The Growing Potential of Wind and Solar Energy in Canada and Beyond

The summer of 2024 highlighted a major shift in the U.S. power grid, as extreme heat in California and Texas showcased the essential role of renewable energy. A recent report from the Institute for Energy Economics and Financial Analysis (IEEFA) found that renewables were both dependable and economically viable, reinforcing the move away from fossil fuels. Grid operators in both California and Texas were able to handle the rising electricity demand, thanks to the rapid expansion of renewable energy sources and the addition of significant battery storage. This development signals a major shift not only in these key power markets but also across the nation, emphasizing the quick pace of the energy transition. IEEFA analyst Dennis Wamsted emphasized the rapid pace of this change, noting that battery storage in the U.S. has expanded from virtually zero four years ago to over 20,000 megawatts today, with capacity growing monthly. This advancement highlights a fundamental change in the energy landscape. In Texas, solar energy generated 16 million megawatt-hours from June through August, meeting 11.6% of ERCOT's summer demand, which marked a significant 40% increase compared to the previous year. California has also experienced considerable changes in its energy mix, benefiting from the enhanced reliability of pairing solar power with storage systems. Although there has been some doubt regarding the reliability of renewable energy, the performance of solar power and battery storage in Texas and California during peak summer heat has proven strong. This season has effectively shown that renewable energy can reliably support the grid during times of high demand, underscoring the ongoing shift in the U.S. toward sustainable energy options. Continued on Source.

Recent records in renewable energy production highlight the growing role of wind and solar in the U.S. energy grid. In Texas, wind and solar accounted for 76% of electricity on a single day, while New England achieved 45% from wind, solar, and hydropower. According to GridStatus.io, various regions, including the Midwest, New York, and the mid-Atlantic, also reported record renewable generation within the past month. These achievements signal a shift toward green energy, although fossil fuels still dominate overall power production. Texas, for example, saw wind generate nearly double the electricity of coal last year. Even regions historically reliant on fossil fuels, like PJM Interconnection, are seeing increased solar production. A combination of mild weather and recent renewable energy investments helped boost these figures. Between 2019 and 2023, 60 gigawatts (GW) of solar and 57% more wind capacity were installed. Eased supply chain constraints and federal tax incentives further accelerated growth, resulting in a record 32.7 GW of new battery, solar, and wind capacity added in 2023. However, experts caution that current growth rates may not be enough to meet rising energy demands and reduce emissions substantially. To cut emissions by 32-51% by 2035, the U.S. would need to install between 32 and 95 GW of renewable energy annually. Additionally, new projects face challenges such as grid interconnection delays and transmission bottlenecks. Despite these obstacles, the rapid installations in states like Texas and California illustrate that significant progress is achievable. Texas has added over 14 GW of solar since 2020, and California has boosted its battery capacity by 7.5 GW between 2021 and 2023. The ongoing transition underscores the urgency to keep pace with growing energy needs while reducing carbon emissions. Continued on Source.

The Ontario government is undertaking its largest-ever energy procurement, aimed at providing affordable electricity for households and businesses. This initiative is part of a broader plan to secure up to 5,000 megawatts (MW) of energy through multiple procurement efforts, aimed at boosting economic growth and addressing the increasing demand for clean and reliable power. The plan emphasizes a diverse energy portfolio, incorporating nuclear, hydroelectric, renewable sources, natural gas, and biomass. The Second Long-Term Procurement (LT2) will oversee future energy projects, ensuring community consent and protecting prime agricultural lands. Ontario’s Minister of Energy and Electrification, Stephen Lecce, emphasized that this initiative, the largest in the province’s history, is crucial for expanding access to affordable electricity across Ontario, while also opposing the carbon tax. The procurement process, directed by the Independent Electricity System Operator (IESO), is expected to be transparent, competitive, and cost-effective, encompassing various energy technologies, including wind and solar. The IESO is tasked with expediting the procurement process, with a design framework due by September 2024 and the goal of concluding the procurement by February 2026. This initiative builds on recent government efforts, including the procurement of nearly 3,000 MW of new battery storage projects. The IESO projects that by 2050, Ontario’s electricity consumption will increase by 60%, driven by population growth, new manufacturing facilities, technological advancements like AI data centers, industry electrification, and the energy needs of electric vehicles. The Canadian Renewable Energy Association (CanREA) praised the announcement, viewing it as a crucial step toward the LT2 procurement of 5,000 MW of new electricity resources by 2034, including wind and solar. CanREA’s president, Vittoria Bellissimo, expressed enthusiasm for the procurement, highlighting the industry’s readiness to deploy new, cost-effective, and reliable renewable energy projects across Ontario. Continued on Source.

