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2020 Was a Rough Year, What Does 2021 Have in Store?

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JC Culberson's picture
Manager of Operations Certrec Corporation

A proven industry leader in energy system operations, planning, compliance, and wholesale energy market structure, I have developed NERC compliance programs for entities ranging from ISO/RTO...

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  • Jan 26, 2021 5:00 pm GMT
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This item is part of the Special Issue - 2021-01 - State of the Industry, click here for more

To say that 2020 was a difficult year may be a bit of an understatement, but that doesn’t mean that everything was bad. In the past year, we witnessed new market opportunities for Distributed Energy Resources (DER), with FERC Order 2222, as well as other developments, like the emergence of off-shore wind hydrogen production in conversations about future trends. With a new incoming presidential administration, I believe we will see more of a focus on renewable energy technologies and green energy production. These are some of the emerging trends to which I believe we should really start paying attention.  

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In 2016, there was a renewed interest in reviving coal-fired generation, sparking some amount of optimism in the coal producing communities. Instead of seeing the rise in conventional generation, as some would have hoped, the ensuing years saw other trends take shape. First, coal-fired generation declined steadily. In 2016 coal-fired plants made up approximately 31% of the total generation in the US, declining to around 25% in 2019, following a parallel trend line with European nations. Available wind-powered generation has been on an incline in the US, making up about 37% of renewable energy generation, and in 2019 total renewables surpassed coal-fired generation for the first time ever. In 2020, the US saw a 10% decrease in coal-fired generation, while solar and wind generation experienced a 23% and 14% increase, respectively. With recent nuclear generating plant retirements, it stands to reason that the US will see more renewable generation coming online in the near future, given the favorable political landscape. Wind and solar have experienced an uptick in markets like ERCOT, which doesn’t have a capacity market to incentivize conventional generation to build in the region. In ERCOT, wind makes up more than 20% of the total generation mix. While the increase in renewables is a positive sign, there will still be generation shortages in certain areas, leading to Reliability Must Run (RMR) status for some conventional generating plants that were slated for retirement or mothball status. Overall, the trend is still moving upward, at a potentially higher rate than years past, for renewable generation in US markets. 

Hydrogen fuel cell technology has been making a great deal of noise lately, as it provides the opportunity for a clean source of energy (NASA has been using it as rocket fuel for decades). When used as a fuel cell (combined with oxygen), the emissions are merely water vapor and heat, and of course, electricity. The traditional processes for hydrogen production, however, are expensive, and use a lot of the fuels that hydrogen is meant to replace. One of these methods is natural gas reforming/steam-methane reformation. This process is endothermic, using high temperatures and produces carbon monoxide and, to a lesser degree, carbon dioxide emissions. It also uses energy from the electric grid, making the case for hydrogen production seem less the solution to energy production. The Energy Policy Act of 1992 classified hydrogen as an alternative fuel, and interest in it as a clean fuel source has been increasing steadily over the past year, even though there are downsides to the production processes. Enter offshore wind hydrogen production. By removing hydrogen production from the Bulk Electric System, entities can use offshore wind farms with on-board electrolyzers to produce hydrogen, which can then be used in fuel cells and other industrial applications. This concept is being heavily researched globally and promises to remove some of the hydrogen production pitfalls that have proven to be a hinderance in the past. This process, called islanded hydrogen production, may prove to be the game changing technology needed to bring hydrogen production in line with expected future demand. While we appear to be yet some time away from hydrogen emerging as a serious competitor to wind and solar generation, there is a lesson to be learned here from the research and development of utility-scale battery storage facilities over the past five years. It wasn’t that long ago that battery storage facilities were thought to be too impractical for use on the BES, but there are numerous utility-scale battery storage facilities online today. While hydrogen isn’t there just yet, it probably won’t be long before we see advancements like islanded hydrogen production making it a more viable option for a low emission fuel source. 

Late in 2020, FERC published Order 2222, opening wholesale energy markets to DER. Some of the necessary work to facilitate these new market participants have already taken place, through ISO/RTO stakeholder meetings and working groups, laying the foundation for how these resources will be planned and operated. Currently, there are a few obstacles that may come into play, namely net-metering and the compensation structures that exist for energy buy-back programs, but I believe there will be incentives in day-ahead, real time, and ancillary service markets that will entice some participation. As this segment of the energy industry matures, I feel that we will see more DER participation in the regulatory and operations and planning levels processes. Some of this participation will come to fruition in 2021, leading to a potential increase in generation to be used for meeting demand, as well as compensation mechanisms for DER aggregators.   

Though 2020 surely brought challenges with COVID-19, various societal shutdowns, businesses brought to the brink of (and sometimes succumbing to) devastation, the human spirit and ingenuity proved to be alive and well. If we can make it through the year we just experienced, just think of what we can do in 2021, once many of these challenges are beaten back. Of course, I would be remiss if I didn’t say a huge thank you to all of the scientists and healthcare workers who tirelessly worked to defeat the largest global viral event of the last 100 years. Because of them, we are able to look to a brighter 2021 and innovate and charge forward with new ideas for energy in the future.

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