5 Energy Sources, 5 Trends (pt. II)

July 12, 2016 Aaron Parker

5 Energy Sources, 5 Trends (pt. II)

The energy grid and generation mix are undergoing a significant transformation. And, by extension, so is the price of the electricity they deliver. The first article in this series surveyed the latest and sometimes greatest in traditional energy sources such as coal and natural gas. Now it’s time to shift focus to renewables.

Wind – More Boom, Not Bust

In the midst of an ongoing wave of investment and innovation, wind generation in many areas of the U.S. is now more attractive than coal and is cost competitive with natural gas. 

Converter transformer in electrical substation (transformer station) with ceramic insulators and cooling ventilation. Blue sky background, power, energy and electricity concept.The Electric Reliability Council of Texas (ERCOT), for example, is expected to add 2.5 gigawatts (GW) of wind capacity to the grid it operates in 2016, compared to only 1.1 GW of additional gas capacity. Simultaneously, a long-distance high-voltage direct-current (HVDC) power line that will connect the large wind capacity of the Great Plains to the Southeast is scheduled to begin operation in 2020. And other HVDC lines are in the planning stages.

Across the country, recently renewed federal subsidies are also spurring wind generation in both new and existing markets.

However, wind’s outlook is not without turbulence; key challenges remain. The greatest obstacle to wind as a generation source is the current grid design. In many parts of the world, electricity grids are set up to handle the flow of relatively stable power from large nuclear, hydro or coal plants. The variability of wind and its geographic limitations — i.e., states in the center of the U.S. are extremely breezy, while the coastal states are much less so — places extra pressure on peaking fossil-fuel plants and the existing transmission capacity network.

Essentially, brown power is currently needed to back up green.

To change the grid in order to incorporate the low marginal cost of wind will require expenses beyond the construction and upkeep of wind turbines and farms. 

solar panels and windmill power plantSolar – Sunny with a Chance of Flux

While solar occupies a tiny portion of the overall electricity portfolio in the U.S. — it’s the 1 percent… of the generation mix — the solar future is bright and can’t be ignored. The total output from solar last year was 38 terawatt-hours, a 20-fold increase over the amount produced in 2011. With current utility-scale costs at 11.6 cents per kilowatt-hour, solar is competitive with natural gas and coal in many regions.

The single biggest challenge to solar is the feet dragging from utilities that are reluctant to integrate large-scale and distributed solar, e.g. on rooftops or carports, onto the grid. The bottlenecks will likely be solved (or stagnated) at the state level without a defined national policy.

A Look Into the Future

In the end, electricity and energy are influenced through policy decisions as often as they are by pure market fundamentals. A national carbon tax, for instance, could dramatically alter the generation mix in a matter of years, not decades.

Whatever the future for the electric power sector, the next few years will be the most enlightening since the Rural Electrification Act of 1936. (Part of the New Deal, it was a big deal, trust me.)

Contributed by Daniel Holder, Commodity Analyst, Schneider Electric

The post 5 Energy Sources, 5 Trends (pt. II) appeared first on Schneider Electric.


Previous Article
Energy Market Update: India, OPEC and Renewables
Energy Market Update: India, OPEC and Renewables

Over the past decade, China has dominated the discussion on economic growth, but that conversation is chang...

Next Article
Energy Espresso: A European Market Update in Minutes
Energy Espresso: A European Market Update in Minutes

Want to understand the vital energy market movements and signals? But don’t have a few hours each day to re...