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What do you see as the major trends facing the power industry? Over the next few years and over the next decade?

Alan Ross's picture
President Electric Power Reliability Alliance (EPRA)

Experienced Chief Executive Officer with a demonstrated history of working in the think tanks industry. Skilled in Negotiation, Coaching, Sales, Team Building, and Management. Strong business...

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  • May 9, 2022
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What do you see as the major trends facing the power industry? Over the next few years and over the next decade? Try to be more specific than just things like EV adoption, global warming, green energy. Be more specific if you can on what the impact of these things will be. We will discuss your answers as others respond to what you write, asking follow up questions for clarification. 

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The way power is billed is "the" most important challenge.

If we are to reflect a billing system that is adherent to the costs incurred there will be a significant leap. Right now and for a century the most important component of the power bill is a variable cost (kWh) BUT the most important cost is the capital expenditure (associated with the power supply chain - G,T & D) and designated in $/kW.

When incurred costs are "tied" to the billing system then there will be plenty of room for great improvements. 

One simple but emblematic example tells it all. Two right next door neighbors with the same monthly power consumption pay the exact same $ amount. But,,,, one of the houses heat water using 3 instant 5 kW heaters while the other just a 3 kW electric 50 gallon tank heater. For the local utility company it makes a huge difference but both clients pay the same. Wrong signals!
 

This is a great question and I hope we can continue to pursue this through perhaps a PowerSession.   

Some of the answers above addressed this but I believe the role of the utilities is going to change and this, I think, is going to be the challenge. 

As Chris Castro says

"No longer are cities and utilities just planning centralized power, but exploring mirogrids and nanogrids and enabling distributed generation. I believe we will soon begin to see the "virtual power plant (VPP" concept become reality, where utilities will aggregate and control hundreds of connected distributed loads to better managed and optimize the grid, as well as catalyze the transition to a clean energy future."

The question will be is if utilities are able to transition quickly enough.  

Also, I see statements about how companies and utilities will be carbon neutral by 2030 or 2050 - but I am not sure we really have realistic plans on how the industry will transform to get there. 

The grid also by far seems to be the biggest obstacle.  And as of today, it is still not clear where all the money is going to go from the infrastructure bill. 

Lots happening though and it is an exciting time of change for the industry!  Themes at Dtech this year included: Microgrids, VPPS, Grid modernization, AI, Cybersecurity, and more. 

The big issue will be the grid itself.  The general assumption is that more things will be electrified (ie EVs, buildings, HVAC, etc.).  The additional demand is intended to be met with renewables, which will be inadequate in most cases.  This will put strain on both transmission and distribution systems.  It has become extremely difficult to get a transmission line approved and built.  Increased transmission will be needed to move renewable power to where it is needed from where it is being generated.  Distribution systems will have to be upgraded.  As an example, if one person in the neighborhood gets an EV and charges it at home, the local transformer can handle the load.  Perhaps even 2 or 3 cars could be handled.  After that, the transformer is inadequate and will need to be replaced.  If more and more rooftop solar is deployed, the distribution lines are normally not set up for 2 way movement of power.  Extra metering will be required as well.  These are some of the technical issues.  There will also be a need for structural changes to the electric markets.  Where renewables are subsidized, they can create negative prices on the grid.  In general, this reduces the incentives to build additional capacity and T&D systems.  Yet, with all of the electrification that is projected, More capacity and T&S systems will be needed.  A different pricing mechanism will be needed both to accommodate time of day pricing and adequate returns for T&D.

I guess that most people will cover the major trends you highlight, focussing on how to make power 'greener' and to decarbonize power supply further. Largely, these trends are already ongoing and many challenges like energy storage is being addressed accordingly. Another major trend is the integration of the power market into other markets and industrial segments. Sometimes this trend is referred to as sector coupling. Due to the low cost of solar pv panels and the need to decarbonize other sectors, it starts to become viable to create green fuels from electricity. Green fuel that can be used as feedstock in (petro-) chemical processes as well as be used to make green fuels for other purposes. Did you know, for instance, that the Dutch Airline KLM is already mixing green fuels with kerosine for all flights departing from Amsterdam? In the years to come, I expect that more utilities will diversify their business from being solely a power supplier to becoming a more general energy provider. The opportunities seem endless.

