Published on August 13th, 2019 | by Steve Hanley0
Power To The People — How Renewables & Batteries Are Reshaping The Utility Industry
August 13th, 2019 by Steve Hanley
Electricity is the foundation of modern society. It powers our lights, televisions, computers, and cell phones. It keeps our beer cold, whisks us to the top of 100-story high buildings, and keeps our surroundings comfortable on hot days. It powers the pumps that bring us fresh water and carry our waste products away.
For over a century, much of our electricity has been generated by burning fossil fuels to make steam with no regard for the damage the resulting emissions might do to our environment. The utility industry saw its mission as providing abundant supplies of electricity wherever and whenever it was needed.
Because the demand for electricity varies from from hour to hour, day to day, and season to season, utility companies design their capacity to meet every conceivable scenario — 24-hour a day baseload generating facilities, medium duty units that ramp up during the day, and short term peaker plants that run only a few hours to meet the need when demand for electricity is highest.
The utility industry in most places is a regulated monopoly. It really wouldn’t do to have three or four utilities vying for business in the same area. Imagine 4 different sets of poles and wires crisscrossing cities and suburban landscape. With a guaranteed rate of return on investment, utilities have had every incentive to build more generating capacity but little incentive to build less.
Renewables Arrive On The Scene
20 years ago, people started realizing that it was possible to make electricity from sunlight and from wind. At first, those systems were prohibitively expensive, but costs have dropped dramatically over time. Today, electricity from wind and solar often costs much less than electricity from coal, gas, or nuclear facilities.
But there is a problem. Conventional generating stations can always burn more coal or gas, but there is no way to make the sun shine or the wind blow on demand. Heaven forfend that someone somewhere should ever flip a switch and nothing happened! And so civilization has continued to simply build more and more traditional generating stations.
We are now realizing — 50 years too late — that burning stuff to make electricity and run all our vehicles is making our planet sick, to the point where one day soon it may be unable to support life as we know it. But how to address that situation while continuing to insure we have all the electricity we need when we need it?
Storage To The Rescue
The answer is energy storage, technology that allow us to make electricity now and save it for use later. There are many ways of doing this. One of the oldest is pumped hydro — use electricity to pump water uphill now then let that same water flow downhill to spin turbines later. Compressed air storage is another alternative. But the simplest and easiest to design and build is large scale battery storage.
Not many years ago, batteries were expensive. “The lack of cheap and readily available energy storage has been one of the impediments to wider adoption of renewables,” Ravi Manghani, director for energy storage at consulting firm Wood Mackenzie, tells the Wall Street Journal. But prices have been dropping rapidly in the past 3 years — up to 40% according to Manghani.
The Wall Street Journal says, “A global wave of investment in high-capacity batteries is poised to transform the market for renewable energy in coming years, making it more practical and affordable to store wind and solar power and deploy it when needed.”
While economic considerations are important, battery installations have other advantages. Permitting and environmental impact statements are the bane of nuclear and fossil fuel plants. Even when approval is granted, construction takes years or even decades. The permitting process for battery installations is much shorter and, once approved, they can be installed in a matter of months.
Mark Jacobson, professor of civil and environmental engineering and director of the Atmosphere and Energy program at Stanford, tells CleanTechnica, “Utilities and companies are buying batteries, not only because their costs have come down, but also because their ramp rates and reliability are much faster than are those of natural gas or other forms of peaking power. In addition, they can be installed most anywhere and much faster than can natural gas turbines.”
The Peak Demand Conundrum
In an article entitled “Utilities are starting to invest in big batteries instead of building new power plants” published in February, GreenBiz said, “Based on our own experience tracking lithium-ion battery costs, we see the potential for these batteries to be deployed at a far larger scale and disrupt the energy business. (Emphasis added.) When we were given about one year to conduct a study on the benefits and costs of energy storage in North Carolina, keeping up with the pace of technological advances and increasing affordability was a struggle.
“Projected battery costs changed so significantly from the beginning to the end of our project that we found ourselves rushing at the end to update our analysis. Once utilities easily can take advantage of these huge batteries, they will not need as much new power-generation capacity to meet peak demand.”
The upshot of GreenBiz’ analysis was that using current costs today, in North Carolina battery storage is a bit too expensive to compete with building a new natural gas peaker plant. But when the modeling switched to projected 2030 battery prices, energy storage proved to be the more cost-effective option.
Bear in mind that cost projections often lag behind actual market performance. That price parity could actually occur 2-4 years earlier than expected. Since a new gas peaker plant would have an expected service life of at least 30 years, “If utilities miscalculate and spend billions on power plants they won’t need instead of investing in energy storage, their customers could pay more than they should to keep the lights through the middle of this century,” GreenBiz says.
The 5% Problem
GreenBiz draws an analogy to a family purchasing a 14-passenger van to drive all year round in order to accommodate the relatives who visit once a year for 3 days. Building peaker plants to meet that extra 5% of demand during the few days a year when it is needed is very expensive. And battery installations aren’t free even if the price of batteries drops significantly.
A new report entitled The National Potential for Load Flexibility published by the Brattle Group offers an alternative — managing the load on the utility grid using modern technology. The report suggests the United States could shave up to 20% off peak electricity needs by 2030.
As after viewing the report, Vox said, “Already, there is a healthy US market for load flexibility. It mostly operates through something called demand response or DR. Dozens or hundreds of loads (power-consuming appliances or buildings) can be linked together into what is, effectively, a single aggregate unit. When a peak in demand arrives, instead of dispatching a power plant, grid operators can dispatch an aggregated unit of demand reduction, “shaving” the peak and reducing the amount of expensive peak power that must be produced.”
But Wait, There’s More
All told, the Brattle report says working smarter not harder could save utility companies 198 GW of electricity per year — 20% of current US supply — by 2030. How is that possible? Demand response strategies already account for about 60 GW. DR could be tweaked to find another 16 GW in avoided demand.
Developing new load flexibility programs and taking advantage of new value streams could add another 40 GW, bringing the total to 115 GW. What Brattle calls “market transformation” could add another 83 GW, bringing the total to 198 GW. And what is this magical “market transformation?”
Not spending money is just as important as reducing expenditures. Utilities can save a ton of money by not overbuilding generating capacity, not buying expensive power from peaker plants, and avoiding peak related transmission and distribution upgrades. “You’ll notice that all these benefits are things load flexibility allows utilities not to do. It’s all savings,” Vox points out.
The utility industry is really a dinosaur, ripe for disruption. New thinking could help keep the lights on while reducing the need for new generating capacity. Electric vehicles are a good example. Smart chargers can be programmed to take advantage of lower rates during off peak hours but demand response technology could also charge the batteries of electric cars when there is an abundance of renewable energy, limiting the amount that is curtailed.
Electric cars could have another impact on the grid. If V2G systems become common, batteries in electric cars could be used to send electricity back to the grid in much the same way that Green Mountain Power is networking Tesla Powerwall batteries in a virtual battery for its service area. Programmable air conditioning equipment and water heating could contribute significantly to effective demand response programs.
In other words, the old model is broken and it is time for some creative thinking. Granting utility companies monopoly status has many social benefits but a lack of competition tends to short circuit innovation. Some utilities, like Green Mountain Power, are rushing into the future while others are looking longingly at the past. Ultimately, the combination of lower costs and avoided costs will lead to an abundance of zero and low emissions electricity for us all regardless of politics, past practices, or ideology.