The growth of the renewable energy sector might not be explosive, but it’s continued in an upward trend over the last 20 years.

While fossil energy is currently responsible for 70% of world energy expenditures, by 2050 grid and non-fossil energy will represent approximately 60% of all energy expenditures, according to a 2019 energy transition outlook report from DNV GL.

In the United States, 29 states, Washington DC, and three territories have already adopted renewable portfolio standards (RPS) that requires a heavier reliance on renewable energy sources.

As the industry continues its steady growth, here are five trends to watch in 2020.

1. Continued impact of social responsibility

The reliability, affordability, easy access, and abundance of fossil fuels delayed the demand for clean energy. However, renewable energy is unique. The traditional economic rules of supply and demand don’t necessarily apply to this sector.

Millennials are now driving a trend of social responsibility and questioning the environmental impact of market goods and financial investments. For example, eliminating single-use plastics has become a commonplace practice. Companies like Patagonia have pledged to become carbon neutral by 2025, in part because their target market demands more eco-conscious products.

People are also starting to view their 401ks as impact investments. They want businesses to offer socially responsible investing (SRI) portfolio options. 61% of employees said they would increase their investments if they were more socially conscious, according to a 2019 survey from Natixis Investment Managers.

As momentum builds toward a more socially impactful mindset, it will normalize renewable energy as a primary source of our energy demands.

2. Increase of eco-friendly real estate and housing

Keeping the trend of social responsibility in mind, we’ll continue to see its impact on construction and real estate.

When it comes to home purchasing or building, potential owners will become even more invested in the following questions, even though they’re associated with higher costs:

• Is the home made from sustainable materials?
• Can it be hooked up to a smart grid?
• What type of insulation was used?
• Are the windows energy efficient?
• Does it have all LED lighting?

While the tiny home trend may remain a niche market, buyers are demanding more environmentally-friendly housing.

This trend also applies to rentals of commercial and residential real estate. Organizations and renters want spaces to be LED-certified and make efficient use of energy and water. They’ll continue to ask questions such as:

• Does the building recycle their water or have water-efficient landscaping?
• Is it using alternative energy sources like solar panels?
• Does it have efficient heating, ventilation, and cooling (HVAC) systems?

As the public consciousness grows and the demand becomes greater, these features will become more commonplace and automatically included in construction materials and property builds.

3. More wind farms and solar panels

Two of the biggest renewable energy sources are wind and solar.

Wind Farms

Wind is the most cost-effective renewable energy source and has the greenest, lowest impact.

In the mid-80s, wind farms were mostly viewed as a tax gimmick. However, the technology continued to improve in tandem with social awareness regarding climate change.

New materials were introduced that allowed for longer turbine blades and larger rotors so capacity factors increased. Over the last 30 years, wind has matured to the point where it is a viable, impactful source of energy.

We’ll see even more exploration of offshore wind farms and floating turbines during the coming year.

Solar Panels

Solar energy is growing and catching up to the efficiency of wind energy, but it remains more expensive.

This energy source will become more widely distributed in local communities, building materials, and personal homes versus large-scale projects.

Challenges

Impact on Threatened or Endangered Species

The Audubon Society estimated that wind turbines kill anywhere from 140,000 to 328,000 North American birds a year; and big swaths of land are required to build large-scale wind and solar utility projects resulting in habitat loss.

While some have been built on land with alternate uses, like cattle grazing, both wind and solar continue to grapple with the environmental impact of their projects.

Developed Battery Storage

There’s an unlimited supply of sun, but the energy isn’t produced at peaks times of use—early mornings and evenings. In order to be effective, solar needs storage.

Batteries are the easiest way to store energy. While it’s likely their cost over time will decrease as the demand for solar polar grows, limited supplies of lithium, cobalt, and nickel continue to be a growing concern.

4. Decrease of federal government tax credits

There are some renewable energy tax credits set to step down in 2020.

The solar incentive tax credit (ITC), which previously allowed a 30% credit for solar energy system installation on both commercial and residential properties, will drop to a 26% as of January 1, 2020 and continue to decrease. It will only be a 10% credit to non-residential systems and will no longer apply to residential systems as of January 1, 2022.

The federal renewable electricity production tax credit (PTC) saw similar step downs starting in 2017 and ending in 2019. Qualified projects whose construction started in 2019 or earlier could qualify for some portion of the credit if they’re up and running before 2024.

At the end of 2019, a tax bill referred to as The GREEN Act was introduced to extend, and even expand, many of the renewable energy tax credits and incentives that were expiring or set to expire. While there appeared to be bipartisan support for extending the incentives, the tax bill signed by President Trump in December 2019 didn’t contain any of the legislation introduced in The GREEN Act.

State and Local Governments

Federal credits will likely continue to decrease, but a rise in incentives from state and local governments will likely continue as a long-term trend beyond 2020.

State and local governments with increasing renewable energy portfolio standards (RPS), such as California, will continue to lead the way for more renewable energy sources with tax exemptions and sales and property tax rebates.

We’ll also continue to see influence from state and local governments through new mandates and standards.

For example, California will require all newly built homes to have solar panels as of 2020; it’s part of the state’s goal to divest in fossil fuels by 2045.

Cities like Berkeley, California and Brookline, Massachusetts have banned the use of natural gas in new homes and apartments, and Seattle, Washington is considering a similar ban.

Expect to see more legislation of this nature.

5. Electrification of transportation

Tesla accomplished a feat that the original, utilitarian Priuses failed to do.

Their high-performance vehicles spurred growth of public interest in renewable energy technology. In response, the traditional automakers have been forced to develop more e-vehicles and make them more cost-competitive.

While an average, everyday consumer may not be able to afford a Tesla, the idea of owning a low emissions e-vehicle has gradually become so popular that the utilitarian models are now catching on at a faster rate.

Over one million e-vehicles were sold worldwide in 2017—a new record—and Q1 2019 sales increased 10% over Q1 2018 sales according to a report from the Edison Electric Institute.

This upward trend will continue in 2020.

We’re Here to Help

To learn more about these how trends may affect your renewable energy projects, please contact your Moss Adams professional.