The global energy sector is on the verge of a revolution. In the next 20 years, the world’s power sector will experience a radical transformation, as a variety of emerging trends shape and mold the ways in which consumers power their lives, from lighting their homes to charging to their mobile devices.
Coal Power Is Becoming a Thing of the Past
The biggest shake-up to the energy sector will arguably come from the decline of coal. As coal-fired power plants across the world enter retirement and the price of natural gas dips to historic lows, it is clear that coal prices are becoming increasingly uncompetitive. Environmental activism has also dampened the appeal of coal as an energy source, with green groups across the world teaming up with other actors in the energy sector to make the case for clean resources and renewables instead of coal. The bottom line is that coal power is quickly becoming a thing of the past.
Natural Gas Is on the Rise
Coal might be out, but natural gas is in. As changes in regulations and overall shifts in general market conditions make coal increasingly uncompetitive, natural gas will be seen as a logical choice for utility companies who want dependable capacity. Of course, there is no doubt that renewables — including solar and wind — are increasingly being seen as viable options. However, it is important to keep in mind that they are still just a small percentage of the overall energy mix. They can only generate power under very specific conditions (i.e., wind power is only viable with high wind speeds), so utility companies need to make use of renewables in conjunction with combined plants to maximize efficiency.
Renewables Achieve Grid Parity
There is a good number of staunch critics out there who charge that renewables development isn’t pragmatic because of the cost. However, the cost of renewables is dropping, and it is dropping rapidly. Over time, renewables will only become more cost competitive. All in all, the future of renewables is looking bright. Renewables have already achieved grid parity across many parts of the globe, and they’re becoming more and more capable of pricing out more traditional forms of energy. In a study analyzing global energy costs published by Lazard, it was found that solar and wind costs are competitive in comparison to traditional generation technologies — even when government subsidies are removed from the equation. Furthermore, the study found that renewables projects face less uncertainty and fewer regulatory obstacles when they are compared with clean coal plants.
Concerning renewables growth, it should be noted that wind energy, especially, is enjoying high growth rates in several markets. This largely because inexpensive wind, along with natural gas, which is also competitively priced, is driving older coal plants and nuclear plants to disuse. Moreover, as these kinds of plants age, they become even more costly, which has only allowed renewables projects to become even more cost competitive. While AEP and Exelon are asking ratepayers to support older nuclear and coal plants, analysts are confident that the price for wind will only go lower, especially as technology, particularly with regards to energy storage, continues to advance.
Utilities See the Value of Solar
It’s not just the demand for wind energy that is going up — solar is also seeing tremendous growth. As a result, many utilities companies are putting solar in their portfolios. A number of companies is opting to do this by pursuing unregulated renewables development, like off-grid solutions and small-scale development, including rooftop solar panel development.
Storage Technology Advances
As renewables expand, energy storage is becoming an increasingly pertinent topic. As companies are looking at ways to more fully integrate renewables and optimize grid distribution, storage is crucial to ensuring a stable supply and optimizing grid solution. The development of large, grid-scale batteries would be an especially key development, and it could ensure that energy harnessed from wind and solar could be stored for peak demand times. This would resolve many of the challenges associated with renewables and power storage, as currently, it is hard to align production and demand given the lag in storage technology. For example, fleets of batteries could deliver a steady source for demand response while also offering backup power supply and helping with other grid functions, like voltage control and frequency regulation. There is no doubt that energy storage is a top emerging technology.
A number of utilities is already making strides toward developing advanced grid-scale storage. For example, PG&E has successfully deployed the first customer-sited storage systems in California. Similarly, the Kauai Island Utility Cooperative in Hawaii developed a deal to buy dispatchable power from a storage facility, allowing solar power to be used to charge a 52MWh battery.
The pay-per-need approach is becoming an increasingly popular option with utilities companies. In this type of arrangement, power or capacity is purchased from an independent energy storage provider. This type of arrangement tends to be most lucrative for companies that have relatively stable and predictable power needs (in other words, companies that don’t deal with wildly fluctuating demand) or that have the necessary requisites to make deals with companies based on the quantity of energy they’ll need. These partnerships are just starting to emerge. Southern California Edison, for example, announced a partnership with Advanced Microgrid Solutions and Stem to use BTM lithium-ion batteries at several different sites. This allows grid and local distribution to be adjusted to meet demands.
Co-Buying Will Become More Common
Co-buying is also becoming a more common arrangement, in which larger utility companies also buy for groups of small and medium organizations. Eneas, a prominent figure in Scandinavian energy services and the brokerage industry, is making use of co-buying. However, mastering the art of co-buying is certainly easier said than done, as it requires forming the right partnerships with the right companies at just the right time. In doing so, a company can win at the price hedging game, ensuring that it locks into stable prices in the winter and then takes advantage of more variable prices in the summer, when prices tend to fall. This requires a good picture of the market in the short and long term, though when these deals are successful, the savings can be considerable. Read more on Eneas’ blog.