CBRE: The Future of Renewable Energy in the US
The United States is one of the world’s largest clean energy investment markets according to the International Energy Agency.
However, the pricing landscape for utility-scale power purchase agreements (PPAs) in the country has increased.
Research from real estate services firm CBRE shows that PPA prices are not expected to decrease significantly in the foreseeable future.
Robert Bernard, Chief Sustainability Officer at CBRE, says: “As we move forward with helping our clients source renewable energy, we will continue to provide insights into the many factors which influence this market.
“While there is great momentum, we also want to be transparent about the challenges that the industry faces; transforming energy systems is a multi-dimensional, complicated issue.“
Favourability outlook for PPA offer inputs
CBRE says that the outlook for government incentives is favourable as the Inflation Reduction Act is unlikely to be fully repealed.
It also says the outlook for solar generation equipment is favourable, but solar manufacturers may reduce supply and new tariffs add additional cost burden.
Engineering, procurement and construction/labour has a negative outlook according to CBRE as the supply of skilled labour will take years to develop and there is competition with other industries.
However, financing has a positive outlook as CBRE says it is likely to improve as the Federal Reserve continues to indicate further rate cuts.
Wind energy generation equipment
According to CBRE, prices for onshore wind turbines as of July 2024 remain approximately 39% higher than pre-pandemic levels.
Further, 2024 witnessed an increase of more than 10% in reported wind turbine prices.
This price increase is due to manufacturers attempting to chase higher margins after operating at very low and sometimes negative margins in the past.
The report says: “A substantial reduction in wind turbine prices would necessitate a significant decrease in input material costs and demand.
“Given the extensive global use of steel and copper, demand is likely to remain sufficiently high to prevent a drastic drop in prices.”
Solar energy generation equipment
Solar modules were sold at record-low prices through 2024 due to historically low input costs and intense competition.
This, however, may be unsustainable pricing as some price inputs for solar modules are increasing according to CBRE.
Both silver and freight pricing has increased and the US government raised import tariffs on solar panels in May 2024.
The government also moved to lift its two-year exemption on tariffs from Southeast Asian countries.
Outlook on interconnection
CBRE says that broadly, interconnection prices are increasing as many of the most accessible interconnection points have been used.
The report reads: “Even if developers do not fully bear the cost of interconnection, lengthy and uncertain projects can lead to cascading effects, resulting in delays, cancellations and increased costs, ultimately constraining the overall supply of renewable energy.”
However, the Federal Energy Regulatory Commission’s approval of both Order 1920 and Order 1977 are expected to increase transmission buildout.
These changes will take time to influence PPA pricing as grid upgrades needed to broadly alleviate interconnection constraints would be extremely large and expensive, with very long lead times.
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