This article was adapted from Energy Weekly, a free newsletter about the clean energy transition.
It’s been a big year for clean energy. From policy to action, the public and private sectors are spurring forward the great energy transition in meaningful ways. Here are the five biggest stories from the year past, and why they’ll matter months and years into the future.
1. Past performance is no indication of future grid stability
The weather this year was weird. No part of the U.S. was spared. The heat dome in the Pacific Northwest. The polar vortex in Texas. Hurricanes in New York. Tornadoes in the Midwest — in December. Blizzards in Hawaii. Fires in the West, fueled by a megadrought. Extreme flooding across the globe.
All signs point to weather getting more extreme as the impacts of climate change take root.
The weather was also a wake-up call for the nation’s energy infrastructure. Power outages jumped 73 percent in the U.S. last year — from 770 million hours in 2019 to 1.33 billion in 2020. More extreme weather will certainly mean more outages — and with them, health, safety and economic damages.
As a result, communities and organizations are beginning to think about the value of resilience in a new light. More utilities are considering virtual power plant programs, giving their customers more resilience and their operations more flexibility. Companies are looking to install backup generation.
As we collectively better understand the value of resilience — and the cost of losing power — more offerings at more price points are sure to emerge.
2. A plan forward emerges to decarbonize steel
This year marked a breakthrough in efforts to decarbonize one of the largest climate culprits: steel, responsible for about 7 percent of energy-related emissions.
First, the United States and the European Union agreed to use embodied emissions as a metric when importing steel in what the White House calls "the world’s first carbon-based sectoral arrangement." This helps incentivize a clean steel market that can’t be undercut by cheaper, dirtier options.
Then, during COP26, 40 world leaders signed onto an agreement to decarbonize five high-carbon sectors: steel; transport; agriculture; hydrogen; and electricity. The countries represent more than 70 percent of the world’s economy.
Meanwhile, industry is showing that clean steel is possible — and is happening. Volvo announced plans to make cars with fossil-free steel by 2026. A steel mill in Colorado is running (mostly) on solar. Boston Metal figured out a carbon dioxide-free steel smelting process.
Taken together, this is meaningful movement towards decarbonizing one of the world’s most stubborn sectors. The industrial sector is a significant contributor to the climate crisis, responsible for roughly a third of global greenhouse gas emissions, but decarbonized solutions are either non-existent, not market-ready or not cheap enough (yet). The progress made with green steel gives me hope that we can do hard things.
3. Long-duration energy storage is edging towards climax
Long-duration energy storage — defined as a system that can store energy for more than 10 hours — has been the Next Big Thing for about 20 years. But 2021 may just have been the tipping point.
In July, the U.S. Department of Energy threw down the gauntlet, launching an Energy Earthshot Initiative to drive down the costs of long-duration energy storage by 90 percent by 2030.
"We’re going to bring hundreds of gigawatts of clean energy onto the grid over the next few years, and we need to be able to use that energy wherever and whenever it’s needed," Secretary of Energy Jennifer Granholm said in a statement.
Whether a result of the Earthshot announcement or simply good timing, shortly thereafter a tremendous amount of finance flowed to the sector, with funds backing new technologies and companies that have the potential to unlock the Holy Grail of deep decarbonization.
Energy Vault secured $100 million in Series C funding, FlexGen announced a $150 million equity commitment, EnerVenue announced a $100 million in Series A funding, Malta announced it raised $60 million in Series B financing and Form Energy closed $240 million in Series D capital.
4. Clean energy procurements consider social and environmental impacts
As the clean energy procurement market matures, some corporate buyers are looking beyond the number of megawatts to more holistic criteria when considering new energy deals.
This strategic lens can be used to assess upstream impacts, such as an energy company’s labor practices or a solar panel manufacturer’s material sourcing. It also can be used to ensure renewable energy deployments are supporting the local community and are creating good-paying jobs that support diversity, equity and inclusion.
On the environmental side, deals are increasingly taking into account land use and the full life cycle of materials used in clean energy technologies, including circular design of solar panels and wind turbine blades.
This trend was highlighted as one of the year’s major trends by the Clean Energy Buyers Association (CEBA)’s annual State of the Market report. It is also the topic of Salesforce's excellent report "More than a Megawatt," which outlines best practices for renewable energy buyers.
Service providers are also looking to provide more holistic information to buyers. LevelTen, a renewable transaction platform, launched a new scoring tool this year that factors in a renewable project’s community, conservation and climate impacts. Enel Green Power also highlights this as one of the top five renewable energy trends in the coming year.
5. Supply chain shortages come for clean energy
Something funny has been going on with energy supply across the globe.
Natural gas prices are spiking in Europe, with people looking down the barrel of a colder-than usual winter. Cost of coal went up. Strained supply chains have spiked the cost of gasoline.
On the renewable energy side, supply chain disruptions have increased the cost of projects. This is thanks to a confluence of factors, including an increased cost for raw components, higher shipping costs and a run on available deals as corporations and communities work to ink deals before clean energy target dates and the sunset of tax credits.
As a result, some corporate buyers are waiting for costs to fall before engaging in new projects.
The fact that a marginal increase in costs could derail important progress in the clean energy transition reflects the moral hazard of focusing on economics as the motivation to decarbonize.