- BloombergNEF’s new report on US energy market recommends the country to scale up investments in wind and solar to meet its net-zero target by 2050
- It would entail expanding solar energy capacity to 2.065 TW and together with wind, to 3.292 TW
- Under the Net-Zero Scenario, these technologies can help decarbonize other sectors through electrification
- While the IRA offers financial benefits, the US needs to make it easy for renewables to grow via better grid infrastructure and extending support to other emerging technologies, among other recommendations
Spurred by the financial incentives offered under the $369 billion Inflation Reduction Act (IRA), the US can realize a net-zero economy by 2050 as targeted and the cheapest way to get there is to scale up investments in wind and solar power to reach 3.292 TW, with solar alone accounting for 2.065 TW of installed capacity by the target year, says Bloomberg New Energy Finance (BloombergNEF).
The achievement of net-zero, however, will depend on ‘clearer and stricter decarbonization policies’ since the IRA can only get the country to achieve a 40% drop in its energy-related emissions by 2035 and 55% by 2050, compared to 2021.
In its New Energy Outlook: US report, BloombergNEF says that apart from wind and solar scaling up to TW levels as estimated under its Net-Zero Scenario (NZS), the report writers see these low-carbon technologies phasing out coal entirely before 2030, even though natural gas sticks around.
BloombergNEF’s Senior Associate for US Power Markets, Tara Narayanan believes that the US must address its love affair with gas to ensure cleaner power can decarbonize everything else.
Under the report’s Economic Transition Scenario (ETS) and Policy Scenario, authors argue that as the power system decarbonizes, the emission reduction gains are passed on to other sectors through electrification. Therefore, an NZS can bring in more benefits with a decarbonized power system.
“The IRA is a multibillion dollar down-payment on decarbonization, but it, and other policies, will need to stimulate trillions in investment to reach net zero,” said Policy Associate for North America at BloombergNEF, Derrick Flakoll.
Analysts highlight the NZS entails a $30 trillion investment opportunity across the US energy system between 2022 and 2050, which is 1/3rd more than the base case of $22 trillion in the ETS.
To get on track for net-zero, they recommend the country to rapidly scale up investment over the next decade to around $10 trillion by 2032, up from $141 billion invested in energy transition technologies in 2022.
While financial benefits offered by the IRA do help bring down the costs of low-carbon technologies, develop and commercialize new technologies and mobilize private investment, the report writers recommend the administration to take a series of measures to maximize their impact. Some of these suggestions include:
- Expand financial support for emerging technologies alongside funding for mature technologies as wind and solar.
- There exist well-intentioned criteria to judge an application, but compliance is difficult for instance, domestic content requirements that need flexibility since the domestic capacity will take years to scale up production.
- Promote electric transmission and grid buildout to improve grid efficiency and expand the use of clean energy across the nation.
- Ease construction of renewables and energy storage and cut through project backlogs.
Recently, BloombergNEF released its New Energy Outlook report for Japan (see RE Can Enable Japan Achieve Net Zero By 2050).
