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American power industry on the move – 20 charts for 2021

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Kent Knutson's picture
Energy Market Specialist Hitachi Energy

Kent Knutson is a market specialist focusing on energy industry intelligence for Hitachi Energy.  He has more than 30 years of experience designing and developing intelligence products for some...

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This item is part of the Special Issue - 2021-01 - State of the Industry, click here for more

The continued expansion of natural gas, wind, and solar (GWS) capacity dominated the power industry news cycles in 2020, with investment in battery storage technology, electric transportation infrastructure, and carbon-free hydrogen fuel, making serious headway. 

For the first time in over one hundred and thirty years, electricity production by renewable energy surpassed coal in America. Over the past seven years, GWS have dominated power supply additions across the United States.  Since 2014, the three power supply resources have accounted for 96.7% of all new capacity built.  Natural gas has displaced coal at a fierce rate over the period, whereas today, gas represents more than 40% of power generation, and coal accounts for about 20%.  In 2010, coal accounted for 45%, while natural gas accounted for 24% of the total power supply.

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Despite the ramifications of lower overall power demand, driven most by the pandemic, the American power industry moved through 2020 with little disruption, and in many instances, showed strong growth.  During the year, wind (11.2 GW), utility-scale solar (6.7 GW), and natural gas (5.9 GW) led new capacity additions, while coal power plants, driven by age, cost, and other factors, continued to be retired (8.7 GW).

Grid investment expected to be higher in 2021

Investment in transmission and distribution continued to surge despite the economic slowdown.  In October 2020, the Edison Electric Institute (EEI) projected capital expenditures (CapEx) by investor-owned utilities would top $139 billion (bn) in 2020 – up a robust 12.7% from 2019 and up 9.1% from the association’s previous 2020 forecast made in October 2019.  Though the institute expects a modest drop in 2021 and 2022, both years are expected to exceed 2019 CapEx; also a record year ($124.1bn), reaching $132.2bn and $125.8 bn, respectively.  Investment in distribution technology, including everything from substation rebuilds to smart grid investments, led the way in 2020, accounting for 30% of all expenditures, with investment in generation (27%) and transmission (19%) accounting for most of the rest. 

The electrification of almost everything is the theme for 2021

In 2021, look for the electrification of almost everything to take an even stronger hold on investment decisions. Electrification will include continued expansion of electric transportation, including automobiles, trucks, ships, rail, and the continued focus on grid digitalization, including implementing new asset management and security technologies.

The big challenge for 2021 – solving intermittency

Leading the challenges of 2021 is solving the variability and intermittency of wind and solar power.  Today, nearly all solar projects are bid into capacity markets with an energy storage component.  Additionally, new natural gas projects are fast-starting, extremely efficient, and hydrogen ready.  The new gas technologies incorporate dual-fuel capable turbines to burn either natural gas or carbon-free high energy-density hydrogen, or a combination of both.  A combination of storage and new gas technology can mitigate the intermittency problem. 

U.S. power industry on a carbon-cutting fast-track

Augmenting the continued focus on clean-energy, the recently enacted 2021 budget and COVID-19 relief bill contained significant extensions of renewable energy supporting federal tax credits, including the Production Tax Credit (PTC) and the Investment Tax Credit (ITC), as well as provisions supporting energy storage and the now nascent but soon to be burgeoning, offshore wind industry that is estimated to be a $100 billion opportunity. 

Despite the significant gains expected in wind, solar and energy storage, natural gas will likely grow further as additional high carbon-emitting coal power plants are forced into early retirement.  Without coal, natural gas is the only dispatchable fuel capable of providing significant electricity during high load periods in most organized markets.  

Twenty charts for 2021

The following 20 charts and captions highlight the most revealing trends and happenings sure to make news in 2021.

1. America’s great fuel convergence

U.S. electricity generation by fuel source, TWh

Based on the 12-month period of reporting, from November of 2019 through October of 2020, electricity production by coal, renewables, and nuclear converged to account for approximately 20% (each) of United States electricity production.  During the period, driven by the pandemic, power demand dropped by 3.7%.  For the first time, nuclear surpassed coal in electricity production. At the same time, renewables, driven by increased wind and solar output, converged to nearly equal the electricity output of both coal and nuclear. Meanwhile, natural gas topped 40% for the first time, continuing its rapid displacement of coal in the overall fuel mix.

