Tulsa, OK — Utilities are putting a new focus on increasing the amount of renewable energy generation sources in their portfolio, both to provide the best service to their customers and to comply with regulations on the state and federal level. Renewable power resources have many differences from traditional fossil-based generation sources, though, and technology, as well as associated prices, is still unsettled in multiple areas.
Renewable Energy World’s sister publication, Power Engineering, discussed these issues with several executives in the power industry, including: Mario Finis, global director of hydropower for MWH Global; Michael Goggin, senior electric industry analyst at American Wind Energy Association; Ken Johnson, vice president of communications for Solar Energy Industries Association; and Bobby Hollis, vice president of renewable energy and origination at NV Energy.
PE: There has been a sharp climb in the use of renewable energy lately, and many states have instituted renewable energy portfolio standards that require a certain amount of energy to be produced by renewable energy sources. What challenges does this create for the power generation industry?
Bobby Hollis: I would definitely say there are some challenges because you’re looking at very different types of energy compared to how utilities have historically operated. We usually want something where you put the fuel in and you get the energy out, and obviously when you’re talking about renewable resources you don’t have that level of certainty. It’s a different kind of planning, and it just requires a different thought process.
You have some opportunities to take advantages of neighboring resources, but for some utilities – even with some interaction with your neighbors – you have some concerns around addressing intermittency in very isolated locations.
The intermittency impact is not one that should be completely discounted, but at the same time I think there are a lot of people rising to the challenge to find ways to integrate renewable energy into their fuel source and supplies.
Mario Finis: I think I would agree with that. The intermittency nature of some renewables is certainly an issue, and when renewables have a penetration that reaches a certain percentage, which varies depending on the particular system you’re talking about, it can have an impact on the dependability and stability of the grid and the things a utility needs to do in order to meet their service requirements.
So that is definitely an issue that needs to be addressed, and there are some measures being taken to try to deal with those issues – bulk storage has been one that has been talked about recently as a way to mitigate some of the effects of the intermittency of some of these renewables.
It’s interesting that some of the states that have adopted a renewable portfolio standard actually have a very large percentage of renewables in their generation mix already. In the Pacific Northwest, if you look at the percentage of generation that comes from renewables in some of those states, it’s already at 70, 80 or 90 percent in some cases. Putting an RPS on new generation in those states has an interesting effect in some cases where you’re not displacing what most people would think you’d be displacing, which is coal and gas. You’re actually displacing other renewables by having an RPS standard in some of these states that already have very high percentages of generation from renewable sources.
Ken Johnson: Renewable and current baseload facilities complement each other. Solar generates electricity in correlation to when demand is greatest. Utilities can utilize solar to “peak-shave” demand, occurring during a time period when electricity prices are highest. In the long run, with improved storage, which we are seeing now with utility solar, solar will have even more application. Demand often goes into the evening, and the CSP plants now have six hours of storage, which is in nearly perfect correlation with demand.
As you have higher prices for coal – or you are dealing with increased emissions costs, utilities can deploy solar at a much lower cost to the consumer and to future generations. Essentially, solar cleans the portfolio, which is going to be an important consideration under the EPA’s 111-D rules.
PE: Although hydropower is considered a clean energy, is it considered a renewable energy under the requirements for renewable portfolio standards?
Finis: It’s sort of a mixed bag, depending on the particular state. In some cases, hydro and even hydro up to certain sizes may be considered renewable sources, but then hydro above certain sizes would not be considered a renewable in terms of meeting the definition of renewable for the RPS. You are correct in that it is certainly a clean, sustainable energy source, but it doesn’t always meet the policy or regulatory definition of renewable in the sense of meeting the renewable portfolio standard.
Hollis: Here in Nevada we have a 30-MW limit, so hydro counts if it’s below 30 MW. We’re the host to the Hoover dam and we don’t count any of that allocation in the amount of energy we could use in the renewable portfolio standard. I think what you’re recognizing there is the policy objective behind the RPS – it really is about developing new, sustainable technologies and primarily new generation sources. In our state, I can absolutely echo the rationale since you could easily swallow up the standard and not do a whole lot of new construction or development if you start counting generators that have been around for decades.
PE: How do renewable energy sources work with the current fossil fuel baseload used by a lot of utilities?
