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Subject: Economic News/Analysis

Capital Flows to Solar Power During the Energy Transition, an Industrial Info News Alert

Researched by Industrial Info Resources -- The energy transition is apparent in capital spending, with the bulk of state-level investments in the U.S. market targeting solar power, data show.

Industrial Info finds an estimated $880 billion in North America is going toward either renewable power and/or energy storage. Power is the clear leader in the energy transition when measured in total investments, with manufacturing coming in a distant second with $130 billion.

Conventional energy--refining, pipelines, production and terminals--combine for about $100 billion across the United States and Canada.

Britt Burt, Industrial Info's vice president of power research, finds the main drivers of the transition among energy providers are the global march toward decarbonization, stakeholder demand and government incentives.

"We're finding an evolving change in mindset among major energy and manufacturing companies that's driving much of the transition to net-zero," Burt said during Industrial Info's North American Mid-Year Industrial Market Outlook event on June 21.

The war in Ukraine, meanwhile, has exposed the vulnerabilities of over-reliance on exporters of fossil fuels. Sanctions imposed on Russia for the invasion left Europe particularly exposed given its past dependence on Russia oil and natural gas.

Renewable energy, provided there's a strong domestic manufacturing base, does not share the same level of geopolitical risk.

In the North American power sector, however, risks remain for renewables. If the wind isn't blowing, or the sun isn't shining, renewable energy underperforms without sufficient battery storage.

Burt's research found battery storage is expected to draw around $10.4 billion in capital. Though that's clearly lagging behind what's going toward wind and solar, another issue may be state-level legislation and the tacit money behind that.

With triple-digit temperatures hitting Texas, Governor Greg Abbot faced criticism for axing a bill meant to improve energy efficiency. That came as several parts of a state with an advanced renewable energy portfolio were left in the dark as demand overwhelmed supplies.

Nevertheless, capital spending plans seem to be making an impact. By source, as Industrial Info data show, the Energy Information Administration (EIA), the statistical arm of the U.S. Department of Energy, finds that solar is the leading source of new power generation this year.

The EIA forecasts solar power generation this summer could be 24% higher than during the prior year. Texas is the clear leader in planned capital investments.

"Texas has some $24 billion in the pipeline for renewables, with some $18 billion of that targeting solar," Burt said. "Battery storage is next with $5 billion, followed by natural gas with $3 billion," he added.

Across North America, solar is expected to see $64.8 billion in total investment value (TIV), followed by wind energy with $20.5 billion.

Nationally, the Solar Energy Industries Association has more than 6,200 solar projects in its database, representing nearly 200 gigawatts (GW) of power.

In terms of the infrastructure necessary to bring that power to end users, Industrial Info found about $47 billion in the pipeline. By state, Texas is again the leader with $4.8 billion in TIV for power transmission, though by region, it's the Rockies that stand out with just over $14 billion expected by 2024.

The International Energy Agency, however, suggests that's not enough. Advanced economies may be making strides, but clean energy spending will need to triple by 2030 in emerging and developing economies to reach net zero.

While net-zero ambitions may be lofty, it does seem that capital spending during the energy transition is paying off. Since 2013, Industrial Info finds that 128 GW of coal-fired power capacity has or is on pace to retire, while a combined 120 GW of wind and solar are starting up. Much of the rest is from natural gas.

In terms of emissions, EIA data show total emissions of carbon dioxide (CO2) decline by 3.6% from 2022 levels to 4.78 billion metric tons next year.

"While we expect to see some slippage and fallout in terms of overall investments, our data does show a significant shift in capital programs tailored to the energy transition," Burt said.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).

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