2. Natural gas, wind, and solar continue to dominate new capacity additions across America

U.S. new electricity capacity additions by fuel, MW

Over the past several years, natural gas, wind, and solar (GWS) have dominated new capacity construction across the United States.  Since 2005, the three power resources have accounted for more than 90% of all capacity additions (328 GW), with a remarkable 97% (170.9 GW) during the last seven years alone.  During the 16-year period since 2005, natural gas has accounted for more than 45.7% (166.2 GW) of all capacity additions, while wind (111.5 GW) and utility-scale solar (50.4 GW) represented 30.6% and 13.8%.  Apart from the addition of only two nuclear reactors currently under construction in the U.S., most expansion projects during the next decade will continue to be natural gas, wind, and solar, with battery storage a part of virtually all solar development projects.  There are currently more than 30 GW of GWS projects under construction, testing, or preparing sites for development.

3. Coal power in America in steep decline

U.S. coal capacity additions and retirements by year, GW

Driven by economics, competitively priced natural gas, and a surge in cost-competitive renewables and energy storage projects, coal as a utility fuel is in steep decline across America.

For the better part of three decades, from 1985 through 2014, net operating coal capacity in the United States exceeded 300 GW.  By the end of 2020, it is expected to drop below 240 GW for the first time since 1978. By 2030, based on plants scheduled for retirement, net capacity is expected to dip below 200 GW for the first time since 1975.

4. For the New York power grid, investment opportunity abounds

New York electricity production by fuel, MWh

Driven by the need to replace aging infrastructure and the development of new clean grid technologies to meet clean energy goals, New York regulators and private developers are on a fast track to building green.  Representing one of the world’s largest economies, New York’s carbon-free power grid’s planned build-out represents a tremendous investment opportunity for renewable and grid development companies, including investments in everything from clean generation to transmission.

Driven primarily by the state’s ambitious clean energy goals, which include achieving 70% renewable power by 2030 and 100% carbon-free power by 2040, there will need to be a massive build-out of clean grid projects in a very short time.  This build-out includes developing offshore wind farms, ports to support that growth, onshore wind, utility-scale and distributed solar capacity, energy storage, and new and upgraded transmission and distribution systems.

5. Grid infrastructure, the great enabler of renewable energy

Top 10 U.S. investor-owned electric utilities annual T&D in-service additions by year, 2010-2019, $bn

The top-10 investor-owned utility (IOU) holding companies reported a record $220.1 billion of T&D in-service additions over the past ten years – that’s 54.7% of the $402.1bn reported by all holding companies.  The average annual growth rate (AAGR) in T&D for this group is 10.2% during the period.

Growth in overall spending on new T&D infrastructure is being driven by several factors, including the replacement of aging infrastructure, the need for new transmission, and new distribution grid technology – all to enable the continued growth in renewables and clean energy technologies across America.

6. Largest carbon-free energy source in America – nuclear power

U.S. electricity production from carbon-free resources, TWh

Nuclear is by far the largest source of carbon-free power in the United States.  In 2020, nuclear power plants accounted for 53.3% (795 million MWh) of all carbon-free electricity production in the country.  There are currently 95 reactors operating in 29 states that produce about 20% of the nation’s electricity.  The average age of the reactor fleet is nearly 40 years.  Nuclear energy is one of the only major power resources that can provide huge amounts of carbon-free power to the grid within a relatively small footprint.  Nuclear power plants typically run well above 90% capacity factor, are available 24/7, and work well in extreme weather conditions.

7. American power companies make big strides shrinking carbon footprint

Top 10 U.S. electric holding company reductions in CO2 emissions (metric tons) between 2018 and 2019

Driven by state and corporate goals, power generation companies are making great strides in reducing carbon emissions.  With the closure of additional fossil capacity and steady and sustained growth in wind and solar power, expect the power generation carbon footprint to shrink even further over the next several years.

