Despite the Environmental Protection Agency’s announcement that the Clean Power Plan is being repealed, the attractive cost of renewables and improvements in battery storage technology mean that wind- and solar-generated power are here to stay.
Even though natural gas remains the most economical source to fuel power generation, many utilities across the U.S. are viewing wind and solar as increasingly competitive generation options, according to survey results published in Black & Veatch’s 2017 Strategic Directions: Electric Industry Report.
It was only a few years ago that electric utilities were uncertain about renewables. Concern was high over how these options could potentially disrupt and change the industry, and as a result, utilities have been slow to embrace them.
But today, as those sources become more financially viable, utilities are gaining a better understanding of their potential, and are making plans to make wind and solar power sources a bigger part of their energy mix.
A Greater Acceptance (and Understanding)
If you ask the early adopters and environmental advocates, electric utilities now “get it.” Rather than viewing these resources as intermittent, and thus unreliable, sources, they now believe they can harness this distributed supply and with it, improve system flexibility and resilience.
Global trends of decarbonization, decentralization and electrification are the big reasons for this change. A majority of utilities still put reliability at the top of their priority list — before cost and environmental sustainability — when considering which types of generation to add to their systems. But while renewables are often seen as the environmentally-driven choice, their greatly improved economics can make them a low-cost generation source for many utilities.
Aided by energy storage and advanced distribution platforms, past skepticism has turned to cautious optimism, and a growing number of utilities now believe wind and solar can become a real asset. According to the survey, 44 percent of electric industry leaders indicate they are investing in solar PV, while 43 percent are putting money into wind power, with plans to add these sources to their systems within the next five years. (Natural gas combined cycle generation came in third at 34 percent.)
This marks the first time in this annual survey that solar PV has appeared at the top. While not surprising, this is a big turning point for the electric industry. Further, utilities are also counting on renewables to help with environmental compliance, with 61 percent pointing to renewable energy as their biggest investment over the next five years.
Moving in a New Direction
But all this positive change has one sticking point: Energy storage and having the capability to save the power for when it’s needed most.
While energy storage technology is improving and interest is escalating, storage is still not at the ideal level. More than half of survey respondents view the use of energy storage as “very important” or “important” to their operation, further embracing solar PV. More than 45 percent of respondents said energy storage is “on their road map,” while 14.2 percent are already developing pilot projects to do this. Still, 27.8 percent continue to have no plans for energy storage whatsoever.
One can also say that the reason for all this movement is not so much a change in attitude or economics, but simply because they are being forced to do it whether they like it or not.
Soon, utilities are expected to either proactively embrace the shift away from the traditional generation or change because regulatory mandates push them into a new direction. The state of Hawaii, for example, has already written into law that 100 percent of its energy supply will have to come from renewables by 2050. And California is not far behind as the state grapples with that decision, which many believe is inevitable given their progressive and environmental-heavy legislative leanings.
Others are being told to create a new market mechanism. New York State’s Reforming the Energy Vision is moving utilities to a more transactive open platform to integrate, trade and aggregate supply from any legitimate source, even if it comes from tiny house rooftops or private, commercially-owned microgrids that were once considered off limits to the greater population.
Renewables Present New Opportunities
Moving in this direction also provides tremendous opportunities for growth. Utilities are already facing the burden of decreasing load demands, which are unlikely to return to the levels of years past. That’s putting pressure on and creating more challenges for the business side of the operation. But new opportunities exist in the electrification of transportation and other sectors of the economy, such as farming and commercial.
As renewables and distributed energy resources proliferate and become part of the common energy ecosystem, the electric industry will continue to evolve to produce new business models that help define the cost benefits. We will likely see more decisions having to be made around the ownership and maintenance of assets, and whether or not a hybrid model should be considered, along with other co-development arrangements.
Jeremy Klingel (left) is Senior Managing Director for Black & Veatch Management Consulting, where he is responsible for developing and delivering the market strategy regarding end-to-end grid-related initiatives for electric utilities. Klingel has led over two dozen smart grid development projects, driving the operational roadmap behind advanced distribution management and end-user experience.
Ryan Pletka is the Associate Vice President for Growth and Innovation at Black & Veatch. He is a founding member of Black & Veatch’s Growth Accelerator team, whose mission is to drive rapid, sustainable growth for the company. Pletka’s responsibilities include identifying new trends, evaluating emerging technologies, developing new business models, and establishing partnerships with internal and external entrepreneurs.
Lead image credit: CC0 Creative Commons | Pixabay