Texas Blackout Hearings Highlight Intertwined Risks of Natural Gas, Power Grid and Deregulated Market

At-a-Glance:

The catastrophic breakdown of Texas’ natural gas and electric system the week of February 15 lacks a single villain to blame for it all. Instead, the widespread constraints in natural-gas supply and the shutdown of core power plant capacity that left millions without power can be chalked up to cascading failures between two interdependent systems – and any solutions will need to take these interdependencies into account to avert a similar crisis in the future. To learn more, read Texas Blackout Hearings Highlight Intertwined Risks of Natural Gas, Power Grid and Deregulated Market.”

Key Takeaways:

  • In a hearing held on February 25, power company executives pointed to natural-gas shortages for forcing more than half of the state’s winter peaking generation fleet to shut down. That loss of generation capacity forced state grid operator ERCOT to institute rolling blackouts to prevent a broader grid collapse.
  • The hearing saw disputes over whether failure to winterize the state’s natural-gas infrastructure was primarily to blame for the shortages, as opposed to a surge in demand for the fuel for both power generation and heating.
  • Underlying these technical failures are questions about the role of the state’s deregulated energy market structure.
    • ERCOT is the only major grid that operates outside the federal regulatory authority that sets maximum market prices.
    • For two decades, Texas’ energy markets have lacked the capacity and resource-adequacy constructs that other states and grid operators use to secure resources to cover rare but potentially disastrous imbalances between electricity supply and demand.
    • Instead, Texas relies on scarcity pricing of up to $9,000 per megawatt-hour during times of peak grid stress to incentive power plant owners to invest in resources to cover those emergencies.

Path to 100% Perspective:

In both Texas and California, the widespread blackouts reveal the need for updated policy, improved planning as well as technological and chronological power system expansion along with adequate modeling. Updated policy means including these renewable fuels and the plants that use them to count towards clean energy goals. As many believe climate change will make extreme weather events more common and even more unpredictable, state policymakers and regulators need to act now to decarbonize the electricity sector.

 

Photo by Mitchell Kmetz on Unsplash

Renewables expected to replace coal by 2033, says Morgan Stanley

At-a-Glance:

The U.S. is on the path to cutting out coal completely as the cost of renewable energy falls and the push for carbon-free power picks up steam. A new report from global wealth management company Morgan Stanley projects coal-fired power generation is likely to disappear from the U.S. power grid by 2033 and will largely be replaced by renewable energy resources. To learn more, read “Renewables expected to replace coal by 2033, says Morgan Stanley.” 

Key Takeaways:

  • The report from Morgan Stanley said renewable energy such as solar and wind power will provide about 39 percent of U.S. electricity by 2030 and as much as 55 percent in 2035.
  • Coal has experienced a steady decline in power generation due to sustained low prices for natural gas.
    • In 2010, coal supplied 46 percent of U.S. electricity, compared with an approximate 20 percent share just a decade later.
    • The share of electricity supplied by natural gas-fired power plants increased from 23 percent in 2010 to an estimated 39 percent last year.
  • The projection from Morgan Stanley comes as the Biden administration is aiming to make the U.S. carbon neutral by 2050, which will require steep reductions in greenhouse emissions and investments in renewables like solar and wind.

Path to 100% Perspective:

Rapidly reducing the use of fossil fuels is a big step on the journey to 100% clean energy. However, as reliance on fossil fuels declines, integration of renewable fuels and renewable generation must increase to ensure reliability and sustainability in power grids. This transition includes efforts to promote policies that enable rapid reductions in fossil fuel use and rapid increases in renewable generation in the electricity sector. These commitments will also steer electricity-sector decisions about investments, infrastructure, and technology toward decisions that quickly reduce greenhouse gas emissions and pave the way for a 100% renewable energy future

 

Photo by American Public Power Association on Unsplash

The Future Of Carbon Capture Is In The Air

At-a-Glance 

While renewable energy is now widely accepted as the cheapest form of electricity generation, energy demand growth, government growth requirements and the need for a responsible transition mean fossil fuels will still have a role. But for that to work with climate goals, carbon capture and storage (CCS) technology must be mainstreamed. In Iceland, Climeworks is showing how direct air capture/storage (DAC) could change the game. To learn more, read “The Future Of Carbon Capture Is In The Air.” Reading this article could require a subscription.

