Business models, not technology, holding back the energy shift?
by Allen Best
Speakers at the opening plenary of the IEEE’s Power and Energy Society international conference in Denver on Monday talked about big, sweeping changes now underway in how we produce, distribute, and consume electricity.
Solar and wind soon will be competitive with fossil fuels without the need for subsidies. They’re being integrated into existing systems at volumes thought impossible a decade ago.
They talked about game changers, return on investment, and the need for policies that Dan Arvizu, director of the National Renewable Energy Laboratory, says are needed to spur capital markets to invest in new technology and infrastructure.
It’s clear, said Arvizu, that the resources are available to create electricity while severely reducing greenhouse gas emissions. But new business models are needed to make it happen.
“We’re in the midst of a massive transformation, not just domestically but globally,” he said in opening the plenary. In 2013, he explained, the amount of new generating sources from alternative energy surpassed new generation from conventional fossil fuels. Within a decade, he predicted, three-quarters of all new energy coming on line will be from renewables, mostly wind and solar.
In the United States, 13 percent of electricity comes from renewable sources, about half hydro and the other half wind, solar, and other renewables.
Arvizu also predicted disruptive technologies on multiple fronts. Solar today has 200 gigawatts of capacity globally. About one-tenth of that is in the United States. “We’re now looking at power-purchase agreements globally that are less than 5 cents a kilowatt-hour,” he said. That’s competitive with and in some cases lower than electricity from coal and natural gas.
Photovoltaic, he said, will not provide the technology for the big jump, however. “It is not the technology that will get us from gigawatt scale to terawatt scale.”
Instead, he explained high-efficiency thin films that will boost commercial module efficiency to 16 percent. Tandem cells have the potential to improve efficiency from 10 percent to over 30 percent.
“Very shortly, these technologies will be available in the marketplace without any subsidies (needed),” he said.
Integrating renewables into the electrical system will require changes, but not necessarily giant infrastructure investment. He cited an NREL study that found the grid in the Western states can absorb up to 35 percent renewable energy. “This can be done, and it can be done now,” he said. “It requires we do some things differently. It requires that we do it in a different way. But it can be done.”
Wind technologies, he went on to say, are now delivering electricity at 3 cents per kilowatt hour “and progress continues to be made.” More is coming, he added. “There are lots and lots of technology opportunities in this space.”
Arvizu also talked about the energy systems integration in a new major laboratory at the NREL campus in Golden as well as 16 other national labs. The national programs are spending roughly $200 million in grid modernization.
The labs seek to fundamentally redefine how renewables and demand-side management strategies are integrated into homes and businesses, a shift from the centralized power plants of the 20th century that sought to simply—and wastefully—always have power whenever anybody turned on a switch. At the NREL campus, for example, scientists are studying how electric cars provide home-based battery storage.
Local storage is, in some ways, a game changer, in Arvizu’s view. And that was also the view Mark McGranaghan, the vice president of power delivery and utilization for the Electric Power Research Institute, the research and development arm of the utility industry. But he said utilities have to be in the middle of the storage.
But like Arvizu, he also sees the maturing of solar technology such that subsidies are no longer needed.
David Sun, senior fellow and chief scientist at Alstom Grid, emphasized the fundamental shift to engage consumers into choices. “I am no longer a passive consumer of kilowatt hours. I have many choices,” he said. “I am not speaking of a centralized market. I am talking about a free market place where we have choices.”
Electrical providers going forward can’t just be suppliers but must find ways to provide “valued services,” he said.
The next panel had representatives of Colorado’s two largest electrical providers. Xcel Energy delivers power to roughly 60 percent of Colorado customers through its subsidiary, Public Service Co. of Colorado, and it has gained a name for itself as the nation’s largest developer of wind energy, at least partly the result of voter and legislative mandates in Colorado beginning in 2004, as well as those in other states.
A decade later, the results have been almost shocking. On Nov. 1 last year, at midnight, 61.1 percent of all electricity delivered by the Public Service Co. of Colorado came from wind power, reported Teresa Mogensen, senior vice president of transmission for Xcel. Admittedly, she added, it was a time of low demand.
But forecasting is a large part of being able to add on substantial amounts of renewables, she said, “so we continue to grow in capability there.”
Integration of renewables can be done, but “it just takes time.”
But Mogensen also emphasized the need for cost recovery of investments. There is much misunderstanding and many misconceptions about what it takes to drive change, she said and described communication of that as a major challenge.
The most skeptical speaker in talking about changes was Joel Bladow, senior vice president of transmission for Tri-State Generation & Transmission Association. Tri-State is the wholesale provider for 44 cooperatives in a four-state region. The service territory is as large as all of California, Bladow said, but with one-10th the load.
That means Tri-State’s 1.5 million customers are widely dispersed, with just four meters per mile, on average, unlike the more densely and hence economically serviced cities and suburbs.
While Tri-State has added substantial amounts of wind and solar generation to its portfolio in the last 10 years, Bladow struck a cautious and conservative tone.
“At the end of the day, affordability and reliability is what we focus on,” he said.
He also cautioned about studies with sweeping and optimistic results. A lot of times, you need to go to the appendixes to study the assumptions upon which those projections are based. And it comes down to money. “One thing I have learned over my career is that there were a lot of great ideas that are not economical.” Some great ideas of just 10 to 15 years ago have disappeared, he added.
As for developing future renewables, Bladow talked about the difficulty of siting transmission lines. He used the example of Colorado’s San Luis Valley, where Tri-State and Xcel proposed to partner on development of the vast solar potential.
To get it to consumers, the utilities proposed a high-voltage transmission line across the Sangre de Cristo Range, using a corridor over La Veta Pass and the ranch of billionaire hedge-fund manager Louis Bacon. Bacon successfully rebuffed the transmission line, and the defeat obviously still stings. “And the governor did not issue one public statement in support of building that transmission,” he said. “Ultimately, it died.”
Bladow did not identify which governor he was talking about. The controversy overlapped the administrations of Bill Ritter and John Hickenlooper.
In response to a question, Arvizu shifted the discussion from technology to policy.
If it’s really 80 percent carbon education that we need, he said, then it’s not just a matter of technology. “It’s now understood that we have available resources that are abundant, and we can do a lot more.”
But the right policies are needed to stimulate the private market to make changes, he added. He did not identify the policies he thinks are needed.
He called the renewable portfolio stand and feed-in tariffs “blunt tools” that have been effective in creating markets, but are not the policy tools “that we need to get us to the objectives.… Ultimately, those policy tools will need to change.”
“The capital markets must be the ones making the trillion dollar investments that are required for transformation over the next 20 years. The capital markets will need to be engaged.”
Was Joel Bladow wrong in his caution and Dan Arvizu right in his optimism? We’ll know in another decade.
Note: this story was amended to reflect that Joel Bladow did not identify a particular governor who had not made a public statement regarding the transmission line over La Veta Pass.