by Bob Shively, Enerdynamics President and Lead Instructor

In future years, we likely will look back on 2016 as a transformational year in the electric industry. This week and next we will examine key trends that in the coming year may move the industry toward a very different future. 

Trend #1: Markets, regulators, and utilities get real about decarbonization of the power sector

In an unprecedented switch, the last several months of 2015 showed more generation in the U.S. fueled by natural gas than coal.

            Source: www.eia.gov

With numerous coal retirements and all indicators pointing to a long period of low-priced natural gas supply, it appears this will be a permanent shift. While natural gas is not a no-carbon source of electricity, it does reduce greenhouse gas emissions by at least 50% per MWh compared to coal. Meanwhile, output of non-hydro renewable sources continues to set records in the U.S., and this too will be an ongoing trend.

           Source: www.eia.gov

In 2016, we likely will see the first new nuclear reactor go into service in 20 years as TVA’s Watts Bar Unit 2 goes online. Construction will continue on four units (two in Georgia and two in South Carolina) although it will be 2019 before they begin coming online. And despite ongoing political posturing and court filings, most states are already working with utilities and interest groups to prepare initial plans to reduce power plant greenhouse gas emissions under the Clean Power Plan rules issued in 2015 by the Environmental Protection Agency (EPA). 

A likely outcome will be many states creating multi-state carbon cap-and-trade programs like the current Regional Greenhouse Gas Initiative (RGGI) and California/Quebec program. Once there is money to be made in decarbonizing generation, we’re likely to see a new wave of innovation regardless of what happens with the current EPA rules.

Trend #2: Utilities can no longer ignore distributed resources

Distributed energy resources (DER) including distributed generation (DG), demand-side management (DSM), and distributed storage are poised for rapid growth. According to
EIA data, distributed solar output through September 2015 grew by 29% over output to that point in 2014.

General Electric estimated that in 2012 39% of new capacity additions worldwide were distributed generation (DG)[1]. Meanwhile controllable loads have become an important resource and, according to the North American Electric Reliability Corporation (NERC), make up 5% of reliability capacity in the U.S.[2] Distributed storage is also hitting the mainstream, most notably through a highly publicized announcement by Tesla but also with quieter roll-outs from other companies.

These resources will only grow as technologies become more advanced. In 2016 the cloud-connected smart home will see advances with new products rolled out by companies like Google and Apple, and others such as Microsoft and Amazon are not far behind.

While electric vehicles might be considered new demand, we include them as a resource because their ability to charge when power is most available makes them a new controllable load. In 2016, Chevy will introduce the Bolt with a 200-mile range and a $30,000 price point. Nissan will offer a new Leaf, and Tesla and other European manufacturers are expected to make additional announcements about lower-cost and longer-range vehicles. Even with low gasoline prices, government support in locations like car-heavy California will likely continue to boost EV growth. 

Given these advancements in various technologies, all utilities will need to restructure their distribution planning to assume very different usage/production patterns by customers and rates will likely need to be redesigned to give the right signals to consumers.

Next week we’ll look at two more key electricity trends to watch for in 2016, and in the weeks after we will explore trends that are driving the natural gas industry in the year ahead.

Footnotes:

[1]  Brandon Owens, The Rise of Distributed Power, available at: https://www.ge.com/sites/default/files/2014%2002%20Rise%20of%20Distributed%20Power.pdf

[2] http://www.nerc.com/pa/RAPA/ra/Reliability%20Assessments%20DL/2014LTRA_ERATTA.pdf calculated by going through each reliability council and totaling peak demand and demand response values