Renewables: The Imperative for Discipline with Julie McLaughlin & Elizaveta Malashenko
Nov 22, 2023
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Julie McLaughlin and Elizaveta Malashenko of Alvarez & Marsal discuss challenges and opportunities in the renewable energy sector, including rising costs, disrupted supply chains, and the impact of weather events. They explore the importance of building resiliency and robustness, as well as the challenges faced by renewable energy projects in unpredictable markets and changing weather patterns. Additionally, they highlight the significance of interest rates, commercialization challenges, and the role of batteries in the renewable sector. They also touch upon the future of the industry and public understanding.
Renewable projects are facing supply chain challenges, including increased demand, scarcity of transformers, and disruptions in solar panel supply due to forced labor regulations.
Renewable companies need to prioritize asset and operational resilience to climate events, which can be achieved through weatherization, grid system improvements, and understanding the impacts on assets and markets.
Deep dives
Current Challenges in the Renewable Sector
2023 started with excitement and momentum in the renewable space, but encountered headwinds including inflation, interest rate increases, and supply chain challenges. Stock market valuations have declined and power purchase agreements are becoming less profitable due to increased costs and supply chain issues.
Supply Chain Challenges and Costs
Supply chain challenges include increased demand, uncertainty about sustained demand, scarcity of transformers, disruptions in solar panel supply due to forced labor regulations, and constraints on basic materials. Supply chain procurement is advised to be elevated as a strategic function, with companies exploring unconventional plays and partnerships.
Grid Connectivity Challenges
Renewable projects face hurdles in connecting to the grid due to inadequate infrastructure, permitting challenges, and policy issues. The existing grid capacity cannot accommodate the increasing demand, and significant investments are needed to expand transmission and distribution capacity.
Resilience and Climate Events
Renewable companies need to focus on asset and operational resilience to climate events, such as extreme weather, storms, and wildfires. Understanding the impacts on assets and markets, and adapting with weatherization and grid system improvements, is crucial. Resilience also presents an opportunity for clean energy assets to enhance the overall energy system.
Wind & solar have had a tough year. Rising costs, disrupted supply chains, market economics and weather events have all contributed to the woes that have seen projects parked and stock prices fall. Yet, renewables are crucial to the energy transition and can be cost competitive and profitable in many cases. Just what does it take to build projects and companies that can weather this volatility? How can the sector build resiliency and robustness? Julie McLaughlin and Elizaveta Malashenko of Alvarez & Marsal join us to diagnose the challenges and identify the pathways forward for the renewables sector as outlined in their latest white paper released today: https://www.alvarezandmarsal.com/insights/renewables-imperative-discipline Julie is Managing Director of the US Energy Practice (previously our guest in episode 94 on the still upcoming SEC regulation on climate disclosures: https://podcasts.apple.com/us/podcast/the-hc-insider-podcast-conversations-in-energy/id1512721188?i=1000559567015) and Elizaveta is a Senior Director focused on the energy transition.
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