You couldn't tell from all the doom-and-gloom headlines about climate change, but the United States might not be too far off its near-term carbon reduction pledge under the Paris Climate Accord signed in 2015. The country agreed to voluntarily cut total carbon emissions at least 26% from 2005 levels by 2025. By the end of last year it had reduced energy-related carbon emissions -- the great majority of total emissions -- 13% from that benchmark. 

There's work to be done for sure, but there's room for a little eco-pragmatism and optimism, too. The bulk of the reduction to date has come from retiring coal-fired power plants and replacing the generation with natural gas (half the emissions per unit of energy relative to coal) and renewable energy. The decarbonization gains should continue for the foreseeable future thanks to the flood of electric vehicles that are about to hit the market and a nearly insatiable appetite for renewable energy projects among electric utilities.

A handful of encouraging trends are already underway. Here are three for investors to keep an eye on in 2019.

A solar farm near a city.

Image source: Getty Images.

1. The continued rise of wind and (especially) solar

The United States counted over 96,000 megawatts of installed wind power and 64,000 megawatts of solar power at the end of 2018. That generated close to 10% of the country's total electricity production, but the U.S. Energy Information Administration expects the share of modern renewables in the grid to accelerate going forward. Wind and solar could reach 11% of total electric output in 2019 and 13% in 2020. By comparison, coal power is expected to drop to 23% by 2020, down from 39% as recently as 2014. 

Wind will reach an important milestone in 2019: topping hydroelectric power as the top renewable power source. NextEra Energy (NEE 0.87%) and Xcel Energy (XEL 1.05%) have paved the way for that with over 22,000 megawatts combined -- and will continue to add new wind capacity for the foreseeable future.

Meanwhile, solar appears poised to grow even more quickly than wind's impressive rise. Solar has accounted for at least 27% of all new capacity from any energy source added to the grid each year since 2013. Once again, NextEra Energy and Xcel Energy will lead the way. The former's main electricity utility in Florida has embarked on its "30 by 30" strategy, which will build 30 million solar panels in the state by 2030. The panels will represent an estimated 10,000 megawatts of capacity, compared to just 2,100 megawatts in the entire state today. 

A green neon light displaying a battery icon.

Image source: Getty Images.

2. Batteries sprinting down the cost curve

Energy storage is a giant reason for optimism that wind and solar can accelerate their growth in the years ahead. Batteries can be used to help smooth out intermittent production profiles from modern renewables and could soon help tip the economic calculus for new power generation in the favor of wind and solar projects in more geographies. The data show energy storage markets are developing virtually overnight.

Greentech Media reports that the United States installed a record 311 megawatts of energy storage in 2018, which should double in 2019 and triple in 2020. The surge will be driven by bigger investments from utilities. For instance, Xcel Energy wants to couple 275 megawatts of energy storage with 2,000 megawatts of wind and solar projects in its pipeline. The 1-to-10 rated power capacity seems to be common among the nation's pipeline of proposed battery projects. 

Meanwhile, the residential energy storage market is beginning to show signs of life. Battery companies such as Tesla and Enphase Energy (ENPH -1.03%) are ramping up their lithium-ion battery product offerings to homeowners in 2019. The latter expects to launch its highly anticipated residential battery lineup by the end of this year, which could be de-risked by newly profitable operations.

Check out the latest earnings call transcripts for NextEra Energy, Xcel Energy, and Enphase Energy.

Three offshore wind turbines.

Image source: Getty Images.

3. Advances in next-generation renewables

Most conversations and policies regarding carbon-free power fail to include two next-generation renewable power sources likely to emerge by 2030: offshore wind power and enhanced geothermal systems (EGS).

The United States has incredible offshore wind potential owing to its vast coastlines, including on the Great Lakes, and the fact most of its population resides in coastal cities. New technology allows offshore wind turbines to be built far enough into the ocean that they're not visible from the shoreline. And they can be much taller than their onshore peers -- boasting operating efficiencies higher than natural-gas power plants.

The U.S. Department of Energy (DOE) reports that over 23,000 megawatts of offshore wind projects could be put into production by 2030, enough to generate about 3% to 4% of the country's total electricity. Recent bids for offshore acreage in New Jersey, New York, and Massachusetts earned record bids from Royal Dutch Shell, Equinor, and Avangrid, to name a few companies. It all points to a domestic offshore wind industry being developed virtually overnight, despite a lack of discussion.  

A hand holding a lit light bulb with leaves in the background

Image source: Getty Images.

Meanwhile, EGS is still in the earliest stages of development, but it has equally impressive potential. The technology involves drilling wells deep underground, circulating a fluid over naturally hot rocks, and using the steam created in a closed-loop system to spin turbines on the surface. Unlike conventional geothermal or hydrothermal resources that are dependent on existing geology in a limited number of states, EGS projects could be economical across a wide range of the country.

In fact, the DOE thinks the United States has at least 100,000 megawatts of next-generation geothermal potential -- equivalent to the nation's installed nuclear power fleet (although EGS would produce slightly less electricity than nuclear on a power capacity basis, but more than wind or solar). In 2018, the department doled out a record $16 million in grants to accelerate research, and it thinks commercially viable technology could be ready as soon as 2030.

That may sound ambitious, but much of the technology will borrow from hydraulic fracturing ("fracking") techniques developed to tap into American shale oil and gas resources. If the technology works as envisioned, then EGS could provide at least 15% of the nation's total electricity by midcentury. Yet it never shows up in long-term decarbonization projections to 2050.

Toy wind turbines and a solar module on a map of the United States.

Image source: Getty Images.

Renewable energy is just getting started

The United States generated nearly 10% of its total electricity from wind and solar power in 2018. Add to that 7% from hydropower and 20% from nuclear, and the country generated approximately 37% of its electricity from zero-carbon sources last year -- a remarkable figure. Considering onshore wind and solar are now among the lowest-cost sources of new generation, as well as the approaching advances in electric vehicles, energy storage, offshore wind power, and EGS, it's clear there's reason for plenty of optimism about America's pace of decarbonization. Investors will certainly want exposure to renewables at large.