NEW YORK — Despite some recent hiccups with supply chains and higher interest rates, the clean energy transition is set to accelerate with long-term policy support, panelists said Oct. 24 at the Aurora Energy Transition Forum. 

The offshore wind industry in the U.S. has had issues with project delays and cancellations and the recent construction accident at Vineyard Wind 1, but the industry has moved projects through the permitting process, and construction is due to pick up soon, Vineyard Offshore CEO Alicia Barton said. 

“We’ve seen setbacks, no doubt about it,” Barton said. “When we look ahead, though, over the next — and I’m not talking like the 10 years; I’m talking about 2025 — we are going to see something like 8 GW of projects actively under construction in the United States.” 

The industry is starting to put steel into the Outer Continental Shelf, but it already has gotten eight to 10 projects through the permitting process, and it will start sending significant power to the grid in two to three years. 

“We actually are seeing this industry, I think, at a very different scale,” Barton said. “And I think that actually does get lost, even on people that are spending all their time on energy, because you hear so much negative news about offshore wind.” 

Some projects have had to cancel their initial contracts, but they have been able to sign new ones for higher returns because many of the East Coast states supporting offshore wind need the power, Barton said. 

“In New England, increasingly, there is a recognition that offshore wind is the resource that will address long-term winter reliability,” she added. “But of course, we need to start showing up sooner … in terms of the number of years that it has taken thus far to get projects done.” 

Solar and batteries have come to dominate interconnection queues, but the economic issues of the past few years have impacted them as well, as 2022 and 2023 saw slight price increases because of the supply chain, said Samuel Scroggins, managing director of Lazard’s Global Power, Energy & Infrastructure Group, which tracks the levelized cost of energy (LCOE) for different generation technologies in annual reports.

The latest LCOE numbers declined slightly, though the days of regular cost declines are in the past. 

“The costs have come down so much for wind and solar in particular that we’re at a point now where there needs to be some incremental technology advancement to see continued cost decline,” Scroggins said. “The model is relatively straightforward. The inputs are pretty clear.” 

Bringing down capital expenditure is getting difficult because the industry already has used many of the best sites, so those that remain are not the “nice, flat, square” pieces of land that are easy to develop, he added. 

The Inflation Reduction Act has given financers and developers a long enough runway to get projects with 10 years of certainty for tax subsidies, which in the past sunsetted much sooner than that, said Allan Marks, a partner with law firm Milbank. It has spread the money around enough that the policy likely will survive regardless of what happens in the elections Nov. 5. 

“If you look at congressional districts, two out of the three jobs created in the manufacturing plants are in red or red-leaning congressional seats,” Marks said. “So, there are good reasons why 18 Republican members of Congress wrote a letter to the speaker and said, ‘Please do not repeal IRA.’” 

While the money likely still will flow from tax credits, the White House switching parties would lead to changes on how the law is implemented with changes at federal agencies, he added. 

Nora Mead Brownell, co-founder of consultancy Espy Energy Solutions and a former FERC commissioner, also noted the IRA’s funding of major projects in conservative states gives it staying power, but she also argued that other policies need changes. 

“We did not change the regulatory model at the federal and the state level,” Brownell said. “We are not rewarding the right things. We have evasive utilities who are terrified of change, who are not introducing their own solutions [and] adding technology efficiency that would give more transparency.” 

That can change with the rate structure of utilities, with Brownell saying performance-based rates should be widely adopted to encourage utilities. 

“We reward great, honking projects that may or may not solve the solution,” Brownell said. “We do not reward innovation. We do not allow people to take risks. We do not enforce data to be shared with people who could create those demand response programs, both at the commercial and retail level, that could make a huge difference.” 

Ideally, more power over the industry would be shifted to the federal level, and states would have more uniform rules because a patchwork makes things harder, she said. 

“I think we have to have a larger conversation about, ‘Yes, this is going to be expensive, but we’re making it more expensive,’ and we need to speak in terms that real people can understand,” Brownell said. 

The Rapid Growth of Batteries in the 2020s

Just a few years ago, the grid hardly had any storage capacity, but now it makes up about 40% of the queues across the country, with significant deployments in CAISO and ERCOT, Jupiter Power CEO Andy Bowman said. 

“It’s become the kind of firm dispatch that we have traditionally looked for natural gas plants to provide,” Bowman said. “And I think the growth opportunity for storage increasingly is not as some kind of ancillary renewable technology; it is for firm clean power. Firm clean power that can be dispatched very quickly. Firm green power that can provide a lot of valuable grid services.” 

Years ago the price for batteries was $4,000/kW, which made them irrelevant, but by 2019 that came down to $400/kW, said Spearmint CEO Andrew Waranch. With tax subsidies and plenty of financing available, the price of a 100-MW, two-hour battery in Texas is down to just $10 million. 

“I’ve always said that batteries will be as prevalent as cell phone towers,” Waranch said. “They will be everywhere. They’ll be on every corner. Because even if they’re big or they’re small, they’re affordable. And when you look at how they compete with other assets, relative to CTs [combustion turbines], they’re cheaper, faster, cleaner and stronger and a lot quicker to build.” 

So far, batteries have had major impacts in California and Texas, Bowman said. 

“California, as with just about every new energy technology, leads the way,” he said. “Texas comes in close behind, surpasses them, and I think we’ll be doing that shortly with batteries.” 

But with how quickly the grid is changing and how disruptive batteries have become, Bowman expects energy storage assets will start to grow in every market eventually. Jupiter is working in MISO, ISO-NE, NYISO and PJM on changes that will help grow and integrate batteries into their systems. 

Spearmint is building 1,200 MW of batteries in ERCOT, but its largest development portfolio is in MISO because it and SPP have the most acute needs for the technology now. 

“If they’re telling you that they’re unsolvable in a few years from now, you usually want to listen,” Waranch said. “But at the same time, in between 1997 and 2002, we did build 225 GW of gas in five years, and so you can solve problems with building quickly.” 

The supply-and-demand picture always is important, but EnCap Investments Managing Partner Kellie Metcalf said that to really roll out the technology, the right market designs are needed. 

“That’s what’s so good about California: The resource adequacy charge is huge,” Metcalf said. “In ERCOT, it’s been the ancillary services and the volatility top to bottom that [cause] revenue.” 

MISO does not have anything like those revenue streams, and other markets like ISO-NE have clean peak programs, but that still is in its early days, she added. 

While MISO is not quite ready to see major investments in batteries because it lacks any real construct that can make storage profitable, Waranch argued that could be solved quickly. “Even if they don’t have a construct yet, when the need arises and they are deficient, they will have to create a construct that works.”