As many areas of the world experience renewable energy inflation, some professionals wonder whether rising costs will slow clean energy’s momentum. Conversely, could decision-makers cut expenses during these challenging times by ramping up their renewable energy use? The picture is less straightforward than some might expect.
Market Conditions Cancel Projects
In 2023, energy industry leaders canceled plans for several offshore wind projects. Those executives recognized the ongoing need for the clean power those initiatives would have provided. Still, they stated market conditions were such that it no longer made sense for them to continue.
Since some offshore wind turbines are as tall as skyscrapers, it is logical that rising costs for critical materials, such as steel, would have dampened leaders’ aspirations. Turbine installations also occur with specialized vessels, which cost more to rent due to inflation. The canceled projects would have added 3.5 gigawatts of power.
However, those scrapped plans only reflect part of the industry’s activities. Some executives are still willing to follow through with intentions if they can see the long-term value. Inflationary conditions are undoubtedly frustrating, but today’s leaders know market conditions can change. They must stay focused on the future without getting too spooked by rising renewable energy construction cost estimates.
Growth Continuing Throughout the United States
A 2024 American Clean Power Association study acknowledged how canceled contracts and rebidding processes posed challenges for offshore wind projects in the U.S. However, those issues did not stifle the industry’s overall growth. Instead, projects representing 56 gigawatts of capacity are under development, providing enough energy to power 22 million homes. They collectively account for 37 leases across the country.
The research also revealed how the offshore wind’s growth has supported adjacent industries. For example, it mentioned positive impacts on shipbuilding since more than 40 vessels are ordered or under construction to facilitate wind power investments in offshore locations.
Those involved in the study also examined state-level activity, finding New Jersey leading with the most projects under contract, representing 5,252 megawatts. Additionally, Virginia is in the top spot for offshore wind capacity under construction, accounting for 2,587 megawatts. The report clarified that even when contract cancellations and other delays occurred, those events did not prevent state decision-makers from seeking alternatives.
Green Power Seen as a Revenue Enabler
Despite renewable energy inflation, some executives understand how investing in green power sources will provide meaningful and lasting business boosts. That is particularly true for leaders who connect such options to their environmental, social and governance (ESG) aims. According to a Bain & Company research study, 72 percent of respondents viewed ESG investments as revenue enablers rather than cost centers.
Today’s leaders must stay accountable to stakeholders, many of whom expect and demand that companies make sustainable changes. Renewable energy investments are relatively accessible ways to show progress while positioning companies as well-equipped for the future. Green energy can also align with other business goals.
The human resources team may be aware that many prospective new hires will mention sustainability or related areas on their applications. An enterprise’s use of clean power shows those individuals that it is an eco-friendly workplace or at least one that is moving in the right direction when making measurable improvements.
Farmers View Solar Power as Essential in Challenging Times
Specific industries find green power could increase productivity and profits. Agriculture is an excellent example. Crops planted under solar panels are better irrigated and shielded from the wind, animals or other aspects that could affect growth. Farmers cannot predict the weather with certainty, but photovoltaic panels provide shaded, more consistent conditions to nurture new growth.
Even when farmers don’t plant crops under solar panels, some still use renewable energy equipment to create revenue streams when inflation and other factors make profitability increasingly challenging. Agricultural land features sprawling acres, and those who own it do not necessarily need or want to use all of it for crop production.
Such is the case for a farmer growing several specialty crops in California. He said he could not continue farming without a solar power agreement made about a decade ago, which allows him to supplement his income by leasing part of his farm for solar equipment.
Although renewable energy inflation cuts into the return on investment for some projects, decision-makers see farmland as viable for their already planned and future initiatives. Similarly, farmers appreciate that these leases could provide them with more consistent income when economic conditions fluctuate and make their crops less profitable than in previous seasons.
World Regions Differ on Investment Reasons and Inflation Effects
When do renewable energy construction cost breakdowns make economic sense? That depends on which factors drive leaders to invest in green power. The reasons vary depending on the area of the world involved.
A 2024 study by the International Renewable Energy Agency (IRENA) investigated the matter, resulting in many interesting conclusions. For example, in China, decision-makers see that solar and wind power are increasingly competitive against coal and gas energy sources. Such outcomes encourage those leaders to keep investing because they see the gradual payoffs. However, the European Union’s desire for improved energy security and more attention paid to relevant policies have caused ongoing clean power investments.
Despite these variations, the report revealed that 2023 was a record-setting year for renewables deployment. More specifically, 86 percent of power capacity additions came from those sources, representing 473 gigawatts. Additionally, 69 percent of the total occurred in Asian countries.
The researchers also characterized renewable energy sources as the only technologies that can rapidly scale to meet the terms of the Paris Agreement. Conversely, they cautioned that the current progress with deployment is not sufficiently geographically equitable or happening quickly enough to meet those goals in time.
Renewable Prices in Asia Reach Record Low
Renewable energy inflation is not an issue everywhere. Asian countries experience the reverse, making green power projects particularly appealing there. A 2024 report by Wood Mackenzie showed that the costs of generating energy from renewable sources were lower than ever during the previous year.
More specifically, using renewables cost 13 percent less than conventional coal. Analysts expect the trend to continue, with such options becoming 23 percent less expensive by 2030 than fossil fuels.
The researchers also clarified that utility photovoltaic solar was the cheapest power source in the region. Additionally, while renewables coupled with battery storage are competitive compared to gas power costs, they are not yet as inexpensive as conventional coal. Forecast data suggested that will change in the coming years, though.
Renewable Energy Inflation Varies
Climbing costs may have left some feeling discouraged about renewable energy’s future. However, these examples show the issue is not equally severe worldwide. Moreover, renewable energy projects remain underway in areas experiencing ongoing inflation. Rising costs are fluctuating but temporary challenges. Clean energy installations are strong investments that continue paying off for decades, making them well worth considering even when inflation causes budgetary issues.
Emily Newton is the Editor-in-Chief of Revolutionized, an online magazine discussing the latest industry innovations and trends.
- Emily Newtonhttps://energiesmedia.com/author/emily-newton/
- Emily Newtonhttps://energiesmedia.com/author/emily-newton/
- Emily Newtonhttps://energiesmedia.com/author/emily-newton/
- Emily Newtonhttps://energiesmedia.com/author/emily-newton/
- Emily Newtonhttps://energiesmedia.com/author/emily-newton/
- Emily Newtonhttps://energiesmedia.com/author/emily-newton/
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