Reserve Margins Shrinking. It’s not the physics that will make a market but the grid operators that take the physics, or in this case the fact that reserve capacity is shrinking, and create the pricing signals that will drive a market forward. For PJM, the vast expanse of the grid, addition of a lot of renewable energy like offshore wind, and retiring power plants, will require more flexibility in the grid in addition to the additional capacity that will need to be built. In the meantime, we know what the grid needs but grid needs are not enough to get project developments through an investment committee.
Tax Credits Drive Markets. Economic growth and investments in the US economy have long been directed through tax credits. While some consider this government aid, it’s really a driver to move private capital into direct investments for economic growth. Mortgage tax deductions and charitable donations are there to incentivize particular use of your personal dollars. MACRS bonus depreciation or manufacturing tax credits do the same, create a positive financial adder to the overall investment thesis that the economy is looking to expand beyond organic growth. If the tax credit doesn’t work, it costs zero. If it works, you get economic growth, so you have a win-win situation.
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- PV-Magazine: Where renewable energy policies are working in 2023
Opinion
Best, Yann