American Council on Renewable Energy (ACORE) launched its “$1 trillion 2030 campaign” in 2018 to achieve $1 trillion in private sector investment in renewable energy and grid technologies by 2030 in the US. In June 2021, it released a report titled, “Expectation for Renewable Energy Finance in 2021-2024: Growing confidence in the Aftermath of the Pandemic”. The report assesses progress on the campaign and presents the results of two new surveys of professionals who actively finance or develop projects in the renewable energy sector. The surveys assess respondents’ experiences in the market over the past year and their expectations for sector investment and development over the next three years. REGlobal presents the key extracts from the report…
According to the report the US has now attracted $167 billion investment in renewable energy, grid-enabling technologies and transmission for renewable integration since the launch of the “$1 trillion 2030 campaign” in 2018. Furthermore, achieving the 2030 objective will require an average of $92.6 billion in annual investment through 2029 which translates to an annual increase of 59 per cent over the 2020 investment level.
The report highlights that the asset finance investment in the renewable energy and grid-enabling technology sectors in the US decreased overall in 2020 to $58.3 billion. The investments decreased even though the solar and energy storage sectors had record years in terms of investments.
The key reason for the investments in the renewable sector to decrease by 12 per cent has been the lower financings in the onshore wind sector. And the key reason for that has been that the credits for new wind energy development were scheduled to phase out at the end of 2020. While the US government extended the wind production tax credits in December 2020, investors did not have the opportunity to take advantage of this change. As the developers wanted to take advantage of the about-to-expire tax credits, investments in the wind sector peaked in 2019.
On the other hand, the investments in the solar sector increased by 36 per cent from 2019. The investments in the energy storage sector crossed the $1 billion milestone in annual investments.
The current US President has set a goal to achieve carbon-free electricity by 2035. ACORE’s “$1 trillion 2030 campaign” is in line with this target. Clean energy initiatives from the banking sector and major corporate players will create further momentum toward ACORE’s objective. According to ACORE’s survey for the renewable energy sector, the investor confidence increased by an average of eight points and developer confidence increased by nine points.
In the survey, more than two-thirds of the investors report plans to increase their investments by more than 10 per cent in 2021 compared to 2020. Notably, 70 per cent of companies that invest greater than $100 million annually plan to increase investment by more than 10 per cent in 2021 compared to 2020.
Also, developers plan to maintain or increase their activity in 2021 compared to the previous year. According to the survey, all the companies that operate renewable energy businesses with revenues greater than $1 billion plan to increase their activity. Meanwhile 87 per cent of the developers say that the extensions of the federal tax credits in December 2020 affected their decision-making in 2021.
Almost 90 per cent of the surveyed investors and 93 per cent of the developers report that they either maintained or increased risk appetites in 2021 compared to 2020. However, the key issues in the business were the reduced access to specific financing sources and consequences from the power outages in Texas.
Meanwhile, investors and developers continue to report shortages in tax equity in 2021. According to ACORE’s survey, 46 per cent of investors and 35 per cent of developers indicate that tax equity availability has either decreased or significantly decreased within the past year. On the other hand, 50 per cent or more of the investors mention an increase in the availability of each of the other surveyed financing sources.
The report also highlights that the interest in hedged merchant renewable or storage agreements has remained unchanged or increased for most survey respondents in 2021. However, due to power outages in Texas, 23 per cent of investors and 30 per cent of developers report a decrease or significant decrease in interest in hedge agreements.
Investors consider the US to be an attractive venue for investment compared to countries like China over the next three years. While 48 per cent of investors expect no change in the attractiveness of the US, 46 per cent anticipate the country’s attractiveness to increase over the period.
Between 2021 and 2024 investors expect the attractiveness of renewable energy sector to be maintained or increase compared to other asset classes in their portfolios.
Over the next three years, energy storage and utility-scale solar are the most popular preferences for investment among investors that were surveyed.
The most attractive regions in the US for investments in the renewable energy sector over the next three years are PJM, CAISO and NYISO. Going forward, most investors and developers consider long-term extensions of the wind and solar tax credits and a new standalone energy storage tax credit as effective federal policy options. The importance of market reforms and financial incentives to facilitate the expansion of high-voltage transmission lines to enable renewable energy deployment has been emphasized by the investors and developers.
ACORE has also mentioned the key policy and market reforms it is promoting to support the achievement of its $1 trillion investment target by 2030:
- Tax Policy: To protect and extend existing incentives for renewable energy sector and provide a long-term level playing field in support of carbon-free electricity generation, including a free-standing investment tax credit for energy storage technologies and regionally significant transmission.
- Climate Policy: To focus on identifying and promoting the most viable suite of climate policies and analyzing their impact on renewable energy growth and investment, including a federal high-penetration renewable energy standard or clean energy standard and carbon pricing.
- Grid Advocacy: To advocate for cost-effective investment in transmission infrastructure to create a macro grid, and a less balkanized and fairer electricity marketplace to promote greater access for renewable energy.
- Energy Storage: To promote the growth through policy advocacy, market reforms and financing solutions.
- Environmental, Social and Governance (ESG) Scoring: To work with its members to increase standardization, transparency and use of material indicators in ESG disclosure and scoring methodologies through specific recommendations and regular outreach to the ESG community.
The full report can be read here