{"id":9535,"date":"2023-11-04T11:07:12","date_gmt":"2023-11-04T11:07:12","guid":{"rendered":"https:\/\/zoominfinancial.com\/business\/green-energy-investment-headwinds-threaten-joe-bidens-climate-targets\/"},"modified":"2023-11-04T11:07:12","modified_gmt":"2023-11-04T11:07:12","slug":"green-energy-investment-headwinds-threaten-joe-bidens-climate-targets","status":"publish","type":"post","link":"https:\/\/zoominfinancial.com\/?p=9535","title":{"rendered":"Green energy investment headwinds threaten Joe Biden\u2019s climate targets"},"content":{"rendered":"
\n

An array of US clean energy investments are being delayed or cancelled a year after Washington passed a landmark climate law, threatening to hold back the Biden administration\u2019s emissions targets.\u00a0<\/p>\n

The Inflation Reduction Act signed by President Joe Biden in August 2022 featured $370bn to swiftly decarbonise the world\u2019s largest economy, including billions of dollars in new, expanded or extended tax credits for low-emissions technologies.<\/p>\n

But in recent weeks companies behind several high-profile investments supported by the subsidies have scrapped or hit the brakes on their plans.\u00a0<\/p>\n

This week \u00d8rsted, the world\u2019s largest offshore wind energy developer, abandoned two projects designed to deliver 2.2 gigawatts of power to New Jersey. BP\u2019s head of low-carbon energy, Anja-Isabel Dotzenrath, told a Financial Times conference that the US offshore wind sector was \u201cfundamentally broken\u201d.<\/p>\n

Last week US carmaker General Motors dropped plans to build 400,000 electric vehicles by the middle of next year, citing \u201cslowing near-term growth\u201d. Ford said it was pushing back $12bn in EV investments amid a \u201cflatter growth curve that we\u2019re seeing relative to what the industry expected and we expected\u201d.<\/p>\n

The Biden administration wants 50 per cent of all new vehicle sales to be electric by 2030, up from less than 8 per cent of cars sold in the third quarter, according to data from Cox Automotive.<\/p>\n

In October a $3bn carbon capture and storage project was cancelled by Navigator CO\u2082, a company backed by BlackRock, due to what it described as the \u201cunpredictable nature of regulatory and government processes\u201d.<\/p>\n

The delays and cancellations come in spite of subsidies from the IRA. The reasons include high interest rates, supply chain constraints and impediments to permitting new infrastructure. Certain projects have also stalled due a lack of guidance on tax rules and strict domestic content provisions in the new law, companies have said.<\/p>\n

The announcements are prompting some analysts to rethink assumptions about how fast the US will be able to drive down emissions under the IRA.<\/p>\n

\u201cIt is almost unavoidable that there are going to be bumps in the road\u2009.\u2009.\u2009.\u2009as some of these nascent industries start to scale up,\u201d said Ben King, associate director of the energy and climate practice at Rhodium Group, a think-tank. <\/p>\n

Rhodium had predicted that US greenhouse gas emissions would decline by 32 per cent in 2030 in its preliminary report published in August 2022. In July it revised down its forecast to at least a 29 per cent reduction, citing faster economic growth, cheaper natural gas prices, slightly higher electricity costs and the challenge of creating new green industries.<\/p>\n

King said that the IRA and an earlier $1.2tn bipartisan infrastructure law were \u201cnever enough\u201d to achieve US climate targets, and a revision in short-term forecasts may be necessary.<\/p>\n

The Biden administration is seeking to deploy 30GW of offshore windpower by 2030. Besides \u00d8rsted, energy companies Avangrid and Shell have also ditched projects in recent weeks. More than half of all US offshore wind contracts have been terminated this year or are at risk of being ended, according to consultancy BloombergNEF.<\/p>\n

\u201cBiden\u2019s offshore wind goals look impossible at this point of time,\u201d said Atin Jain, a senior wind analyst at\u00a0BNEF, which cut its offshore wind forecast by nearly 30 per cent last month. \u201cIt is also unlikely that the US will meet its 80 per cent clean energy [target] by 2030. The country won\u2019t add nearly enough wind and solar capacity to meet this goal.\u201d<\/p>\n

Other large-scale wind and solar projects built on land have been hit by financing costs related to interest rates and a cumbersome process to connect far-flung generation to the electric grid.<\/p>\n

\u201cEven as tremendous opportunity awaits, there are still serious market challenges that must be resolved to realise the potential of the IRA and achieve the Biden administration\u2019s goal of power sector decarbonisation by 2035,\u201d said Gregory Wetstone, president of the American Council on Renewable Energy, an industry group.<\/p>\n

More than 10,000 green energy projects were in a queue waiting to be connected to the electricity grid at the end of 2022, which represented about 1,350GW of generating capacity and 680GW of storage, according to a report by the Lawrence Berkeley National Laboratory. <\/p>\n

The typical project built in 2022 took five years from the interconnection request to commercial operations, compared with three years in 2015. The backlog is worsening as more projects are attracted due to the incentives in the IRA, according to the report.<\/p>\n

\u201cThe largest issue in the US right now is the ability to have transmission availability and interconnection,\u201d said Martin Pochtaruk, chief executive of solar manufacturer Heliene, which announced a $145mn factory in Minnesota after the IRA. \u201cIf that is resolved, then the flow [of clean energy] will be faster.\u201d<\/p>\n

While some high-profile investments have slowed down, others are moving ahead. The utility Dominion Energy this week won regulatory approval to build a 2.6GW offshore wind farm in Virginia. Toyota, the world\u2019s largest carmaker, said it would invest $8bn more into a North Carolina battery plant. GM chief executive Mary Barra told analysts the company \u201cis very committed to an all-EV future\u201d. <\/p>\n

The White House said the IRA had unlocked historic levels of private sector investment in green energy, including more than $11bn in solar manufacturing and $7.7bn in offshore wind.<\/p>\n

\u201cBy lowering barriers for the private sector, Bidenomics is revitalising American manufacturing, lowering costs and strengthening our energy security, and creating good-paying jobs, especially in low-income and energy communities,\u201d a spokesperson said.<\/p>\n

Michelle Solomon, senior policy analyst at Energy Innovation, expects the economic difficulties to be a \u201ctemporary blip\u201d for renewable energy and said that regulatory tools were available to make emissions targets achievable.<\/p>\n

\u201cClean energy is still a really good investment, even though it\u2019s a slightly bigger investment than it used to be,\u201d said Solomon, adding that clean energy installations were expected to have increased in 2023. \u201cWe still have many pathways to be on track for our emissions targets for 2030, as long as we kind of double down on these factors that can accelerate the renewable energy buildout.\u201d<\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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