Expanding wind and solar energy generation throughout Canada is crucial for developing a larger, cleaner electricity grid that aligns with the nation’s clean energy transition and climate objectives. However, to effectively manage the variability of these renewable energy sources, a more intelligent and adaptable electricity grid is needed. Enhancing grid flexibility can be achieved by integrating wind and solar power, strengthening grid interconnections, boosting demand-side flexibility, and implementing energy storage technologies. Energy storage, particularly short-term grid-scale lithium-ion batteries, plays a key role in this transition by storing electricity for later use, thereby enhancing grid resilience and reducing the need for additional infrastructure and costly, emissions-intensive power plants. While lithium-ion batteries are commercially viable and increasingly cost-effective, long-term storage solutions like compressed air and flow batteries are still in the experimental stage, facing higher costs and uncertainty. Additionally, batteries can strengthen the reliability of electricity systems by providing backup power during disruptions in generation. This capability is becoming more critical as grids encounter the escalating challenges posed by extreme weather events associated with climate change. Battery storage capacity is expected to grow significantly, both globally and in Canada. Global energy storage capacity is projected to increase 15 times by 2030. According to the Canadian Climate Institute, Canada’s battery storage capacity has already grown from 11 megawatts in 2016 to about 92 megawatts in 2023, with forecasts indicating it could reach 4,177 megawatts by 2028. However, to achieve Canada’s climate goals, capacity might need to surpass 12,000 megawatts by 2030 and approach 50,000 megawatts by 2050. The rate of battery storage deployment will vary by region, with provinces like Quebec, Manitoba, and British Columbia needing less storage due to their abundant hydropower resources. To support this growth, the Canadian government, along with provincial authorities, is advancing policies and funding initiatives to accelerate battery storage projects. A set of proposed federal investment tax credits is expected to further speed up battery storage deployment in Canada. While the details are still being finalized, these tax credits for clean electricity, clean technology, and clean technology manufacturing will encompass battery storage projects as eligible investments. To fully realize the potential of battery storage and meet climate goals, Canada must address barriers such as long project timelines, supply chain issues, and regulatory challenges. Adjusting market rules to recognize the multiple benefits of battery storage could help overcome these obstacles and support the development of a more resilient and flexible electricity system in Canada. Continued on Source.

Despite challenges like tariffs and supply chain interconnection issues, the U.S. energy storage market continues to experience unprecedented growth. Growth Trends and Future Projections The U.S. energy storage market is expected to see another record breaking year, with Wood Mackenzie predicting a 45% growth in 2024, following a 100% increase from 2022 to 2023. Although there was a dip in installations in the first quarter of this year due to seasonal project completions, the strong growth pipeline suggests higher installations later in the year, mirroring the trend seen in 2023. Annual installations in the energy storage sector are increasing at a faster rate than those in the wind and solar sectors, driven by the need to balance renewable energy sources and enhance grid resilience. This growth is further supported by declining module costs and incentives from the Inflation Reduction Act (IRA). Despite the challenges, the sector has significant opportunities for expansion. Impact of Tariffs and Interconnection Issues The announcement of increased section 301 tariffs on imported lithium-ion batteries from China, effective in 2026, is expected to raise prices and slightly temper growth expectations. However, the extended timeline and potential shifts in manufacturing to other Asian countries or domestically will help mitigate the impact on demand. Future tariff increases or additional trade barriers, depending on the next presidential term, could pose further risks. Developers are also facing challenges with project interconnection across various markets. The interconnection queues are congested with numerous submissions that are no longer active, and the Independent System Operator (ISO) analysis is lagging behind the volume of submissions. These delays create cost and timeline uncertainties for project developers. Although the new Federal Energy Regulatory Commission (FERC) interconnection rule (Order No. 2023) aims to reduce speculative projects and expedite processing, ISOs need time to implement these changes and manage the current backlog. Support from Renewable Penetration and State Policies Grid-scale storage dominates the U.S. market, with ERCOT and CAISO accounting for nearly half of all installations over the next five years. The increasing penetration of renewables in these regions is driving new revenue opportunities in wholesale energy markets, despite the saturation of ancillary markets due to the growing number of storage installations. New contracting methods and partners are being developed to guarantee project revenues. In Texas, tolling agreements match risk-takers with experts in optimizing operations during real-time price fluctuations, while conservative players obtain stable revenue for project funding. In California, major Investor Owned Utilities (IOUs) are securing contracts for energy and resource adequacy, providing merchant opportunities for owner-operators. In other regions, state policies that support renewables and energy storage, along with utility long-term planning for balance and reliability, are driving the procurement of storage systems. In the desert southwest, the large solar build-out is expected to increase installed storage capacity 14-fold to nearly 30 GW by 2033. Other leading markets, like New York and Massachusetts, are also seeing growth due to state mandates, though completion timelines may vary from original projections. While lithium-ion batteries will dominate projects over the next decade, longer-duration systems will become crucial for smoothing renewable generation across seasons. Early pilot projects featuring iron-air technology with a 100-hour duration, as well as other systems with 8-12 hour durations using compressed air and flow batteries, represent nearly 10% of the project pipeline by megawatt-hour, though they comprise only 1% of the power capacity. Conclusion Overall, the U.S. energy storage market is poised to meet the evolving needs of the grid, supported by existing tax credits and a declining cost curve. Accelerating interconnection processes and diversifying supply sources will be key to achieving carbon reduction goals. Continued on Source.