This post is the fourth in a series of excerpts from the Advanced Energy Now 2021 Market Report, prepared for AEE by Guidehouse Insights.
At $384.4 billion, Advanced Electricity Generation is the largest advanced energy segment globally and the second largest segment of the U.S. advanced energy market, at $39.8 billion. Global revenue fell 10% from 2018 to 2019 and stayed largely flat (down less than 1%) in 2020, but this weakness masks significant growth in solar in 2019 and wind in 2020. In the U.S., advanced generation revenue has grown in each of the past two years and was up 10% overall in 2020, with solar and wind both up in 2019 and wind growing dramatically last year.
Wind was the largest subsegment of Advanced Electricity Generation in the U.S. for the first time since 2012, with $19.1 billion in 2020 revenue. Looking over the past three years, U.S. wind revenue has grown gradually after a period of relative stagnation. This is in contrast to the boom-and-bust cycles of previous years when the fate of the production tax credit (PTC), a key federal financial incentive, was regularly in question.
Despite COVID-19, Solar and Wind Show Strong Year
In 2020, global solar and wind installations remained resilient despite challenges brought on by the COVID-19 pandemic. Global wind revenue has increased every year since 2017, growing 13% in 2020 to exceed $119.2 billion. The growth of wind revenue in 2020 was largely driven by the European Union plan for renewables and will be bolstered in 2021 by the latest extension of the wind production tax credit (PTC) in the United States.
The COVID-19 pandemic caused short-term disruptions, but wind markets, and offshore wind in particular, have proven extremely resilient globally. The supply chain disruptions from COVID-19 were less intensive across offshore wind installations due to longer project timelines compared to onshore wind. Europe currently leads developed markets in offshore wind capacity and has benefitted from this resilience, especially the U.K., Germany, Belgium, Denmark, and the Netherlands. In the long term, annual installations of offshore wind are expected to increase from 6.4 GW in 2020 to 20.7 GW in 2030. While COVID-19 has caused some 2020 capacity additions to be rescheduled for 2021, overall levels remain strong, and the global wind market is expected to continue its growth in 2021.
The COVID-19 pandemic created significant challenges for the solar industry, disrupting supply chains and creating permitting challenges for new solar installations. In 2020, Solar revenue decreased 11% globally, while the U.S. solar market recorded a 5% decline. Despite the challenges brought on by COVID-19, the U.S. market added 13.4 GW of capacity in 2020, a 6% increase in installations compared to 2019, despite lower revenue. Grid-scale installations proved more resilient than distributed solar, increasing 20% over 2019. The distributed solar market, on the other hand, saw a nearly 10% reduction in added capacity.
Meanwhile, renewable energy is seen as a key component of the economic recovery strategy in many countries. As such, solar and wind markets are expected to be strong in 2021.
Fuel Cells Benefit from Green Hydrogen Push
Despite new attention over recent years, fuel cells have been under development for more than a century, with applications from space travel to residential micro-CHP. Historically, the fuel cell market has been constrained by the high cost of materials used in production. This cost is expected to decrease as fuel cell efficiency improves and less costly materials are used in production.
Some of the recent attention on fuel cells may be attributed to the rising hype around the hydrogen economy. Although most of the capacity of stationary fuel cells to date has been fueled by natural gas with internal reforming, pure hydrogen-powered fuel cells are gaining interest as the hydrogen feedstock can be produced from renewable energy sources through electrolysis.
Fuel cell incentives across the globe are often linked to fuel cell vehicles (see Advanced Transportation), but there is funding for stationary power generation applications as well. The South Korean government subsidizes as much as 80% of the purchase price of fuel cells with potential local subsidies to stack on top of that. As a result, South Korea is the world leader in fuel cell power generation, boasting a fleet of nearly 300 MW. Japan also directly supports fuel cells, as does the U.S. with the Investment Tax Credit.
The global market for fuel cells has grown steadily over the past three years, increasing 10% in 2018, 17% in 2019, and 7% in 2020. Investment in green hydrogen and fuel cell technology across Europe and Asia Pacific indicates that this growth will continue.
Hybrid Power Plants Quickly Emerging as Electric Power Leader
The emergence of solar-plus-storage has been the most important trend in the electric power industry in the past two years. These hybrid power plants account for a large percentage of newly announced energy storage capacity, including some of the largest energy storage systems built around the world. The U.S. has emerged as the hottest market for these new projects and is driving much of the innovation. In U.S. interconnection queues there are 102 GW of solar PV projects and 11 GW of wind projects being proposed with energy storage attached. Precipitated in large part by a dramatic decline in battery costs, nearly one-third of all proposed solar projects in the U.S. now include energy storage. Hybrid projects are also being planned and built in Australia, Japan, Europe, and the Middle East.
These projects are becoming more standardized in their technical and business model designs. Combining solar PV and battery uses at a single site through standardized configurations can provide significant cost savings relative to building the two technologies separately. Savings are derived from shared hardware such as inverters and transformers, along with more streamlined installation, project design, and interconnection. Projects are also being standardized in their business and financial models, although there is still variation in terms of managing the co-located solar and storage assets separately or as a single grid resource. PPA is the preferred structure for these new projects, offering utilities and other customers the ability to procure dispatchable solar PV generation at a set rate.
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