Renewable Energy

Top 5 Renewable Energy Trends for 2022

Homeowners, cities, states and most utilities are rapidly adopting renewable energy.

Despite supply chain issues, rising commodity prices and an ongoing pandemic, installations of new renewable energy capacity hit record highs this year.

As we look ahead to 2022, there are five major disruptive trends in the renewables sector that all investors should be aware of.

And as the world decarbonizes, your portfolio should have some exposure to each.

No. 1: Solar Business Models

Over the past decade, the cost of solar-generated electricity has dropped 85%. Today, solar photovoltaic installations make some of the cheapest electricity available.

During the past several years, solar installations have been paired with storage. And moving forward, that’s going to be the main business model for solar.

Community solar projects are quickly increasing. In the second quarter of 2021, 177 megawatts of community solar were built.

And utility-scale solar set a third quarter record when installations totaled 3.8 gigawatts. The utility-scale pipeline now stands at 81 gigawatts.

Logistical challenges due to a slow supply chain will affect how much gets installed in 2022, but there are 22.3 gigawatts of projects currently under construction.

No. 2: The Evolving Renewable Energy Supply Chain

The renewable energy materials supply chain is continuing to evolve. And it has to.

Last year, prices increased year over year for the first time in seven years due to a critical shortage of some components.

These include semiconductor chips in addition to raw materials, like polysilicon. Labor costs increased too.

But perhaps the biggest financial pill companies have had to swallow is the cost of ocean freight. It has jumped 100% from 2020.

These shortages and higher prices are forcing many U.S. renewable project developers to look for other suppliers or find U.S.-made alternatives.

No. 3: New Transmission Lines

Offshore wind is booming here in the U.S.

On the East Coast, every state from Maine to Georgia has at least one offshore wind project planned or under development. Most will be 20 to 30 miles offshore.

But there’s a key element that is needed to put them there. And that is a network of transmission lines.

Transmission projects can take years to approve. Siting and permitting delays are always an issue.

Right now, 844 gigawatts of proposed new renewable energy are waiting to be connected to the grid. And the biggest holdup is grid interconnection delays.

However, Congress recently approved the Transmission Facilitation Program. This makes the Department of Energy a 50% owner of new transmission projects, which will speed up their development and installation.

This will streamline transmission rights-of-way and overrule state and local regulators.

No. 4: Next-Generation Technologies

Until recently, much of the renewable energy focus has been on wind and solar. But there are other new technologies with investment-worthy elements, namely green hydrogen.

Green hydrogen is made from electrolyzers powered by renewable energy. That hydrogen is used to power fuel cells that generate electricity.

A major upside is that there are no carbon dioxide emissions or other pollutants.

But today, green hydrogen is still too expensive to be mainstream. In order to be viable, it will need to be financially competitive with existing fuels.

That will happen as volume production increases.

No. 5: Renewable Energy as a Part of the Circular Economy

Recycling is nothing new to most businesses and homeowners. But it’s brand-new to the renewable energy sector.

Businesses are coming up with novel ways to recycle old wind turbine blades. Next year, roughly 8,000 aging blades will be replaced. And by 2050, there could be a total of 2.2 million tons of old turbine blades.

By 2030, old solar panels could create 1 million tons of waste annually. And there will be 80,000 metric tons of lithium-ion batteries to recycle.

A number of states have already adopted solar panel recycling policies. The good news is that companies are already addressing these issues.

What’s the Investment Opportunity Here?

There are plenty of exchange-traded funds (ETFs) that focus on different aspects of renewables, such as solar, wind and green hydrogen.

So an ETF focused on some or all of the public companies in the renewables sector is a must-have for investors as they enter the new year.

Good investing,

Dave

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