Renewable Energy Outlook 2024: Supply Chain and Project Hurdles Could Yield Dividends

In 2023, the U.S. solar and offshore wind industries achieved significant growth despite persistent challenges from global supply chain disruptions, regulatory complexities, and rising interest rates. Several offshore wind farms are nearing completion, with two already delivering power to the grid, while a record 33 GW of solar capacity was added to the U.S. grid last year.

Industry experts express cautious optimism that positive trends for these renewable resources will continue into 2024, even as obstacles remain. The Inflation Reduction Act (IRA) and the substantial clean energy investments it has catalyzed are central to this confidence, they say.

“For all of us in the [solar] industry, it's a significant milestone legislation in that we're talking about a decade of certainty, which is a much different dynamic than having just a few years certainty,” said Eric Pollock, chief commercial officer at DSD Renewables.

Marlene Motyka, a principal at Deloitte and the firm’s U.S. renewable energy leader, characterized the current obstacles as “really just growing pains as the industry is scaling, rather than intractable issues that are going to stop the industry’s momentum.”

Solar: Tariff Moratorium Expiry and Onshoring Push

Both industries face additional headwinds this year. In June, President Joe Biden’s two-year moratorium on new tariffs on solar panels will expire. Following the moratorium's end, an Aug. 18 U.S. Department of Commerce finding that four Southeast Asian countries circumvented tariffs on Chinese-made components will trigger new duties on solar imports from those nations.

Solar imports also remain constrained by the Uyghur Forced Labor Prevention Act. In response, the solar industry has invested heavily in onshoring manufacturing, with several major factories announced last year.

Although module prices fell by nearly 50% globally in 2023 and manufacturing capacity tripled from 2021 levels, replacing imports with domestically produced panels will increase overall deployment costs in the U.S., the International Energy Agency said in a January report.

“Looking at all of the investment decisions that have been made with module manufacturing and battery supply moving into the domestic market – that all has to be seen as an optimistic sign. Once those shovels go in the ground, and things start to really get built, my optimism will increase.”

Carl Newton
DSD Renewables’ vice president of strategic procurement and estimating

Domestic panel manufacturer First Solar, South Korea-based Q Cells, India-based Waaree Energies, and the North American subsidiary of Italian company Enel all plan to bring new U.S. factories online this year.

Carl Newton, DSD Renewables’ vice president of strategic procurement and estimating, noted that having Commerce’s final decision on tariffs has been “extremely helpful” for providing certainty. “Tariffs, Customs and Border Protection issues, understanding the Uyghur Forced Labor Act – it’s still a relatively new thing for all of us,” he said. “We're all working our way through the supply chain mapping, and that's just another step that we all have to take in our due diligence. That said, as long as you do your due diligence, you shouldn't have problems with it.”

Newton added that regulatory uncertainty remains the biggest hurdle for the solar market. “That tends to be more disruptive to us than anything else right now,” he said. “As far as equipment and material pricing, things are staying pretty steady. Module [prices] have declined quite a bit, actually, over the last six months.”

Motyka anticipates the impact of IRA-driven investments will become visible this year. “A lot of producers are going to reshore, and new ones are going to come into the U.S. just to capitalize on those IRA tax credits and to help meet the demand from renewable developers who are chasing domestic content adders,” she said.

State-level conflicts have emerged as solar capacity expands, particularly around net-metered distributed solar. In Virginia, the State Corporation Commission in September struck down Dominion Energy’s interconnection parameters for certain net-metered projects, which the Virginia Distributed Solar Alliance argued posed “unreasonable” barriers. Conversely, a California appellate court in December dismissed a challenge to the California Public Utilities Commission’s updated net energy metering rule, which reduced compensation for rooftop solar exports and has been linked to job losses.

“The general outlook is grim,” said Carlos Beccar, marketing director of Fresno-based solar company Energy Concepts Enterprises. “[2024] is going to be even worse. The job loss is going to probably double.”

Offshore Wind: Breathing Room and Vessel Development

The offshore wind industry will see several developers attempt to rebid contracts they exited in 2023 during upcoming state solicitations, while the domestic workforce and supply chain needed to support projects and ports are rapidly being built out. As of this month, two utility-scale offshore farms are delivering power to the grid — a U.S. milestone.