Key Takeaways

  • Climeworks new plant, named Orca, will combine Swiss-based Climeworks’ direct air capture technology with the underground storage of carbon dioxide provided by Iceland’s Carbfix and the plant should be online in spring 2021. 
  • What makes Climeworks use of DAC so interesting is that it doesn’t just work in removing emissions associated specifically with power generation, but can capture emissions directly from the air. This is the company’s largest plant so far, intended to capture around 4,000 tons of CO2 per year.
  • There has been significant movement in the CCS market recently. In the UK, as part of its recently announced green infrastructure plans, the government has promised £1 billion to set up four industrial clusters for CCS. 
  • The Norwegian government is working with Equinor, Shell and Total on a project intended to standardize and scale carbon capture, transportation and storage in Europe. The Northern Lights Project is expected to capture CO2 from industry in the Oslo-fjord region, following which the carbon will be liquefied and shipped to an onshore terminal on the Norwegian west coast and then taken out to the North Sea for long term subsea storage.
  • In Canada, Carbon Engineering says its technology can be scaled up to remove up to 1 million tons of CO2 from the air annually, with a large-scale plant in development with Occidental Petroleum with a completion date reported to be 2026. 

Path to 100% Perspective

Capturing carbon dioxide from the air, utilizing synthesis to combine these into hydrocarbons suitable for synthetic renewable fuels offers substantial opportunities to take valuable steps towards carbon neutral communities. These renewable fuels could be used in transportation, energy storage and energy distribution which improves power system sustainability, reliability and flexibility.

 

Photo by Thomas Kolbeck on Unsplash

Leveraging Coronavirus Stimulus to Take a Giant Leap Toward Decarbonization

At-a-Glance

While electricity demand has faltered during the global pandemic, the share of wind and solar generation has continued to increase. Wind and solar produced 10 percent of global electricity between January and June in 2020. In the European Union, renewables accounted for 33 percent of all power generation. According to the International Energy Agency, the EU’s renewable energy production was higher than its fossil fuel generation between February and early July of this year. The increased role of renewables has highlighted the investments necessary to make the transition to a 100 percent renewable power system faster and more economically efficient. To learn more, read “Leveraging Coronavirus Stimulus to Take a Giant Leap Toward Decarbonization.” 

Key Takeaways

  • While there are nuances depending on local circumstances, one significant takeaway is that the power system as a whole can handle a more rapid shift to renewables than grid operators have long assumed. 
    • “What we found was the energy system can cope really well with much more renewable power and that it’s possible to raise the ambitions around adding more clean energy,” said Sushil Purohit, president of Wärtsilä Energy.
  • Charting a more rapid and financially efficient transition to a 100 percent renewables future was a primary objective of Wärtsilä’s recent report, Aligning Stimulus With Energy Transformation, based on its Atlas modeling. 
    • The report demonstrates how using energy-related stimulus investments to support clean energy could speed decarbonization in five key countries: the U.S., the United Kingdom, Brazil, Germany and Australia.
  • According to the report, 54 percent of the $400 billion pledged has been targeted to benefit fossil-fuel-based energy, while 36 percent has been devoted to clean energy. 
    • In the U.S., more than 70 percent of the current $100 billion allocated for energy stimulus was pledged to fossil fuels, compared to less than 30 percent for clean energy.

Path to 100% Perspective

Beyond the issue of decarbonization, this is a missed opportunity to spark near-term job creation. According to a report by McKinsey & Company, every $10 million of government spending on renewables creates 75 jobs, while the same amount invested in fossil fuels creates 27 jobs. For the U.S., reallocating the $72 million of the COVID-19 energy stimulus currently earmarked for fossil fuels to clean energy would result in 544,000 new jobs, 175 percent more than would be produced in the traditional energy sector. In addition, these investments would result in 107 gigawatts of new renewable energy capacity and a 6.5 percent increase in renewable electricity generation, from 17.5 percent to 24 percent.

New Energy Outlook Projects Massive Energy Sector Shift Through 2050

At-a-Glance:

BloombergNEF (BNEF) published its New Energy Outlook 2020 (NEO) in October. The NEO projects the evolution of the global energy system over the next 30 years. This report is widely utilized by planners, strategic thinkers, and investors in developing long-term forecasts and plans. One of the NEO’s most notable projections is that the sharp drop in energy demand from the Covid-19 pandemic will remove about 2.5 years’ worth of energy sector emissions between now and 2050. To learn more, read New Energy Outlook Projects Massive Energy Sector Shift Through 2050.” Reading this article may require a subscription.

