Macroeconomic issues complicated bringing new renewable energy to the US grid in 2023, but state policymakers served by the PJM Interconnection could still pursue more aggressive clean energy targets as echoes of these challenges persist into the new year.
Supply chain issues, inflation and interest rate hikes in 2023 led to a raft of stalled projects and cancelled offshore wind contracts in the US. While major updates to renewable energy mandates in the PJM region — mostly US mid-Atlantic states — were not prevalent this year, that may not be the case heading into 2024, even as some of the economic challenges linger.
Those headwinds have been the crux of problems faced by the offshore wind industry, prompting a wave of contracts cancellations that culminated with Danish developer Orsted in October abandoning its Ocean Wind 1 and 2 projects — 2,250MW of capacity that had deals in place to deliver up to 9.9mn MWh/yr to New Jersey.
Despite a rough 2023, Sam Salustro, vice president of strategic communications at business group and offshore wind advocate the Oceantic Network, is optimistic that the sector is "definitely moving forward again."
"A lot of the projects that were in trouble terminated their contracts earlier than [Ocean Wind 1 or 2] did," Salustro said. "We see a lot of those projects rebidding into [new solicitations], so they are going to get new contracts, much more stable contracts."
But there are still obstacles facing the industry. New Jersey must now make up for the capacity lost by the Ocean Wind cancellations, which it could do in an upcoming solicitation. Maryland is working to ensure the state has enough acreage to support its 8,500MW offshore wind target after federal regulators removed a potential development area from consideration.
More broadly, there are signals that "interest rates may drop a little bit," Salustro said.
"We do not really see supply chain pressures easing, but commodity prices have generally eased over the last year or so," he said. "There are some signs that it is going to be really tight, but we are building a healthier version of the industry with a second pass at this."
Onshore, the PJM Interconnection, which manages the grid for a territory that spans the mid-Atlantic and parts of the Midwest, is transitioning to a new review process. Industry advocates have cautioned the new process could result in projects with more recent applications having to wait until 2027 for their permits, which would make it difficult for states to meet renewable energy goals in the near future.
PJM says the more pressing issue is permitted capacity not getting built. The grid operator in 2022-23 signed-off on about 40,000MW of new capacity, but only 6,150MW has come on line. Developers say the slow pace is a consequence of financing, siting and supply chain issues.
PJM's transition to the new interconnection process prioritizes project readiness rather than the order in which developers submitted applications. The grid operator has suggested that not all projects still in the queue are viable.
"We have already seen the impact of the new process, when 112 out of some 700 developers withdrew their projects in August instead of meeting basic readiness requirements, indicating that there were a significant number of speculative projects in the queue that were contributing [to] a backlog," PJM said.
New year, new targets
Against this backdrop, PJM states are not backing down from offshore wind or broader clean energy commitments, even if success in setting — and reaching — those targets remains an unknown. New Jersey lawmakers are working on a bill to set a 100pc clean energy standard, which has the support of governor Phil Murphy (D).
An attempt to bolster Pennsylvania's clean energy mandate appears in doubt. A hearing earlier this month over bumping the state's Tier I requirements to 30pc by 2030 drew a tepid Republican response.
In Maryland, perhaps the biggest question mark when it comes to updating clean energy policy in the region, Governor Wes Moore (D) has called for reaching 100pc clean electricity by 2035, but it remains unclear how or when he will pursue updates to the current 50pc renewables by 2030 target. Moore's office did not respond to enquiries about the upcoming legislative session.
Some smaller potential changes will be considered by Maryland lawmakers next year. State delegate Vaughn Stewart (D) plans to introduce legislation that would remove waste-to-energy from the list of Tier I-eligible resources in the state renewable portfolio standard, a concept that has bipartisan support but has failed repeatedly to get through the legislature.