Hollis: I think the point was already made, and it’s a great point, that there’s a notion that the replaced resources will always be fossil fuels, and that won’t always be true. Quite frankly, you do end up leaning quite a bit on those fossil resources – especially those quick peaking units – to follow those intermittent resources. As you get more solar, as you get more penetration, as you get more wind, you must rely on something when the fuel source (the wind or the sun) is interrupted. That’s not going to be a coal resource, that’s going to be natural gas. Fortunately, our country is in a resurgence of the natural gas industry that’s really benefiting customers from a cost perspective, but it adds some volatility as well. So you’re buying some amount of gas, and you’re hopefully not using it because you’re going to lean on those renewable resources, but as those renewable resources are displaced throughout the day, whether it’s cloud cover or decreased wind, you’re going to have to rely on those peaking units, which are not the most efficient generators. You’re not going to get the best output out of them, but you’re going to have to use them to assure that customers have reliable service. They always have to be there to back that up until we have storage technology that’s commercially viable and reasonable from a customer perspective, a cost perspective. It’s going to be hard to see where those conventional peaking plants are not going to play a very important role for a long time to come.
Finis: I think that’s exactly right, and that’s one of the things I think a lot of the general public doesn’t recognize is that the utilities have to be prepared to supplement or replace a lot of renewable energy sources on pretty much on a moment’s notice if the wind should stop blowing or a cloud cover comes in or whatever the case may be. You do have to firm up that energy with something that is dispatchable.
In some cases, hydropower can be used as a dispatchable resource because of the somewhat predictable nature of river flows. Hydro can help mitigate that somewhat, and so I think that’s an important element, to realize the fossil fuel fleet does need to be maintained, or the baseload fleet, which includes some hydro, does need to be in play to help firm up the intermittent renewables.
Michael Goggin: Wind energy directly displaces on a 1:1 basis electricity that would have come from the most expensive power plant that is currently operating, which is almost always the least efficient fossil-fired power plant. Wind energy displaces more expensive and polluting forms of energy because wind energy has no fuel cost, and this is a win-win for consumers and the environment. Wind energy’s variability is nothing new for grid operators, who have always accommodated large fluctuations in electricity demand as well as the unexpected failures of conventional power plants. Those other supply and demand changes are still many times larger and more costly to accommodate than the gradual and predictable changes in wind output. States like Iowa and South Dakota now reliably produce more than 20 percent of their electricity from wind, and another seven states obtain more than 10 percent of their electricity from wind. At times wind energy has reliably provided more than 60 percent of the electricity on the main Colorado utility system and more than 35 percent on the main Texas system.
PE: Much of the discussion dealing with wind power right now relates to finding more efficient and effective ways to transmit power from wind power projects, which tend to be in remote areas, and places with high energy loads that can use the electricity. How do you think this is progressing, and what can be done to more effectively transmit power produced by wind?
Goggin: High-voltage transmission has been used to cost-effectively and efficiently transport all types of energy for more than a century. A large share of our best wind energy resources are currently left untapped because our power system is obsolete and congested, and the solution is getting policies in place that allow private investors to build needed transmission upgrades. Texas and much of the Midwest have established themselves as leaders in that area. Texas is wrapping up a major grid upgrade that will allow the state to nearly double its use of wind energy, while large parts of the Great Plains and Midwest are making progress towards grid upgrades that will similarly allow them to more than double their wind energy use.
PE: The majority of solar generation in the U.S. is currently provided by photovoltaic technology, but there are several concentrating solar power projects in progress – a technology that the U.S. Energy Department’s Loan Program Office has called game-changing. Do you agree with this assessment, and what other technologies are on the horizon that could help more effectively use renewable generation sources?
Hollis: This is all the brave new world when you talk about solar technologies. For example, five to ten years ago, everyone really had their bets on CSP technology, with or without storage, as being a “game changer” from the perspective of how you would integrate renewables into your portfolio. The primary reason for that is because it’s more dispatchable, and the storage gives you the ability to ride through the intermittency. The real game-changer that happened was price; so as solar PV panels became price competitive with every other technology and gets closer to some of the conventional generation prices when you look at peak hour pricing, it’s hard to see where the CSP with its current pricing competes.
