an interconnection application.”
There are about 1,400 GW of planned generation and storage capacity in interconnection queues across the U.S., reflecting a surge in solar, energy storage and wind development, according to a report released in April by the Department of Energy’s Lawrence Berkeley National Laboratory.
As the queues have grown larger, it takes longer for transmission providers to complete interconnection studies, which determine if grid upgrades are needed to bring proposed projects online, according to the report. It took 3.7 years on average between a project entering the interconnection queue and coming online in the last decade compared to 2.1 years for projects built between 2000 and 2010. The Federal Energy Regulatory Commission proposed reforming the process earlier this summer.
“What we ask of our grid operators is an enormous task given the acceleration in the number of [renewable energy] projects and the size of the projects,” said Cary Kottler, Pattern Energy senior vice president of North American development. “So making sure that they are able to make their way through these interconnection queues is going to be crucial to meeting our goals.”
Transmission is needed, but hard to build
Even if the interconnection processes are improved, is there enough transmission to deliver power from clean energy facilities to the places where it would be used?
“It's great to incentivize low-cost renewables — and the demand is there from customers and it’s growing, whether it's from utilities or big corporations, or small corporations, that are hungry for carbon-free power — the demand is there, but if you don't build out the grid, you can't get the power to the load,” Kottler said.
The power sector needs to be “forcefully behind” the transmission build-out to make sure renewable energy can grow fast enough to meet governmental and corporate goals, he said.
The blueprint for reaching 70% and higher renewable penetration levels will be building a growing web of transmission lines that can move electricity from renewable energy sources with different profiles, coupled with energy storage, back and forth regionally, according to Kottler.
However, that plan depends on making sure the transmission gets built, or it will be a struggle to reach emissions-reduction goals, he said.
“Transmission has traditionally been the hardest thing and has the longest time horizon to get done. So that's the rub,” Kottler said.
Georgia Power is delaying shuttering some coal-fired units because the state’s transmission system can’t handle their exit from the grid or the renewable energy additions that would be needed to replace the power plants, according to Mahan.
“The transmission system, if it is not fixed and expanded on, will restrict the success of renewable development in many states,” Mahan said, noting FERC has proposed reforms aimed at improving the transmission planning process.
“We are so far behind that I don't think folks understand how far behind we are and where we need to be with regards to robust transmission planning so that we can fully implement what could be done with the Inflation Reduction Act,” Mahan said.
Permitting reform, renewable energy bans
Currently, project permitting and zoning is governed by a patchwork of local and state requirements, and there aren’t federal plans to address the issue for generating projects, according to Norris.
In a related challenge to meeting carbon reduction goals, it typically takes about four years to complete a renewable energy project after it has been procured, Norris noted.
While there is generally a strong awareness of the permitting challenges energy infrastructure developers face, there is less understanding of how long it takes to build interconnection upgrades to connect generating sources to the grid, Norris said.
“What we're ultimately going to see, especially because we have such a limited window here, at least for the 2030 target, is more build-out occur in the states and jurisdictions that have more streamlined and efficient permitting processes,” Norris said.
Permitting is a challenge, but so too is a rise in bans on renewable energy development, according to Kasotia.
“Certain communities in various states are imposing moratoriums on land-based solar development,” Kasotia said.
Local governments in nearly every state have adopted policies to ban or limit renewable energy projects, according to a March report by Columbia Law School’s Sabin Center for Climate Change Law. The report’s authors found 121 restrictive local policies and 204 contested renewable energy facilities, up 17.5% and 23.6%, respectively, from a report issued six months earlier.
Renewable energy developers acknowledged many of the IRA’s benefits for their industry, such as a 10-year tax credit for emissions-free resources and stand-alone energy storage as well as incentives to develop domestic production of renewable energy equipment.
“We're certainly delighted that the bill includes provisions for U.S.-based manufacturing,” Kasotia said. “That's a great first step. The real question is how quickly can we ramp up production in the U.S. so we can make our supply chain more efficient, more local, and have more certainty around that?”
It will take time for that manufacturing base to be developed and it may take years before new transmission lines can be planned and built, which will require a simultaneous focus on near-term steps that can advance the energy transition, according to Kasotia.
“We have to think long term and fix what we can at this point, but make sure that we continue to work towards long-term goals in terms of the infrastructure that we have to support the energy grid,” Kasotia said.