The electric holding companies with the largest drop in CO2 output were American Electric Power (AEP) Co. (-15.8 million tons/17.8% drop), Vistra Energy (-15.1/12.2%), Duke Energy (-14.1/13.4%), Southern Company (-9.3/9.6%), and rounding out the top five, Xcel Energy (-7.1/13.8%).

8. European power grid rapidly getting more connected

Source: National Grid, the IFA-2 connecting France with the United Kingdom

There are several new undersea power cable interconnector projects about to become operational across Europe. These high-voltage direct-current (HVDC) projects will enable significant transfers of renewable energy.  On December 8, 2020, the 623-kilometer (km) massive 1,400-megawatt (MW) bi-pole NordLink (aka “the Green Cable”) project was energized, creating, for the first time, an interconnection between Norway and Germany. This optimization makes the interconnect somewhat of an energy storage project that allows both short-term benefits and long-term seasonal benefits in the transfer of carbon-free renewable electricity.  Once the project completes its trial phase, the ‘Green Cable’ expects to be in full power flow mode by the Spring of 2021.

This project, and the soon to be energized IFA-2, connecting the United Kingdom (UK) grid with France’s power grid by year’s end, mark two of several major interconnector projects set to tie the UK with Norway and the European mainland.  The longest undersea cable project currently under construction, the North Sea Network Link (NSN Link), between Norway and the UK, is expected online in 2021.  These long-haul power transmission projects, along with several additional undersea power cables planned between now and 2024, will enable access to renewable energy, including hydropower, wind, and solar, from source to load centers.

9. America’s great offshore wind opportunity

Offshore wind industry comparing the United Kingdom with the United States east coast, GW

The United Kingdom’s (UK) successful and world-leading offshore wind industry provides the perfect template for how the United States (US) offshore industry could proceed, representing a mammoth investment and job creation opportunity.  Unlike the UK and most of Europe’s offshore industries, the United States hasn’t started the big buildout yet. The development projects that secure financing and get the regulatory green light will be able to implement state-of-the-art new grid and turbine technologies that will result in higher levels of efficiency and reliability as projects enter service.  

The ability to plan, finance, and construct complex projects are proven in the UK and across other parts of Europe and Asia.  For the nascent United States (US) offshore wind industry to become the next significant growth region, the same level of supply chain support, currently ongoing in the UK and other parts of the globe, will need to develop in the US.

If all goes according to plan, by 2030, both the UK and the US will be home to two of the largest portfolios of offshore wind capacity in the world, and it only gets bigger as the global power industry continues its path to zero-carbon emissions by mid-century.  The U.S. market could have large-scale offshore projects operating by as early as 2024, and by 2030 is expected to have roughly 24 GW in operation.

10. Repowering wind farms – big market opportunity

U.S. wind power capacity (GW) by age in years

Repowering wind farms are set for rapid growth as nearly 1/3 of U.S. wind capacity is now ten years or older, with another nearly 1/3 between 5 and 10 years in age.  The work will include both ‘partial,’ where towers and foundations are retained, and ‘full’ repowering, where new foundations and towers replace old smaller infrastructure.

11. Big storms mean big damage

2020 was the most prolific Atlantic hurricane season on record.  There were 30 named tropical storms and eight hurricanes.  Total damages from these storms are estimated well above $50 billion.  The damage to the nation’s coastal grid was substantial, particularly along the Gulf Coast, in and around Louisiana. The most damaging storm was Category-4 Hurricane Laura, which made landfall on August 27, 2020, near Cameron, Louisiana.  The damage from Laura alone was estimated at $19.1 billion.  The costliest year ever, in terms of economic damage, was 2017, at nearly $300 billion.  Of the ten costliest years on record, six have occurred during the past decade.  Grid hardening and storm preparation will continue to be a heavy investment area for coastal utilities in the years to come.       

12. Heatwave has California power market reeling

In mid-August, to manage a potential large-scale power outage driven by triple-digit temperatures, the California Independent Service Operator (CAISO) called on utilities to implement rolling outages across the California grid.