That being said, as you start seeing these really large scale PV systems come online at 200 to 300 MWs and the related intermittency issues and how they are impacting the systems, you start seeing people refocus on, “How do you value the ability to ride through the intermittency and the ability to actually have a dispatchable resource?” While it’s still difficult to quantify, and it’s still a pretty wide gap with solar PV, the intermittency and the cost attributes of CSP technology will become more important to explore. Ultimately, it’s really a question of trying to get that price gap closed in so that CSP benefits can be more effectively realized.
Johnson: CSP provides a large-scale solar solution: firm, dispatchable peak power. Here, you have a 100 percent reliable source for peak generation. We are beginning to tap into the greatest energy resource in this country, which is solar energy. What you see in CSP is the ability to use thermal storage in order to extend generation into the evening hours. The greatest technology innovation going forward is going to be in storage, both thermal as well as electric. Storage will allow you to use solar or wind 24/7, 365 days a year.
PE: There has been more of a focus lately on energy storage, such as the molten salt storage in the new solar power plants. What technologies do you think look most promising for storing energy, and how would they benefit the effective use of renewable energy?
Johnson: There is thermal storage, there is battery storage, there are new innovations in batteries – all of these are very promising. Ultimately, what will be most important in storage will be the ability to manufacture in large scale and drive down the cost. We’re in a very competitive environment, and we look forward to seeing what technologies emerge.
Hollis: I think the molten salt storage solution at the utility scale appears to have the most promise. It’s still the one technology people are focused on. It’s the one most in the industry believe can probably have the cost-effectiveness at some point in the near future.
On the other hand, as you look at smaller systems and even at the distributed generation level, there is a lot of focus on just true battery storage. Whether it’s for a 5-kW system or for a 5-MW system, there’s a lot of really promising development taking place on the battery front. The real issue we’ve seen there when we explore those technologies is getting them to a place where the battery life is much closer to the life of the generating asset, and getting to a point where people are able to figure out exactly what you do with the battery when it reaches the end of its service life. It’s very similar to the hybrid vehicle technologies. At the end of the life, what happens to the 5-MW battery that happens to be adjoined to a plant? How do you safely dispose of it and are we okay with possibly disposing of four or five batteries over the generator’s life?
There’s a lot of promise there, but there are a lot of questions that still have to be answered. From a utility perspective, when you’re looking at doing these types of things, you’re looking at them in ways that are going to benefit customers. When you have an asset that is only going to have a six-year life, that doesn’t necessarily look very favorable from either a utility perspective or a regulator’s perspective. But in the same way I see this as an issue, everyone on the other side of the table in the development community and on the battery side recognizes that as well and they are focused on getting that to a longer life asset and getting that to a place where it’s much more viable.
Finis: I think that’s exactly correct. There are a couple of points just to reiterate there – one is the scale issue. Certainly batteries and flywheels and a lot of these other emerging technologies, they just don’t have the utility scale that is actually necessary to make some of these things feasible from a price standpoint. So I think with batteries, the biggest installation is somewhere along 35 or 36 MW, and it has only got a couple of hours of storage. So those issues, while they’re certainly improving day to day, they’re certainly large issues at doing this at any kind of reasonable scale.
There are some utility-scale storage technologies out there. The largest proven one is pumped storage hydro. We are looking at going a bit more modular on pumped storage to make it more economical on a smaller scale. That’s something that’s being investigated that I think has some promise to help integrate some of the intermittent renewables. The other storage technology that’s typically mentioned is compressed air energy storage, and that’s not quite at the scale of pumped hydro. It goes up to a couple of hundred megawatts. Unfortunately, it’s still somewhat untried technology. There are a couple of significant sized compressed air energy storage projects in the world, but the other downside of those projects you need fossil fuel to run the reciprocal engines to compress the air, so it’s not necessarily a completely clean or carbon-free technology.
Goggin: While energy storage is an exciting new source of power system flexibility, it is important to keep in mind that large amounts of wind energy are being reliably integrated without a need to add energy storage. It is typically far lower cost to use the vast amounts of flexibility that have been built into the power system for more than a century to accommodate large fluctuations in electricity demand and abrupt failures of conventional power plants. The gradual and predictable changes in wind energy output only add a small amount of incremental variability to total power system variability, which can be readily accommodated using existing sources of flexibility.
PE: Do you think incentives such as the Production Tax Credit are necessary to keep momentum in the current growth in renewable energy sources?
