New wind installations dropped 77.5 percent in the third quarter of 2022 versus the same period the year before. New utility-scale solar installations fell about 40 percent in 2022 compared with 2021. These projects dropped despite the incentives in the Inflation Reduction Act (IRA), which extended and increased tax credits for wind and solar projects and introduced new incentives for green hydrogen and battery storage for the electric grid. The IRA was expected to make Biden’s climate targets and many state climate plans come to fruition by adding massive amounts of renewable energy into the grid. Over $40 billion in wind, solar and battery projects were announced in three months late last year—as much as the total renewable-energy investment for all of 2021. But supply-chain and trade issues have complicated planning with average lead times for securing high voltage equipment increasing from 30 weeks to more than 70 weeks.
Issues with Supply Chains and Legislation
Solar panel imports, 80 percent of which come from China and Asia, have slowed following U.S. legislation aimed at labor abuses in China with several thousand shipping containers of solar panels being detained by U.S. Customs near ports such as Los Angeles. The wind industry is struggling to overcome pandemic-related supply-chain and logistics challenges in delivering huge equipment. And, companies are waiting on Treasury Department guidance for the specifics of how a project can qualify for tax credits in the Inflation Reduction Act.
A further problem is connecting the wind and solar projects to the grid. Before grid operators and interconnecting utilities sign off on new projects, they review the projects’ likely impact on the power system and any needed network upgrades, adding to the time and cost to get renewable projects grid-connected. Even battery storage–an industry which saw more installations in 2022–have had some construction plans slowed by as much as a year due to supply chain problems.
Grid operators are overwhelmed by requests with around 8,100 projects in the United States in 2021–up from 5,600 in 2020–each requiring a technical review. Interconnection wait times increased to about 3.7 years for projects delivered between 2011 and 2021–up from around 2.1 years for projects built in the decade prior, adding to project costs.
Only 23 percent of the power-generation projects seeking grid connection from 2000 to 2016 were ultimately built. Completion rates were lower for wind, at 20 percent, and solar at 16 percent. Around 19 gigawatts of wind and more than 60 gigawatts of solar were withdrawn from interconnection processes in 2020 and 2021. This is significant as demonstrated by an earlier IER posting about the massive investments in the grid necessary to service President Biden’s “net-zero” target with estimates of the need to expand the grid by 2 to 5 times its current capacity.
For example, grid congestion in the Midcontinent Independent System Operator (MISO) region caused developers to cancel wind and solar projects. Some 245 renewable energy projects that had reached advanced stages of development were withdrawn between January 2016 and July 2020. According to developers, congestion and related grid upgrade costs were the main reasons for the cancellations, especially in the western region of MISO. The 245 advanced projects represented 40 percent of the projects in MISO’s queue at that time. Projects withdrawn were concentrated in Minnesota, southern Wisconsin, southern Michigan, and in Michigan’s Upper Peninsula. Michigan and Minnesota saw the most withdrawals, representing about 5,000 megawatts in each state.
Recently, a 60 megawatt solar project in MISO was cancelled because of delays caused by ongoing interconnection studies. It turned out, that with inflation and supply chain problems, the delays caused the cost to produce the power to be much greater than the contract price for which the developers agreed to sell the power. This is despite massive subsidies and state mandates for renewables.
When traditional technologies (coal, natural gas, nuclear) are constructed, they are sited close to load (customers), but renewable resources need to be sited where the resource is best and that is often in difficult to reach locations, requiring additional transmission lines and upgrades to the system. MISO calculated the need for about $3.4 billion in transmission upgrades for 27 projects submitted into MISO’s February 2017 west interconnection, representing 3,421 megawatts. That cost translates to about $1 million per megawatt to interconnect, or almost the cost of building the renewable technology. All but two of these 27 projects were canceled because the grid connection costs made the renewable project unprofitable, even with subsidies and mandates. A March 2020 study by MISO showed that 60 proposed projects representing 9 gigawatts of wind would require upgrades costing over $1 billion. Wind and solar developers want ratepayers to pay for the transmission costs to relieve the congestion they are causing on the system.
Wind and Solar Rejections
Another issue is the willingness of communities to welcome large renewable energy projects. Land-use conflicts have hindered the growth of these projects both in the U.S. and Europe for years. According to Robert Bryce’s Renewable Rejection Database, nearly 80 rural governments either banned or restricted solar energy projects last year. For example, the Rotterdam, N.Y. Town Board voted 5-0 to adopt a year-long moratorium on large solar projects. The vote followed weeks of input from residents, who urged lawmakers to adopt the measure over concerns about the long-term impact solar arrays pose for the town.
Over 40 Ohio townships adopted measures last year that prohibit the construction of large solar or wind projects, or both. Across the United States, about 106 communities have rejected or restricted solar projects since 2017. The number of wind rejections also increased last year, with 55 communities enacting ordinances or other measures that prohibit the installation of large wind facilities. Since 2015, about 360 communities across the United States have rejected or restricted wind projects.
Rural communities in Michigan, New York, Ohio, and other states are blocking wind and solar projects because they are concerned about their neighborhoods, views, and property values. These communities do not want their towns to be swamped by forests of 600-foot-high wind turbines or inland oceans of solar panels, and as they become more common, people are becoming more familiar with the massive dedication of land necessary to build them. They are also concerned about the effects that noise pollution from big wind turbines can have on human health–a problem that was documented way back in 2009 by the Minnesota Department of Health.
Land-use conflicts are a binding constraint on the growth of renewables. Wind and solar energy have low power density, which means to displace large quantities of coal and natural gas that have much higher densities will require enormous amounts of land. For example, the land required to accommodate the hundreds of megawatts of new wind and solar power under the Inflation Reduction Act would require a land area about the size of Tennessee.
Despite the rejections, many wind and solar projects are being approved and the amount of renewable capacity in the United States is growing. Solar PV capacity in the United States increased five-fold between 2015 and 2021 and installed wind capacity nearly doubled over that time period.
Wind and solar projects are slowing because of supply chain problems, inflation, legislation, and trade issues. There are also grid connectivity issues, raising project costs, and “not in my backyard issues” with communities rejecting projects. Rural Americans are fighting against wind and solar projects because they want to retain the character of their townships, ranches, farms, and villages. Because the density of wind and solar projects is much lower than coal and natural gas generation projects, much more land is required. Also, because wind and solar projects tend to be sited far from demand centers, more costly transmission is required that consumers will eventually see in their bills. As people learn more about the prospects of a “net-zero” future, there are rising concerns about the multiple costs to society being pressed upon them by political forces.