Hope in the New Year: Opportunities Abound for the Power Industry

There are challenges facing the power industry in 2018, but there are also a lot of exciting opportunities. Renewable energy and gas-fired generation are expected to continue growing, but changes in federal and state policies could also provide needed support for the coal and nuclear power sectors. Advanced technology, distributed generation, battery storage, and microgrids will all play a vital role in the future.

There's no doubt that the power industry is changing. Nuclear and coal-fired generation are still major sources of power in the U.S., but both are having difficulty participating in competitive markets. New renewable energy continues to be added, and natural gas prices have remained relatively low, keeping gas-fired generation at the top of the U.S. power mix.

Although the demand for electricity in recent years has been stagnant-or even declining-in the U.S. and many other developed countries, demand is still growing worldwide with many Asian and African countries implementing electrification programs to get power to people who have never had it before. Britt Burt, vice president of global power generation research with Industrial Info Resources (IIR)-a Sugar Land, Texas-based provider of global market intelligence-said during a webinar on November 29 that the power industry continues to be one of the more aggressive industries in terms of investment, but it's highly dependent on location. (For information on European market trends, see "Europe's Power Generation Industry Evolves," an online supplement to this issue.)

The East Asia and South Asia regions, which include China and India respectively, rank at the top of IIR's 2018-2019 power project spending forecasts. (For an in-depth analysis of India's power sector, see "India's Ongoing Power Generation Course Correction" in this issue.) However, the projects being undertaken in those regions are changing. Coal used to dominate new capacity additions in China and India, but the latest IIR projections show investments in renewable energy, including hydro, exceeding coal in both countries-and by a wide margin in China (more than threefold).

Help for Coal and Nuclear

With the abundance of fracked shale gas, fuel prices have remained relatively low for U.S. gas-fired generators, giving their power a competitive advantage. "With the availability and the abundance of natural gas," Burt said, "I don't have a reason to believe that natural gas won't continue to be a major player for meeting global power demand."

Yet, there are actions being taken to put a finger on the coal and nuclear side of the scale. In 2016, the New York Public Service Commission approved a "Clean Energy Standard," which subsidizes upstate nuclear power plants for their carbon-free generation. Legislation, called the "Future Energy Jobs Bill," was also passed in Illinois that year, subsidizing nuclear plants in that state for their zero-emission power. Furthermore, Illinois is considering legislation to help Dynegy's downstate coal plants compete in markets there.

In October, Connecticut Gov. Dannel Malloy signed a bill allowing state energy officials to modify Connecticut's rules, thereby granting Dominion Energy permission to sell up to 75% of the output from its Millstone nuclear plant in a competitive solicitation with other zero-carbon resources. Earlier that month, lawmakers in Ohio introduced a bill to set up a zero-emission nuclear resource program designed to help the Davis-Besse and Perry nuclear plants remain viable. New Jersey policymakers held a hearing in December focused on strategies to prevent premature closure of its nuclear power plants, which could help the Salem and Hope Creek facilities. Oyster Creek (Figure 1), New Jersey's other nuke plant, has already announced plans to retire in 2019.

1. A long history.The Oyster Creek facility is the oldest operating nuclear plant in the U.S. Placed in service in 1969, Exelon plans to retire the single 625-MW boiling water reactor unit in 2019, even though its license doesn't expire until 2029. Courtesy: Exelon Nuclear

Pennsylvania legislators, too, are showing support for the nuclear and coal industries. Both houses in that state passed resolutions in October urging the Federal Energy Regulatory Commission (FERC) to strongly consider the Department of Energy's (DOE's) Grid Resiliency Pricing Rule. Granted, the rule doesn't need Pennsylvania's blessing, but it indicates that the state could take further action, if the rule is ultimately rejected.

In that proposed rulemaking, DOE directs FERC to impose rules on competitive power market operators to ensure that reliability and resilience attributes are "fully valued" for certain power generators. One of the required attributes in order to receive higher compensation is for the plant to maintain a 90-day onsite fuel supply, which means nuclear and coal-fired units would be the main beneficiaries. FERC was directed to take action by December 11, but new FERC Chairman Kevin McIntyre asked for, and was granted, a 30-day extension. In any case, coal and nuclear subsidies are likely to stay front and center in 2018.