A comparison of 2010 and 2020 peak hour summer days highlights the dramatic shift from dispatchable thermal and nuclear resources to intermittent resources like utility-scale solar and distributed rooftop solar over the past decade.  During the 2010 summer peak, recorded on August 25 (Friday), 2010, the resource mix was much different than today.  That day, peak demand was about 47.4 GW.  Solar was virtually non-existent.  Thermal and nuclear resources (66.3%) and power imports (17%) from outside CAISO met most of the load.  Solar and wind accounted for less than 1% of supply at the time.

On August 16, 2020, peak demand occurred during hour 18 and, like historic peaks, was supplied primarily by thermal and nuclear resources (56.5%), while power imports represented only 9.7% of the total demand.  Solar and wind represented a robust 19.6% of supply at the time, but four hours prior, during hour 13, solar alone accounted for 26.9% of the total supply.  In terms of dispatchability, a few hours can make a big difference.  The shift in peak demand to the early evening hours after the sun has gone down is a good indicator of how large-scale battery storage could lessen grid stress when deployed at a significant amount.

13. Texas wind and solar power resources shine this summer

In 2020, wind and solar resources in ERCOT were more significant contributors to load during the summer’s peak compared to 2019.  On July 13 (2020), wind and solar provided 25.4% of the electricity throughout the day and 18.7% during the peak hour between 4:00 PM and 5:00 PM CT.  In contrast, consider that during the 2019 summer peak, on August 12, wind and solar provided 17.7% through the day and only 12.9% during the peak hour.

There was considerably more thermal power needed to meet the 2019 peak, and it came at a relatively high price.  During the 2019 peak hour, the average real-time (RT) locational marginal prices (LMPs) was $4,159/MWh, while prices during this summer’s peak hour averaged only $25.20/MWh.  The big difference could be attributed to several factors, including adequate surplus capacity at the time of the peak, fewer transmission constraints, and fewer unscheduled plant outages.  Additionally, the availability of more wind and solar power contributed to the low LMPs as the high temperatures across Texas came with windier and sunnier conditions. 

14. America’s organized markets – reliability the goal

Power generation by fuel during hours when peak demand in 2020 was 95% of the all-time peak

The three largest organized power markets served by western coal mines use a balanced portfolio made up of a combination of dispatchable (coal, natural gas, nuclear) and intermittent (wind and solar) power to meet loads and maintain reliability.  This is particularly true during high load periods.  Looking only at hours when peak demand was 95% of the all-time ISO/RTO peak during the summer of 2020, coal and natural gas were large contributors to overall power demand.

In the SPP, which has by far the largest percentage of wind capacity (28%) contributing to the high peak hours, both coal (31%) and natural gas (34%) were also significant contributors.  Within ERCOT, wind accounted for only 12% of high load hours, while natural gas (59%) and coal (18%) provided most of the power supply.  And in MISO, the largest market, coal (44%), natural gas (37%), and nuclear (11%), supplied most of the electric demand during the high peak hours.

15. U.S. natural gas power on the move

U.S. natural gas electricity production (MWh), and average annual fuel coast (current $/MWh)

Driven by unprecedented low fuel costs and highly efficient new turbine technology, natural gas power continues to grow.  Gas power is the most economical dispatchable source of electricity in America today.  It is the primary reason coal is quickly fading as a major power generating resource.  The development of utility-scale energy storage technology holds great promise in replacing gas power, primarily replacing peaking capacity but until it reaches scale, expect natural gas to continue its rise as a utility fuel.

16. America’s LNG export market on the rise

U.S. monthly natural gas feedstock delivered to LNG export terminals, Dth

In a little more than four and a half years, natural gas deliveries to LNG liquefaction export facilities in the United States have increased from zero to roughly 340 million dekatherms (Dth) per month. That’s a remarkable statistic given the short time frame the country has been exporting LNG.  And with new capacity continuing to come online, the growth in gas deliveries to LNG facilities is only expected to grow.  The recent high volumes of LNG are driven most by supply shortages in Asia and Europe driven by colder than normal winter weather. 

