Nov. 24, Reuters Abandoned offshore wind farms, threatened solar power plants, and dwindling interest in electric cars.
President Joe Biden’s climate change plan is being weakened by economic realities, a year after the country passed the biggest climate change legislation in its history, which was intended to spark a boom in clean energy production in the country.
Rising financing and material costs, unstable supply chains, postponed rulemaking in Washington, and slow permitting have all contributed to the devastation, which has resulted in projects cancelled by offshore wind developer Orsted (ORSTED.CO) in the Northeastern United States and lowered EV manufacturing plans by Tesla, Ford, and General Motors.
Biden, who promised to achieve a net-zero economy by 2050, is faced with challenges that the historic Inflation Reduction Act’s billions in tax credits cannot solve on its own. As a result, the prognosis for the clean energy industry is dire.
Biden is anticipated to miss this year’s UN climate summit in Dubai amid alarming warnings that the world is moving too slowly to prevent the worst effects of global warming. Last year, Biden walked into the UN climate summit in Egypt bragging about the IRA as proof of unparalleled progress in the fight against climate change.
According to clean energy specialists contacted by Reuters, the United States’ aggressive goals of decarbonizing by the middle of the century will become even more elusive as a result of the growing losses.
John Hensley, vice president of the renewable energy trade association American renewable Power Association (ACP), stated, “While we see healthy numbers being deployed each and every quarter and we’re continuing to be on a growth path, it’s certainly not at the level that is required to hit some of those targets.”
Projects in other areas are also being severely impacted by the dynamics of rising costs and disrupted supply chains. According to Wood Mackenzie, no significant country is on course to fulfill the carbon reduction targets set forth in the United Nations’ Paris Agreement, which aims to keep global warming to 1.5 degrees Celsius.
While there have been macroeconomic setbacks and local barriers to the deployment of renewable energy, a White House official noted that there are also many instances of progress, such as the growing EV market and Dominion Energy Inc. (D.N) making progress on the country’s largest offshore wind farm off the coast of Virginia.
“This has been a resilient trajectory in the face of headwinds that are macro in nature, headwinds that affect decision making across the economy,” White House National Climate Advisor Ali Zaidi stated in an interview. He declared that the US will meet its climate targets.
A TEN Billion Houses
An ACP study shows that since late 2021, more than 56 gigawatts of renewable power projects—enough to power almost 10 million homes—have been postponed. Half of the delays can be attributed to solar energy installations, partly because of import limitations from the United States. Washington has been attempting to counteract tariff-dodging and the exploitation of forced labor in a panel supply chain where Chinese goods predominate.
Developers also frequently list grid connection delays that can take up to five years, local conflicts over the location of solar and wind projects, and permitting bottlenecks as some of the industry’s major problems.
Prakash Sharma, vice president of scenarios and technologies at Wood Mackenzie, stated in an interview that “investment has increased in a number of areas.” “But then when it comes to some of those permitting and approvals that are required to push projects forward, or infrastructure development, that’s an issue which IRA cannot solve.”
Contract prices have increased due to limited supply and high demand for renewable energy from businesses and utilities, which may result in higher costs for customers. According to tracking company LevelTen, solar contract costs increased by 4% in the third quarter to reach $50/MWh for the first time ever.
The head of GE Vernova’s wind division, Vic Abate, stated that while progress is moving more slowly than some had predicted, it is still going in the right direction.
According to him, “I’m not betting against the IRA,” during an interview. “The question here is more about when. This year, rather than ’23 to ’24,’ folks are most likely thinking ’24 to ’25.”
By encouraging local production of equipment like solar panels and wind turbines, the IRA seeks to strengthen the U.S. clean energy supply chain. However, manufacturers have recently cautioned that the viability of dozens of proposed American plants is being threatened by a flood of new Asian capacity.
Unrest within the emerging offshore wind sector in the United States, on the other hand, is possibly the most well-known setback. Due to skyrocketing costs, developers including Orsted, BP, and Equinor have taken multi-billion dollar writedowns on projects and attempted to renegotiate or cancel contracts. In August, there was a federal sale of wind leases in the Gulf of Mexico, but players largely did not turn up. It is now generally accepted that the Biden administration’s goal of installing 30 gigawatts of offshore wind by 2030 will not be met.
As for the corporations, some are holding off on making investments as they wait for the Treasury Department to develop regulations governing the use of the tax credits in the IRA.
To find out if the corn-based fuel may be used as a feedstock, Robert Walther, director of federal affairs at ethanol manufacturer POET, for instance, says his company is awaiting the creation of tax credits for sustainable aviation fuel under the IRA.
“We’re not pulling the trigger on anything until we know what the value of these tax credits are,” Walther stated.
However, Dan Reicher, a Stanford University expert, says that the United States should be proud of how it is addressing climate change, especially in light of the Trump administration’s relatively recent attempts to pull back laws that protect the environment.
“These are the normal ups and downs of clean energy development and deployment,” Reicher stated.
“I think we can go to COP with our chin held high that we’re making some real progress.”