Renewables (Solar and Wind) seem to be seriously challenging fossil fuels.  More and more countries are leaning on them due to heavy demand for electricity due to digitalization.  In fact, Karnataka one of the 3 leading states in India is not only going great with them but, even declaring 5 year policies with 2022-2027 being the latest.  It is anyway certain that renewables - solar & Wind - either singly or together cannot replace fossil fuels.  If one wishes to achieve the targets, ideally, he has to strategize between the fossil fuels and renewables.  Fossil fuels with solar AND fossil fuels with biofuel (Hybrid) generations would provide ideal combinations.

Since I posted a very lengthy (and very specific) paper on this subject earlier this year, I will send you to that, (description and link below) and follow up below with implications.

My colleagues at Energy Central asked me to participate in the title predictions. After considering this, I offered to review three areas where I post frequently and consider myself qualified. These areas are:

  • U.S. growth in electric vehicle (EV) deployments
  • U.S. progress in transitioning to fossil-fueled generation to utility-scale photovoltaic (PV) and battery energy storage systems (BESS)
  • Deployment of the first large-scale offshore wind projects.

I track all of the above with posts on a regular basis, so, in general I will follow this process:

  • I will start with trends from 2021 posts
  • I will look at other factors that could accelerate or decelerate growth
  • Make projections on growth for the next few years in the above markets.

https://energycentral.com/c/ec/power-industry-2022-trends-predictions

The triple-whammy of climate-change-effects, rapidly increasing renewables and rapidly expanding EVs have the potential to create major disruptions for electric utility operations. The good news is that my home state (California) will deal with many of these first, has an extensive planning process to help with this and that process spills over to many of the other WECC states. The bad news is that other states/regions (especially my former home state, Texas) do not have competent planning, and will probably ignore our experience.

-John

Overall, I see the top major trends facing the utility and energy sectors being (1) digitize, (2) decentralize, and (3) decarbonize. 

To start, (1) digitization is happening faster than we can keep up. We are moving in a direction where we are requiring real-time data and digital infrastructure (e.g. advanced metering infrastructure, fault detection systems, DERMs). This will be critical to provide information to end-users about their consumption patterns to encourage conservation and efficiency, as well as support utilities with better managing a complex and dynamic electric grid.

That brings me to the (2) decentralized trend. It's obvious that the World, due to the onset of renewable energy technologies like wind and solar and CHP, is becoming more decentralized. No longer are cities and utilities just planning centralized power, but exploring mirogrids and nanogrids and enabling distributed generation. I believe we will soon begin to see the "virtual power plant (VPP" concept become reality, where utilities will aggregate and control hundreds of connected distributed loads to better managed and optimize the grid, as well as catalyze the transition to a clean energy future.

Lastly, considering the climate crisis and arguably are greatest humanitarian threat, the energy markets are quickly (3) decarbonizing and moving towards 100% clean energy. This is important to not just reduce carbon and greenhouse gas emissions, but also spur new jobs and industries, drive local economic investments into communities, and reduce the air pollution impacts on our communities, especially disadvantaged, minority, and communities of color. This is one of the most exciting trends, leading to breakthrough innovations in energy storage technologies, green hydrogen, large-scale renewables, virtual power plants, and more.

Wholesale Capacity Markets have failed. I envision a shift from acquiring "plain old capacity" to "retainers for specific, standardized grid services" in "version 2 of capacity market design".

Alan Ross's picture
Alan Ross on May 9, 2022

Richard, great follow up post. Where do we go for more information on this? 

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