Executive Roundtable: The Future of Utility-Scale Renewables

Lindsay Morris, Associate Editor, Power Engineering
February 02, 2012 | 14 Comments

Renewable energy in the United States is at a crossroads. With several federal tax grants set to expire by the end of 2012, utilities are trying to decide if the falling prices of solar and wind technology makes renewable energy competitive enough to invest in despite vanishing federal aid.

Lindsay Morris recently discussed the future of renewable energy with four renewable executives: Tom Doyle, president and CEO of NRG Solar; Michael DeAngelis, manager of energy research, Sacramento Municipal Utility District (SMUD); Steve Sawyer, secretary general of the Global Wind Energy Council; and Ed Feo, managing partner, USRG Renewable Finance. These renewable energy leaders discussed the possibility of a North America sans renewable tax grants, the pros and cons of low-cost manufacturing of PV modules, the role of renewable energy in light of the natural gas revolution, and more.

How will the removal of the 1603 Treasury Grant affect renewable energy developments? Will we see more state renewable programs popping up to encourage renewable growth?

Mike DeAngelis: The 1603 Treasury Grant Program is a significant incentive to renewable energy development. At SMUD, we’re in the final stages of negotiating sale and buyback agreements for our new 120 MW wind project in Solano that is now under construction. The sale is to a private party. The 1603 Program is a very important part of the deal.

Ed Feo: I agree that the 1603 has been a significant program for renewables over the last two years. As of September 2011, the Department of Treasury reports that almost 20,000 projects have been funded for a total of more than $9 billion since the program began in 2009. Let’s assume for the sake of this discussion that the grant is not renewed or replaced with something very similar to it. If you do the math and back out the amount of the grant based tax equity transactions, the tax equity market suddenly falls from a volume of over $7 billion to around $3.6 billion.

Another factor affecting the tax equity market is the expiration of the Production Tax Credits (PTC) at the end of 2012. What we’re seeing is a pretty significant acceleration of wind development financing into 2012 that might otherwise have fallen to 2013. This acceleration of development and financing in wind will actually put more pressure on the tax equity market in 2012, and could have the effect of increasing pricing for the available tax equity.

Tom Doyle: I think you’re going to see different types of development going forward. The large scale, utility-type development activity is going to be impacted the most by the loss of the 1603 grant. I think there will still be tax equity markets available for smaller projects.

Will there be a time when renewable energy no longer needs government subsidies?

Doyle: The way we’re developing our business plan, we absolutely assume that there will be a point in time over the next five years when renewable energy no longer needs government subsidies. We see a lot of markets from a retail price perspective where solar projects can achieve grid parity without government subsidies. In fact, we’ve studied the U.S. market and believe that within the next three to four years, there are more than 20 states where we can compete without government subsidies.

DeAngelis: Regarding declining costs, we have really seen some of the renewable energy technologies moving down the price curve as production economies, learning curve progress, and innovation occurs over time. As that continues, I think we’re going to see excellent competitive prices from wind and solar PV.

Steve Sawyer: We have successful wind developments in New Zealand, Mexico and Brazil without any government subsidies of the kind that we’re used to seeing in the U.S. If we’re talking about a level playing field, I think that wind and solar in many locations are ready to compete right now.

How do low natural gas prices and the overall “natural gas boom” affect the renewable energy market in the U.S.?

Doyle: From my perspective, low natural gas prices force us to sharpen our pencils and focus more aggressively on ways that we’re going to be able to drive down costs. I actually think low natural gas prices have been a benefit to the renewable space because I think we’ve all seen what’s happened with respect to prices in a very short amount of time. I do believe at some point in time, we’re going to see gas prices elevate north of the $4 level, and that’s only going to be an upside for a renewable space that has already worked out a lot of the major issues to drive down costs and achieve grid parity.