17. Leading states with the highest percentage of total electricity coming from wind and solar resources

States with the highest percentage of total electricity production in 2019, coming from wind & solar resources

Iowa leads the U.S. in the percentage of total electricity production from wind and solar resources.  In 2019, wind and solar farms generated more than 41.6% of all power produced in the state – wind accounted for virtually all (99.9%) of the power output.  Kansas followed closely behind Iowa, with 41.5% of all power coming from wind and solar.  Like Iowa, most of Kansas’s contribution came from recently commissioned wind farms.  Oklahoma (34.1%), North Dakota (27.3%), Maine (23.8%), New Mexico (23.5%), Vermont (23.2%), Colorado (21.4%), California (20.8%), and Minnesota (20.6%) round out the top 10 states, with California representing the largest contributor, and the only state, with a significant utility-scale solar contribution (28.3 million MWh) in 2019. 

18. Leading states with the highest percentage of total electricity coming from carbon-free resources   

States with the highest percentage of total electricity production in 2019, coming from zero-carbon resources

Nearly all (81.2%) of Vermont’s power generation is carbon-free, with hydro, wind, and solar providing 1.8 million MWh of the state’s total output (2.4).  Most of the rest of Vermont’s power comes from wood-solids biomass plants.  Vermont produces the smallest amount of electricity of any US state.  Washington is ranked second with 76.7% of the state’s electricity from carbon-free energy sources – primarily federal and public hydro projects representing nearly 81% (66 million MWh) of all carbon-free power across the state.  South Dakota ranks third with 73.8% from carbon-free resources – hydro (7.9) and wind (6.7) make up most of the state’s portfolio.  Idaho (73.1%) and New Hampshire (71.2%) rank fourth and fifth in carbon-free electricity production.

19. Leading states in the production of electricity from wind and solar resources

States with the highest volume of electricity production in 2019, coming from wind & solar resources, MWh

Texas is by far the leading state in combined wind and solar power generation.  In 2019, wind and utility-scale solar farms generated 87.8 million MWh, with wind accounting for more than 95% of the power output.  California is the second leading state with 42.0 million MWh generated, with solar and wind contributing 67.3% and 32.7%, respectively.  The high wind states of Oklahoma (29.1 million MWh), Iowa (25.3), Kansas (21.1), Illinois (14.5), Minnesota (12.2), Colorado (12.1), North Dakota (11.2), and New Mexico (8.3) round out the top 10 in producing the highest volume of wind and solar electricity.

20. Leading states in the production of electricity from carbon-free resources

States with the highest volume of electricity production in 2019, coming from zero-carbon resources, MWh

Texas ranks first in carbon-free power production (130.6 million MWh), with wind accounting for 64% of that output.  Illinois produced the second-highest volume of carbon-free power (114.2), with nuclear accounting for 86.5% of the output.  California produced the third-highest volume (96.5) with a balanced portfolio including hydropower (38.3), solar (28.3), nuclear (16.2), and wind (14.5), making up the state’s total electricity production.  California leads Pennsylvania, Washington, New York, South Carolina, North Carolina, Alabama, and Tennessee, all supported by large contributions from nuclear and hydropower.

Looking ahead to 2021

Driven by favorable regulations and tax laws, lower technology costs, and a desire by customers to go even ‘greener,’ the future couldn’t look brighter than today for clean grid investment.  Combine these attractive incentives with government and corporate carbon reduction goals, and you have the perfect environment for ‘green’ development.  The only thing that could hold back the carbon-free surge is the inability to solve wind and solar resources’ intermittency problem. Implementing more battery storage and investing in sophisticated new technologies like hydrogen production from green resources can do that.

Expanding the high-voltage power grid to enable more power exchange between organized markets and major interconnected grids will further support the effort to optimize renewable energy supply.  The digitalization of the ever-growing data, collected from digital equipment and sensors, will enable a more sophisticated and efficient grid.  The electrification of almost everything, including transportation, will only lead to a greener and brighter future.

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