Johnson: As a country, we have provided incentives for all energy sources. Since 1917, we have been incentivizing the gas industry; since the 1930s, the coal industry. It wasn’t until 2005 that there were any incentives for solar, and even then it was only a two-year tax credit. You can’t build anything with a two-year tax credit. Getting it extended to 2016 has provided some stability for the industry to scale up and lower costs. Ultimately, it’s important that we treat all technologies in the same way. If we maintain support for the oil and gas industries, it’s critical that we maintain support for the newly emerging technologies such as solar and wind.
Goggin: The Production Tax Credit has proven to be a very successful policy. In 2012 alone, the PTC helped to drive $25 billion of private investment in the economy, returning more than enough in additional federal, state, and local tax revenue to offset the value of the tax credit. Further evidence of the PTC’s importance is what happened when the credit was allowed to briefly expire at the end of 2012. For the first six months of 2013 there was very little activity in the wind industry, as companies were ramping up to respond to the late extension of the PTC. In recent months the wind industry has signed a record number of power purchase agreements with utilities, because with the lower cost of wind energy combined with the PTC, wind contracts are a great deal for utilities and their consumers. It is also worth pointing out that all energy sources receive incentives and other government support, and that the cumulative support for fossil and nuclear sources is many times larger than that given to all renewable energy sources.
PE: What sort of changes do you predict occurring in the renewable energy sector over the next five to 10 or even 20 years?
Goggin: Wind energy will hopefully continue to experience the major cost declines seen over the last several years. Larger and taller wind turbines, improved technology, economies of scale, and the creation of a domestic manufacturing industry have reduced wind energy costs by around 40 percent over the last four years, and these trends continue.
Finis: There are certainly things that are going to be happening in the industry. I think Bobby hinted to that earlier as to the advances in technology are certainly going to continue, and I think as prices for photovoltaic solar come down, I think we’re going to see greater adoption of some of the renewables just from a cost perspective, not necessarily with the incentives that are out there today that are needed to make these things work. I think they’re going to become more competitive strictly on a price basis. I think also as some of this storage technology is developed further, we’re also going to see more and better implementation of renewables as we can integrate those into our systems better and deal with some of the intermittency and variability that some of these technologies have.
I think we’re also seeing a bit of a change on the regulatory front, and if anyone is going to predict where that’s going, I’d love to hear it. The whole issue of price on carbon cap and trade or whatever direction we may go in that area may also drive additional development of renewables. And also I think we’re also starting to see some acknowledgement of perhaps some of the issues on the technologies that have been adopted recently. Again going back to hydro, it’s been a very mature technology, it’s been around a long time, we understand a lot of the environmental impacts and have been dealing with fisheries and other issues for a long time. I think we’re just starting to see recognition for some of the impacts wind and solar may be having, things that may have not been fully comprehended until recently. I think there has been discussion on some of the impacts on eagles and perhaps on bats that perhaps were not fully understood prior to development of some of these sites, so a better understanding of environmental impacts is also going to drive some of the hopefully some better and more environmentally friendly development of some of the renewables.
Johnson: I think the biggest changes are going to be on the policy front. Technology will continue to innovate and improve, but ultimately the biggest innovations will be to ensure access and allow people to make their own decisions about their energy sources, as well as to make sure the grid is modernized and can handle large volumes of solar, including through smart technologies and storage. Those developments will be made possible by innovations in policy, both federal and at the state level.
Hollis: On the policy side, you’re actually seeing some confluence, which is rare, from all political spectrums around the notion of taking advantage of the best generation resources wherever they may be situated for the benefit of the country, not necessarily just a state. So you’re seeing a lot more effort to really make sure if you’ve got one of the best wind states in the country or one of the best solar states in the country, you’re not limited by the fact you may only have two million people in the state. You’re seeing the transmission lines being approved by the federal government – they’re still taking place, they’re slower than they have been before because load dropped off significantly throughout the country during the recession. Ultimately, you are seeing an acknowledgment and recognition, whether it’s a Republican-controlled state or a Democrat-controlled state, that if you’re really looking to develop these resources for the benefit of the state economically for job creation or capital development, you really have to open up that market opportunity past your borders. If you’re Nevada or Wyoming or Idaho, it’s a pretty limited pool of energy supply purchasers that you’ve got out there. But if you look to your borders, in our case, if we look to California, or we look Oregon to the north, we see opportunities there. I think the policy, the technology and the challenges are all starting to converge in a way where people are saying we can address them, and we can address them in ways that will benefit our customers and our companies.