DeAngelis: I think it’s true that increased natural gas supply and low prices will make it more difficult for renewables to compete in the U.S. And though natural gas is certainly much better than coal and petroleum in terms of greenhouse gas emissions, it still results in significant carbon emissions. If California is going to meet an overall goal of 80 percent reduction (of greenhouse gases) by 2050, then that means eventually reductions in natural gas use would be needed also.

Feo: The RPS programs really put renewables off in a separate procurement bucket so you don’t have this head-to-head competition between natural gas and renewables. But natural gas does affect what the price of power is, and that in turn affects what’s going to be considered an acceptable price for renewables. I think on the natural gas side, the impact is potentially greater on coal than it is for renewables, with gas becoming the dominant fossil fuel. It may be more of a battle between coal and natural gas than between natural gas and renewables.

Sawyer: Slow – painfully slow – the world is moving to price carbon emissions. When you compare just the combustion of gas and coal, the advantage for gas is quite substantial, but when you include the fugitive emissions from the hydro-fracking process, the situation changes dramatically.

On the manufacturing side, does it look like the majority of technology will continue to come from other countries? If the U.S. were to gain the upper hand in the renewable technology market, would that be beneficial to American renewable developers?

I think it’s hard to have a crystal ball on this topic. Particularly China has become a major force in photovoltaics and may be becoming significant also in wind manufacturing. The Solyndra issue aside, I think the jury is still out concerning U.S. innovation and U.S. subsidies and whether they can overtake the government subsidies from other countries and the cheap labor applied to traditional wind and solar PV technologies. But yes, if the U.S. renewable growth continues, that’s certainly going to help support the industry and the economy in this country.

Sawyer: I can’t speak for PV, but I do not believe it will ever be the case that any significant percentage of the wind turbines erected in the U.S. will come from other countries. The economics of wind means that anything other than quite a small quantity will be shipped around the world.

Feo: Having been at SPI and having walked around the exhibit hall, I think it was noteworthy to see how many manufacturers were there from Asia, but also from Europe and the U.S. It was quite the drama to have the SolarWorld case announced in the middle of the conference. I think it’s going to be fascinating to watch that case develop—is this a matter of selling panels cheaper in the US than at home, or simply a matter of more efficient manufacturing taking control of the market? The commentary thus far from developers is that they love that competition among manufacturers, whether it’s fair or unfair. At the end of the day, the competition results in lower prices and the ability to do more projects at competitive rates. If prices were to be increased, fewer projects would be economic.

Doyle: One thing that people need to appreciate is that there are different types of PV manufacturing. I think what you’re going to see more of going forward in the U.S. is module assembly. It’s a low-cost effort that really does make it appear as though you’re fabricating in-country. I think the cell manufacturing will continue to come largely from China.

I will echo what Ed said as far as would it be beneficial to American renewable developers if we had more technology developed in?house? I don’t think it really matters that much. I think what’s important to developers right now is the intense competition to drive down PV panel pricing. It’s such an aggressive market that it’s significantly surpassed our expectation of what we thought we could see as a buyer of PV products.

DeAngelis: There are technology improvements going on in wind very clearly right now – direct drive, new materials/components and other improvements. But inherently, wind has been penetrating grid-connected markets for a much longer amount of time than photovoltaics. I think there’s a whole series of PV technologies, particularly thin films and some of the concentrators that are still in the development stage. The more developed countries, with high labor costs and the resources to manufacture advanced, innovative technologies, can become competitive compared to the traditional sliced crystalline cell technologies that might require more labor provided in countries such as China.

14 Comments

Nick Cook
February 16, 2012

Its true storage will add capital cost but the problem with wind is it is very fickle and turbine output can vary from almost nothing to full output on a daily, possibly hourly, basis, even in Wyoming. It would not be possible to operate industry on such a flexible basis; employees would have to be swapping shifts on a daily basis. Also without storage you will need additional/over capacity to cover periods of low generation which may need to be several times the average output to give a reasonable certainty of having enough power during normal working periods.