Felisa Sanchez, of counsel with law firm K&L Gates’ maritime and finance groups, suggested the wave of project delays and cancellations last year may be a “blessing in disguise.” “These cancelations are now allowing some breathing room that’s going to free up port availability, vessel availability,” she said. “There was a real crunch on and fight for those limited assets.” Sanchez expects 2024 will “see the benefits of some of these rough waters” and “allow the supply chain to catch up a little bit.”

Bureau of Ocean Energy Management (BOEM) Director Liz Klein acknowledged that specialized vessel needs, coupled with post-COVID economic and supply chain difficulties, have posed challenges, but she remains “very, very optimistic” about the coming year. “While any individual project might have a timeline that shifts, it's not an indication of failure, it's not an indication that this type of clean energy is not possible in the U.S.,” she told Utility Dive. “It just indicates that these are large, complicated endeavors.”

BOEM has four lease sales scheduled for 2024 and continues to advance research into floating offshore wind technology for deep-water installations off the West Coast. The industry’s vessel development has been hampered by the Jones Act, a 1920 law barring foreign vessels from transporting goods by water. Dominion Energy is building the first U.S. wind turbine installation vessel, named Charybdis, expected to be completed late this year or early in 2025 for its 2.6-GW Coastal Virginia Offshore Wind project.

Sanchez noted the offshore wind labor workforce buildout remains a “work in progress,” with developers, contractors, vessel owners, and port operators increasingly recruiting from high schools and colleges and working with maritime colleges on industry-specific training.

“The need for labor to build these projects is huge. I don't think that there's any developer or contractor out there that's going to tell you, ‘Oh, yes, we're very comfortable with our labor situation going into 2024.’”

Felisa Sanchez
Of counsel with law firm K&L Gates’ maritime and finance groups

Although BOEM’s first-ever Gulf of Mexico lease sale received a tepid response last year, with bids on only one of three areas, Klein said the region is “tremendously important” due to the “existing talent, infrastructure and equipment” from the oil and gas industry. She emphasized BOEM’s focus on “supporting project proposals and making sure that we are being as efficient and effective as possible in our permitting reviews.”

“I think one of the ways to demonstrate the success of this type of technology, this type of clean energy, is to get projects built and delivering electrons to the grid,” Klein said. “There are a number of exciting milestones that we've hit, and I expect a lot more of the same in 2024. I am as aggressively optimistic as I have ever been about the prospect of offshore wind in the U.S.”

Grid Connection: Transmission Bottlenecks

The arrival of utility-scale offshore wind and record solar capacity makes transmission buildout and interconnection queue reform more critical than ever. Clean energy proponents hope to see the Federal Energy Regulatory Commission (FERC) finalize its proposed transmission planning and cost allocation rule. Acting Chairman Willie Phillips said in November the rule is a “chief” priority for him.

In November, Jesse Jenkins, leader of Princeton University’s ZERO Lab, said annual transmission capacity growth must rise from the previous decade’s 1% average to 2.3% to avoid halving the IRA’s potential emissions reductions.

“When we think about the boosts coming from the IRA and [Infrastructure Investment and Jobs Act] to renewables, that can only exacerbate the pressure on the transmission bottleneck,” said Motyka. “That is a challenge that I don’t think is going to be lessened dramatically anytime soon, but there are a lot of parties working on that, from the RTO and ISO perspective as well as from the FERC side.”

In California, wind and solar curtailments hit record highs last year. As of September, the Energy Information Administration found the California Independent System Operator had curtailed more than 2.3 million MWh of wind and solar output in 2023.

Evergreen Action’s Power Sector Senior Policy lead Charles Harper said in December he sees 2024 as a potentially significant year for transmission reform, following FERC Commissioner James Danly’s term expiry on Jan. 3. Danly opposed the proposed transmission rule, and Harper said the group is now “really optimistic” about its passage this year.

“I don’t think the pressure [for transmission reform] is going to go away,” Motyka said. “I think it’s only going to increase, and there’s this resounding push and discussion around the fact that there is this generation that needs to be deployed as we continue to retire fossil generation.”

Correction: A previous version of this story misstated the timeline for an increase in solar module manufacturing capacity. It has tripled since 2021.