POWER January 2017 - 10

SPEAKING OF POWER
producers are committed to adding more
clean energy not just to comply with regulatory
mandates-customer demand and
cost are also powerful drivers.
The DOE's " Revolution Now: Update
2016 " report notes that decades of investments
by the federal government and
industry have contributed to significant
cost reductions in renewable generation.
From 2008 to 2015, the cost of land-based
wind power dropped 41%, distributed solar
photovoltaic (PV) dropped 54%, utility-scale
PV dropped 64%, and modeled
battery costs fell 73%. The report adds
that over two-thirds of all new U.S. capacity
in 2015 came from wind and solar PV,
with wind accounting for 41% of all new
capacity.
Given those numbers, short construction
timeframes, and low load growth, it's
no surprise that the Energy Information
Administration (EIA) projected in December
that " U.S. wind power capacity is expected
to increase by 11% next year, while
utility-scale solar power capacity is set to
grow by 27%. "
Beyond new solar and wind capacity of
various scales, natural gas is still favored
as the fuel for dispatchable generation, for
several reasons (Figure 4). Gas, at least in
North America, remains relatively cheap;
prime mover choices run from large to
small-enabling right-sized capacity additions
closer to load (something that's
becoming increasingly important in areas
with low to no demand growth); adding
capacity or multiple small units is relatively
easy; and new gas-fired turbine generators
and engines are designed to cycle and
ramp with greater flexibility than other
thermal technologies-a capability that
will continue to be highly attractive.
In addition to those attributes, gas
plants use familiar, reliable technology.
Though nuclear power can say the same,
ballooning timeframes and budgets for
projects around the world are making new
conventional nuclear builds in developed
nations increasingly uncompetitive-even
with government loan guarantees and other
sweeteners. Small modular reactors are
finally making their way through the new
technology gauntlet and could provide a
new model for the industry, but they're
still a long way from being familiar, reliable
technology.
Meanwhile, whether it's deployed via
electric vehicle batteries, facility-sited or
grid-scale batteries, or the more familiar
pumped-hydro and compressed-air, storage
is becoming a routine " utility player, "
where only a couple of years ago it was
seen as untested and uneconomic. Legislative
mandates are part of the story.
California is the leader here, with, most
recently, a bill passed in 2016 requiring
the state's investor-owned utilities to obtain
1,825 MW of storage by 2020 (when
added to the 2013 mandate); however,
NREL reports that more than 10 states
have at least introduced legislation in
support of energy storage. Deployment of
4. Coal-country gas plant. Cane Run Generating Station Unit 7 was profiled as a gas
Top Plant in our September 2016 issue and is the first combined cycle plant in Kentucky, where
it provides clean, inexpensive electricity for a traditionally coal-dependent region. Courtesy: Louisville
Gas and Electric Co. and Kentucky Utilities
storage is uneven, as is true of most power
technologies, but storage is no longer a
novelty. Regardless of federal or state policies,
generators and their customers are
likely to continue developing use cases
based on some combination of economics,
convenience, and reliability.
Fuel Prices Still Matter
The fuel for renewable generation is free,
but that alone hasn't usually made wind
and solar the most economic choice.
However, we're now at the point where,
as noted above, lower costs (that are increasingly
competitive with traditional
generation, even without subsidies) and
shorter construction times can make these
renewables an easier choice. That's especially
true in countries and regions where
other fuels are expensive or environmental
concerns dominate.
As for dispatchable generation fuels, in
recent years, the U.S. has come to take low
natural gas prices for granted, but those
prices are rising. The EIA said in December
that, " Growing domestic natural gas
consumption, along with higher pipeline
exports to Mexico and liquefied natural
gas exports, contribute to the Henry Hub
natural gas spot price rising from an average
of $2.49 per million British thermal
units (MMBtu) in 2016 to $3.27/MMBtu in
2017. " That's one reason the agency projects
that coal generation will exceed gasfired
generation this winter. Nevertheless,
the EIA's latest short-term energy forecast
projects that, although " more electricity is
expected to be generated from coal than
natural gas this winter, the share of total
annual generation from natural gas is forecast
to exceed coal during 2016 and 2017. "
Another reason coal could maintain
its traditional edge during the heating
months: continued challenges in supplying
gas to generators. As this month's Legal &
Regulatory column notes, recent efforts
to build and finance new interstate gas
supply pipelines are running into formidable
roadblocks. Despite the desire most
Americans share with the next president
to see infrastructure development, energy
infrastructure remains challenging, even
when the need is clearly demonstrated.
Markets Form, Falter, and Reform
In recent decades, POWER has focused
mostly on " Business and technology for
the global generation industry, " as our
tagline says. Market issues-from wholesale
to retail market design-have generally
been beyond our purview, especially
given how much there is to attend to just
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POWER January 2017

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