If the wind is only supplementing the normal grid power then the problems may not be significant but in this case it still means that the grid will need to be taken to where the wind source is for backup.

Storage and interconnection are the answers, but the storage has to substantial, cheap and able to provide at least a few days of supply if wind is to be the predominant energy source. In the UK in Dec 2010 wind output for the whole of the UK dropped to about 5%, or less, for over a day on three separate occasions, two of which were for about 3 days. Wind currently only supplies a very small fraction of UK energy so conventional generation is able to make up the difference, but if wind provided a major part we would have been in a bit of a pickle.

ANONYMOUS
February 16, 2012

Regarding the idea that some sort of storage will bring down the cost of wind, I would not really agree. Any method of storage will add capital cost, and higher capital costs will only increase wind LCOE rather than reduce it.

There are many uses for electrical power. Industrial users tend to pay higher utility rates than residential users. So a more cost-effective approach might be to encourage industrial users of energy to relocate to areas with favorable wind conditions, where wind turbines can be installed and operated more profitably. It would seem to be more practical to use the power as soon as it is produced, rather than trying to store it. There is a long history of locating power-hungry industries near geographically remote sources of plentiful electrical power. That's why Alcoa aluminum and Boeing aircraft ended up in the Pacific northwest with its massive hydro power resources.

I would propose that installing low cost on-shore turbines in high-wind remote areas like Wyoming or South Dakota, and then building up a local industrial base around that source of power, is the most logical approach. The incentive of low cost power and low cost real estate will result in businesses voluntarily relocating. Having users move to the power source is cheaper and more efficient long term, than building out the infrastructure and transmitting the power long distances to existing users.

Anatoly Arov
February 15, 2012

Thanks Nick for taking time to look into my press release. This device is working with kinetic flow between cylinders for purpose of rpm limitation. Recently I invented new device that is considerably simpler and does not have internal flow, after compressed air test (which as goal has car engine with huge achievable travel distance and small tank) I will test device performance in deep water application creating pressure 5 bar 50m depth) using in lab. compressed air tank as pressure source.
Second part in case somebody will come out with support. Fact, that two types of devices (and sure will be more) can utilize pressure into energy, of cource with a twist, confirms as a fact, that nothing is absolute in engineering, absolute only that we did not look around enough, and that knowledge and human curiosity does not have limits, that's why we still have inventors. My invention came as a result of another SLT technology, which is my major invention in energy efficiency and really clue for static pressure utilization.
Sorry, in your first comments you talk about energy storage. If CAES use my last invention (air side) for release of energy stored, there will be more efficient and more effective CAES system

Nick Cook
February 15, 2012

To return to my comment regarding 'huge potential energy in deep waters of lakes and oceans' I have to admit I made a mistake.

What I should have realised is that the deep waters of lakes and oceans have water under 'huge pressure' not 'huge potential energy'. Pressure, however huge, is not in its self potential energy. Anything that's under a huge amount of mass will be under huge pressure, but this does not translate to huge potential energy unless this mass can move to a place of lower potential energy.

Arov. When you have finished testing your 'static pressure engine' what are you going to use in place of your compressed air source?

By the way, I've had a look at 'PIPS deep water static pressure to energy converter' @ www.world-wire.com/news/1010010002.html. It has two pistons that apear to move up and down under fluid pressure which is then translated into rotary motion. Moving pistons indicates moving fluid from one pressure to a lower pressure which is a perfectly normal way of harnessing the potential energy in a fluid under pressure to convert it into kinetic energy, but this does also imply a fluid flow, albeit a little different from the continuous flow through a turbine. On the basis that large turbines can harness close to 90% of the potential energy that was originally in the water stored in the dam I would doubt if there is a huge room for performance improvement.

