Future Shock Is Here For The Electric Utility Industry

This has been a tumultuous year in the electric utility industry, not so much for what has happened but what nearly happened.

Texas’ ERCOT power grid came within a few watts of overload this past summer as the thermometer climbed and Texans revved up their thermostats to cool down. “Hairy” is how one utility executive described that situation.

Similarly, California came close to blackouts but might have been saved by an appeal to consumers from California Gov. Gavin Newsom, asking for electricity use restraint. Unprecedented heat baked the state with temperatures reaching 116 degrees F in some places.

But the mood across the industry — in my own unscientific survey – is one of huge excitement, as the nation electrifies its transportation and manufacturing, tempered with real concern that expectations can’t be met. The industry is challenged and is keen to deal with five areas of future shock.

The Pressures

The entire industry is under pressure from the public, utility commissions and the federal government to reduce carbon emissions to 50 percent of 2005 levels by 2030, and to reach net zero by 2050. Across the board there is a willingness to try.

Some utilities say they’re certain they can attain those targets. Florida Power & Light President Eric Silagy told me they will meet their net-zero target by 2045.

Others aren’t so sure. Take CPS Energy, the municipal utility serving San Antonio: It has the largest commitment to solar in Texas but also is struggling to close very reliable coal generation and isn’t able do so without gas as a bridging fuel.

CPS Energy President Rudy Garza laid out the challenge this way: “As an evolving utility and industry in transition, we see natural gas as a well-established transition fuel that we can use to maintain near-term generation reliability and gives us time to develop and integrate emerging technologies, including the conversion of natural gas generation to operate on hydrogen fuel, to achieve our goals under the City of San Antonio’s Climate Action and Adaptation Plan.”

He said CPS Energy teams are working with industry leaders to evaluate new technologies in geothermal and nuclear generation, and large-scale, long-duration energy storage.

Garza’s words echo those of others in the industry. The utility is willing to change, working to change, but it can’t go faster than innovative technology is deployed.

Future Demand

Estimates vary on the growth in electricity demand, but there is general agreement, backed up by many studies, that demand could double or by 2050 — which has become a target date beyond which the future looms with too many unknowns.

It is hard to see how a doubling of demand could be met without some large measure of natural gas in the mixture.

Gas accounts for 38 percent of the nation’s generation, and coal 22 percent. Fifty percent of the generation would have to be retired while the demand is doubling. A difficult sum to square.

Yet the industry is trying.

Duane Highley, CEO of Tri-State Transmission and Generation Association, Inc., which actually covers four Western states, said, “Within this decade, Tri-State’s clean energy transition will achieve Colorado’s 80 percent greenhouse gas reduction goal as we retire coal resources and add significant wind, solar and storage. To maintain reliability and affordability, our most recent modeling showed a need for a natural gas resource at the end of the decade that helps to keep the lights on when those renewable resources are not enough to serve our members’ load.”

Highley went on to say that Tri-State “will draw heavily on clean energy, with a goal for 70 percent clean energy used in our system by 2030, but in the current market the need remains for dispatchable resources.”

Many utilities are in the same position: They are driving for more renewable power but worry about reliability and destabilizing their systems if they shed too much dispatchable power – the power which is predictable on demand supply.

Waiting For Technology

For the industry, technology is the wild card. Questions abound:

· How long will it be before hydrogen becomes a viable planning option?

· Will there be advances in carbon capture, utilization and storage which will save some of the fossil investment?

· Will battery storage improve so that days of storage in batteries is available?

· Will small modular reactors be ready, licensed and deployable in quantity soon enough to be included in plans for achieving net zero in 2050?

Clinton Vince, chair of the U.S. energy practice at Dentons, said, “Recent legislation will allow a tremendous amount of money to flow into decarbonization initiatives on both the supply side and demand side, with tax incentives for everything from renewables to carbon capture, utilization and storage to nuclear, and significant funding for new technologies.”

The Transmission Conundrum

The United States needs more transmission. That is a truism in the utility industry and in the Biden administration, which is pouring money into new transmission.

But how much is feasible?

Ideally, new lines would stretch from the windswept prairies and sunbaked deserts in the West to the high-demand areas in the East. Industry reality check: That won’t happen. Instead, there are moves to shore up the grid with short-line, new transmission and a rewiring of old connectors with higher voltage lines. More interregional transmission is recommended in a new study conducted by GE Energy for the Natural Resources Defense Council.

Michael Skelly, president of Grid United, a new Houston-based company, is working on a plan to build a line which would run about 300 miles from near Pueblo, Colorado to the Oklahoma panhandle. The project, named Three Corners Connector, would be a 520 HVDCVDC
installation. Lines like this are a way of making the grid more durable by increasing the flow of electricity between Western and Eastern grids, and ERCOT. Strengthening the grid, not remaking it. Moving dispatchable power is a form of storage, says Skelly.

Data and Power Electronics

Data is the new player in the utility space. It is playing a big role in reshaping utilities and hooking up the many new areas of utility interest – like distributed energy resources, demand side management and microgrids — and is bringing about the virtual utility.

Electricity used to flow from a generating station to consumers, whereas it now can flow both ways, and it is up to sophisticated power electronics to manage the flows.

The world’s largest engine, the 3,000 U.S. utilities, must reinvent themselves without the ability to shut down and retool. The lights must and will stay on.