Battery Storage, DG, and Microgrids Expand

Energy storage is another segment that is likely to be top of mind for years to come. Storage is often viewed as an important component for renewable energy integration. It's also an option in some areas for companies trying to alleviate grid congestion without investing heavily in new transmission infrastructure. Some countries, including Japan, Chile, and Mexico, have started requiring that new renewable energy projects be co-located with storage systems.

According to a forecast published by Bloomberg New Energy Finance (BNEF), the global energy storage market is expected to grow to a cumulative 125-GW/305-GWh by 2030. To get there, an investment of about $103 billion would be required over the next 12 years.

Eight countries are expected to account for the bulk of storage deployments, with the U.S. leading the way (see sidebar "Innovative Products Provide Opportunities for SRP"). Storage that provides system-level services, such as short-duration balancing or peaking capacity, is expected to account for much of the added capacity through the early 2020s, but behind-the-meter systems are expected to dominate in later years. By 2030, BNEF projects that 69-GW/157-GWh will be installed behind the meter, accounting for more than half of all storage capacity.

Innovative Products Provide Opportunities for SRP Most power generation companies see change taking place all around them. Old, stodgy utilities are a thing of the past. Advanced technology and innovation are required to remain competitive in the future. Salt River Project (SRP) is one of the nation's largest public power utilities, providing electricity to more than 1 million customers in Arizona. POWER asked SRP to respond to a few questions about the future and how it's attempting to capitalize on market changes. Is there any technology that SRP is deploying in coming years that will be particularly useful and beneficial? SRP: One technology that we are exploring is the combination of solar and storage applications. We have recently executed an agreement with NextEra for a 10-MW utility-scale battery with four hours of storage capability paired with a 20-MW solar project to be located in Pinal County. This is a significant step forward and represents our commitment to maintaining our current diverse portfolio of generation technologies. We are also further investing in our interruptible demand response (DR) pilot. We have identified 6,000 residential customers for the program, which will target thermostat DR to determine if DR can be utilized as a dispatchable energy resource. How is the power company of the future going to be different from the power company of the past? SRP: The demands on the "power company of the future" from stakeholders have increased. Thus, the power company of the future will need to be more resilient in response. This means digital services and diverse product offerings that meet the unique needs of customer segments. Offering more opportunities to save and determine different levels of green energy. Is there anything that has SRP particularly concerned or especially hopeful about the future of power generation? SRP: We are hopeful about how Arizona and SRP are positioned for the future. We have made significant investments in power generation, including the recent acquisition of Gila River natural gas units, which will ensure continued reliability and low-cost energy for our customers for years to come. We will also be entering the [California Independent System Operator] Energy Imbalance Market in 2020, which will provide further benefit to our customers through power generation optimization. SRP's strategy to be a leaner, greener, and more customer-centric organization is a winning proposition. The company is in its best financial position in years and has a dedicated, talented workforce ready to lead the industry into the future.

Distributed generation (DG) comes in various forms including solar photovoltaic (PV), wind, microturbines, reciprocating engines, fuel cells, and gas turbines. Solar PV is the fastest growing segment (Figure 2). Decreasing solar installation costs, attractive incentives, and greenhouse gas emission restrictions are expected to drive the adoption of solar PV technology in the long term.

2. Rooftop solar. The photovoltaic panels shown here are mounted on a roof in Berkeley, California. Courtesy: Alfred Twu

Research and Markets, a provider of international market research reports and data, said the DG market reached $60.04 billion in 2017. Furthermore, it's expected to grow at a compound annual growth rate of 11.48% through 2022. But there is at least one potential roadblock on the horizon.

"Right now, the production tax credit [PTC] for wind is set to expire at the end of 2019-solar moves into the earlier part of the decade," said IRR's Burt. "However, we have been hearing a lot in recent days here about bills before the Congress and the administration for tax reform."

Burt said that depending on what form the bill is passed in, the tax credits could be affected. The American Wind Energy Association (AWEA), an industry advocacy group, said the House proposal would derail the 2015 bipartisan-passed agreement to phase out the PTC over five years. "This proposal reneges on the tax reform deal that was already agreed to, and would impose a retroactive tax hike on an entire industry," AWEA CEO Tom Kiernan said in a November 2 press release. That would be a big blow to planned wind power projects (see sidebar "Xcel Energy: Riding the Winds of Change").

