The renewable power space is heading for a very bad year in the US and Europe, as supply chain issues and raw material inflation will impact not only the amount of business that gets completed, but also the margin on that business. The trade issues between the US and China on solar panels have essentially brought the industry to a halt for the moment and suggests that all forecasts of the growth in renewable power contributions in the US in 2022 are too high, and consequently demand estimates for natural gas and coal for power generation are too low – see out comments in the energy section of today's daily report. The EIA forecast below likely fails to take into account the current woes and if governments, at the federal and the state levels act on the information in the chart they may be unprepared for some power shortages later in the year. Overestimation of the rate of renewable power installation as well as its operating rate is responsible for many of the current power shortages that we see in most regions.
One of the subjects that we will cover at length in the ESG and Climate report tomorrow (to be found here) is the significant need for CCS globally, but especially in the US, as we see more balanced forecasts of energy supply emerging which show more use of fossil fuels for longer – especially, but not limited to natural gas. These forecasts recognize the current energy momentum as well as some of the more practical realities around the rate of construction of renewable capacity relative to energy demand growth. The CCS plans that are appearing all over the place are nothing more than plans right now and if the EPA permit activity is a true barometer – not much has moved beyond planning. This needs to change and we likely need both an increase in CCS incentives – which could take many forms – as well as some streamlining around the permitting process. Simply waiting and hoping for a renewable miracle is not going to work – nor is some sort of CCS cost breakthrough.