Anatoly Arov
February 15, 2012

Thanks for crushing respond.
Do not reject something that you do not know how it works.
Gwatts means actual energy output in 1 sec produced by my static pressure engine, new concept, testing presently going on using compressed air as pressure source (not propulsion technology) with loss of pressure only for leakage. It was time that people was killed telling that sun is not rotating around our planet.

Nick Cook
February 15, 2012

I wish people discussing RE, or energy in general, would learn the difference between ENERGY and POWER, Power is the size of the engine in your car, or to be more precise the rate at which the engine can convert the Energy (fuel) in the tank into useful energy i.e. mechanical work/motion in the case of cars.

Arov; "GWatts" (GW) is not energy it is power, energy is power times time, how long can you supply your GWs for? Energy would be GWh or GJ (GWs). Power does not do anything on its own, much like a battery has Volts but these don't do anything useful until it is connected to something.

The "huge potential energy in deep waters of lakes and oceans" is simply that, potential energy. To turn this into useful work, i.e. kinetic energy, the mass of water or compressed air, has to move to a state of lower potential energy, the difference being the available energy to do work. Sure you can store energy in compressed gas at the bottom of lakes etc. but you can't just extract useful energy from the pressure that exists unless the mass under pressure can move to somewhere of lower pressure.

"PV and kinetic energy devices are intermittent and 10 times less efficient than static pressure devices."
If the pressure is static it's not doing anything, that's why it is 'static' the efficiency of something that's not doing anything is not really meaningful. A hydro dam provides static pressure, potential energy, as a head of water but you don't get any useful energy out until the water flows through the turbines and unless you keep filling the dam, which requires energy, this will soon run out.

I don't have the space or time to do a rigorous explanation but there seems to be some flawed physics here.

Anatoly Arov
February 14, 2012

Future for RE is in huge potential energy in deep waters of lakes and oceans. Utilization of deep water pressure is possible with single device capable of delivering GWatts of energy , device is under development, it needs push and investment and will be put for testing soon. This will enable to produce base energy and eliminate need for storage, excess energy will be compressed air to drive vehicles, using the pressure of compressed air with require only 10 gallon tank allowing to travel over 1000 km. REW should create conference to discuss this possibility, and help to promote this idea.
PV and kinetic energy devices are intermittent and 10 times less efficient than static pressure devices which cost 100 times less.

agate thompson
February 13, 2012

Really Very interesting issue. Thanks for sharing actually, this will be helpful for electricity suppliers comparison

luigi hernandez
February 10, 2012

Very interesting issues , we at Suneva currently jointly developing projects in puerto rico with NRG Caribe found a lots of similarities regarding RE issues.
Luigi

Nick Cook
February 5, 2012

Preston Peterson - Using hydrogen to store off peak electricity is not as simple as it seems, it is not that easy to store and transport due to its very low volumetric energy density, even in liquid form its only slightly better than ethanol. When you add losses from conversion (electrolysis), storage (compression) and fuel cell (about 60% max) the round trip efficiency is less than 40%. Even if this could be pushed to 50% it's probably not a brilliant solution and even at 50% it means you need about twice as much, difficult, storage as the required demand. Also hydrogen is probably not a good solution for long term (seasonal) storage.

C Grieco's post on Gravity Power makes a lot of sense for the lower end of utility scale storage but at the levels I mentioned in my first post, ~8TWh for the UK, even this is probably not the best solution as it would require over 13,000 of their 10m diameter by 2Km deep shafts, about 1 a day from now until 2050. I would agree with C Grieco that pumped hydro is 'currently' the only viable bulk storage solution and their version also achieves a much higher storage capacity (~2x)than a 10m by 20m hole with traditional pumped storage. The thing that makes pumped hydro storage cheap is its long service life and its daily cycling but multi TWh is for weekly or longer, such as seasonal, storage which completely changes the economics, for example; a facility that only gets used once a month would take 30 times longer to repay the capital than one used every day.