Xcel Energy: Riding the Winds of Change Industrial Info Resources, a provider of global market intelligence, estimates that during the 2018-2019 timeframe more money will be invested in North America on wind energy projects than on gas, coal, nuclear, and solar projects combined. One company that's putting a lot of money into wind power is Xcel Energy, a Minneapolis, Minnesota-based electric and natural gas utility that serves customers in eight states. POWER posed a few questions to Steve Mills, Xcel Energy's vice president of operations, to get his take on the future. What opportunities do you think offer the most promise for Xcel Energy? Mills:Xcel Energy is the nation's No.1 utility wind energy provider, and we're on pace to be the first utility in the nation to surpass 10 GW of wind on its system. We have owned wind generation since 2008, and we have developed key expertise in wind asset operations and maintenance skills over that time. Wind currently accounts for 19% of our energy mix; by 2021, we expect wind to supply nearly 35% of demand. Better technology is driving down the cost of wind, so it is a good value, even before factoring in tax credits. We expect our wind investments to save more than $1 billion in fuel and other costs. Xcel Energy is positioned well to successfully expand our renewable portfolio and provide a balanced energy mix for our customers. Is there any technology that Xcel Energy is deploying in coming years that you think will be particularly useful and beneficial? Mills:We have developed a very comprehensive wind forecasting tool to aid in optimizing our wind resources and dispatching fossil generation that directly benefits our customers with lower costs. In addition, unmanned aircraft systems, or drones, are improving the safety and efficiency of inspecting utility infrastructure. Xcel Energy has been among the leading utilities in drone research and development. Our program initially began inside our power plants, inspecting boilers and taking inventory. Currently, we have a partnership with the Federal Aviation Administration (FAA) to inspect more than 20,000 miles of transmission lines in 10 states. Not only does this allow us to complete needed inspections, the program will provide feedback to the FAA as it develops safety protocols. Is there anything that has you particularly concerned or especially hopeful about the future of power generation? Mills:The utility industry hasn't always been considered an innovative industry. Today, it is. Xcel Energy has pilot programs in many emerging technologies including electric vehicles, battery storage, smart meters, microgrids, and others. Utilities must understand their customers, develop processes and products quickly, and drive down costs. We can be hopeful about the future because the evolution of power generation is attracting new talent and fresh ideas. Change is driving new opportunities and Xcel Energy is well-positioned to be a change management leader in the utility industry of the future.

Microgrids are also continuing to gain traction. In the U.S., the power grid is generally very reliable. However, when natural disasters such as a hurricane or wildfire strike, a microgrid could mean the difference between life and death. That may sound like an exaggeration, but when power is lost to critical services like hospitals and nursing homes, it really can be catastrophic.

Of the microgrids currently installed, many are located on college and corporate campuses, prisons, and military bases (Figure 3). Often, they are interconnected to the local utility grid, but they maintain islanding capabilities in case of emergency. As prices decrease for equipment such as solar PV, battery storage, wind, and diesel or gas-fired backup systems, microgrids will undoubtedly grow in popularity, especially in remote locations (see "Collaboration and Innovation Produce a Powerful Microgrid Solution" in the August 2017 issue).

3. Marine power. A 568-kW battery system stores energy from a 1.2-MW photovoltaic solar system installed at the U.S. Marine Corps combat center in Twentynine Palms, California. Source: U.S. Marine Corps/Lance Cpl. Thomas Mudd

Technology Advances

For power generators, the future will likely bring more advanced technology. Artificial intelligence is already starting to make its way into power plants, and computers are identifying problems well before skilled operators could realistically be expected to detect anomalies. The "connected plant" has become a real thing.

Sensors, data historians, and a range of digital tools have been in place at power plants for decades, but new technology is analyzing the data and acting on the findings. Many plants have leveraged past investments in technology, incorporating predictive software and reaping benefits that include enhanced productivity, cost savings, improved worker safety, and more efficient operations and maintenance.

And that's what it's all about, operating plants in a way that keeps them competitive and in the market. That's good for customers and good for the power company. (To learn more about the latest digital tools being deployed throughout the power industry, attend the Connected Plant Conference, which will be held February 26-28, 2018, in Charlotte, N.C.) a-

-Aaron Larsonis POWER's executive editor.

Opening image courtesy: Nick Gesell

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