However nothing, except nuclear, compares to chemical energy as a storage method, particularly in a solid form. The solution I'm looking into would use 'green coal' (i.e. clean, recycled carbon) for storage and a hole, or better still a heap, of this volume would store in excess of 1.25TWh of electrical output, over 2000 times more than can be stored by Gravity Power. This is the scale and ease of energy storage that could really support large scale RE electricity.

Chris Grieco
February 3, 2012

Gravity Power is developing bulk electricity storage which we feel will be true utility-grade, utility-scale energy storage for peaking power and to support RE penetration: www.gravitypower.net.

Venture-funded and soon to establish operations in high-growth energy storage markets (i.e. not the U.S.), the Gravity Power Module is based on the proven principles of the only widely deployed energy storage technology on the planet; we will provide the highly desired benefits of pumped storage hydropower, yet largely eliminate its challenges of the very lengthy siting and permitting processes and its requiring a huge amount of upfront capital to achieve its first Watt of additional storage capacity.

If all goes well, no longer will it be a decade+ and a few billion of USD upfront required to install additional clean, fast-responding, energy storage-based power plants of significant capacity and life.

Preston Peterson
February 3, 2012

I have read on several occasions that off peak electrical production is either very cheap or is simply wasted. Also have read about compressed air storage of energy with heat storage for efficiency.
I don't understand why we can't store both H2 and O2 from hydrolysis to be used in fuel cells. I understand about losses in hydrolysis and compression of the gases. Also fuel cells can become fouled from contaminates. Pure H2 and pure O2 should not foul the fuel cells. Compressed gases can be stored for a long period of time and added to or taken away as a large buffer.
Initial costs may be high but should come down rapidly with more deployment.
H2 can be piped from where it is produced to where it is used as well.
Natural gas pipe lines and storage facilities are already well established and can be converted to H2 when we either run out of cheap natural gas or we decide that we must further reduce carbon emmisions.
I believe that H2 could also be mixed with natural gas and the H2 producer could get credit for the energy added. Often times wind energy production is near natural gas lines or at least electrical lines that travel to where natural gas lines exist. This way the energy value is mostly preserved and the H2 does not have to be compressed any more than the pressure of the natural gas lines. It could also be filtered out by the end user thru permeable membranes to be used at sight in fuel cells. Some fuel cells are already using H2 on sight by producing it from natural gas. This would simply make the natural gas supply even richer in H2.
This would use and preserve the natural gas distribution system and slowly convert some or all of it (slowly) to H2.
Interested in hearing more about how this would not work, OR how it could work for a cleaner energy future.
Regards to all, napaeric@sbcglobal.net

Charles Eddy
February 3, 2012

Nick's comment is on the money. Until we have a major breakthrough on storage, and a much more sophisticated grid, "storage" for utility-scale renewables will be gas fired turbines for off-hour (no sun, no wind) base load and peaking. In setting rates, the cost of constructing and operating the additional gas turbine plants will have to be considered part of the cost of renewables.

Nick Cook
February 3, 2012

I've just scanned this article and can't find any mention of energy storage, utility scale or otherwise.

If we are going to adopt RE technologies at utility scale we are going to need something to compensate for their intermittency, which is either going to have to be conventional fast/medium response (and poor efficiency) backing generation or utility scale energy storage. Either that or, from evidence so far, we will need to install capacity very many times the base load, you can't time shift full utility load by days.

Don't get me wrong, I'm all in favour of RE and I believe it is viable, that's why I'm researching an energy storage/energy infrastructure that could deliver this scale of energy storage, which in the case of the UK would be in the multi TWh region, in fact according to Andy Boston (Technical Head, Business Modelling at e-on) his estimate for the UK is about 8TWh, about one week's worth of electricity generation!. This level of storage needs a whole new approach, working on it.

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Lindsay Morris

I am an associate editor for Power Engineering magazine. I cover EPA's regulations for the power industry in detail. When it comes to renewables, I write regularly about solar and wind-related policies and technologies. I'm a native of...

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