Key Takeaways:

Other notables from the report:

  • Electric vehicles (EVs) reach upfront price parity with Internal Combustion Engine (ICE) vehicles before 2025.
  • Gas is the only fossil fuel to grow continuously through the outlook, gaining 0.5% year-on-year to 2050.
  • Coal demand peaked in 2018 and collapses to 18% of primary energy by mid-century, from 26% today.
  • In the NEO Climate Scenario, the clean electricity and hydrogen pathway requires 100,000 terawatt-hours (TWh) of power generation by 2050. This power system is 6-8 times bigger than today’s and generates five times the electricity.
  • Green hydrogen provides just under a quarter of total final energy in 2050 under the Climate Scenario.
  • Reducing emissions well below two degrees under the clean electricity and green hydrogen pathway requires between $78 trillion and $130 trillion of new investment between now and 2050.

Path to 100% Perspective:

The dramatic fall in once-expensive renewable and flexible capacity costs has transformed energy investment over the last decade and the pace of change in accelerating. The cost of offshore wind, for example, has fallen by 63% since 2012. With a renewed focus on future-proofing their business models, utilities have increased renewable energy investments, taking advantage of the certainty that clean energy brings to the balance sheet. In effect, adopting renewable energy, coupled with flexible generation and storage for system balancing, is akin to purchasing unlimited power up-front, as opposed to placing bets on fluctuating oil prices and exposure to narrowing environmental regulation.

 

Photo by American Public Power Association on Unsplash

CEOs outline 3 trends hitting electricity

At-a-Glance:

Major power companies held earnings calls in recent weeks to share their focus on issues such as expanding renewables and the role of hydrogen under a national push for 100 percent clean electricity. Additionally, CEO’s discussed how the COVID-19 pandemic is threatening to delay solar projects and defer grid maintenance. To learn more, read “CEOs outline 3 trends hitting electricity.” Reading this article may require a subscription.

Key Takeaways:

Here are the issues that major electric companies are focused on as 2020 winds down:

  • One effect of the coronavirus pandemic may impact renewable energy development. NRG Energy Inc. CEO Mauricio Gutierrez said a chunk of the pending purchased power in Texas may be delayed six to eight months because of supply chain and financing issues related to the virus.
  • CenterPoint Energy Inc. CEO David Lesar said the company will work on renewable natural gas and hydrogen renewables in Minnesota plus possible new transmission infrastructure to connect to renewable sources in Texas.
  • CEO John Ketchum of NextEra Energy Resources LLC said hydrogen will come into play if federal policy accelerates a zero-carbon goal by 2035.
  • Vistra Corp CEO Curt Morgan said Vistra has “a portfolio of highly efficient, low-emitting natural gas assets that can provide reliable, dispatchable power and complement the intermittent nature of renewable resources.” He explained a diverse portfolio enables renewable products that can ensure reliability and an affordable price. “Every reputable and objective study on the changing power generation landscape has natural gas playing a significant role for several years to come, especially as we electrify the economy,” Morgan said.

Path to 100% Perspective:

These are exciting times as the renewable energy future is a focus for so many organizations and governments around the world. Emerging technologies are moving closer to reality, which makes ambitious energy goals more realistic and the path to 100 percent renewable energy is now within reach. The big challenge facing power generators around the world is how to integrate renewables into the grid while building security of supply and a sustainable power system with an affordable plan for everyone involved. Renewable carbon neutral fuels such as hydrogen and synthetic methane are being explored as solutions for sustainable and reliable power systems. Curtailed renewable electricity is used in the process with water to produce Hydrogen, and carbon is captured from air to produce synthetic methane with hydrogen. These fuels are used in flexible power plants to provide a long term energy storage for seasonal and weather management needs.

 

Photo by Priscilla Du Preez on Unsplash

Pathways Toward 100% Carbon Reduction for Electric Utility Power Systems

Many states, cities, towns and utilities are committing to a 100% clean energy future. This push toward 100% is ubiquitous in the news, academia and politics. However, there is no clear or commonly accepted understanding of what this means. For example, what is the difference between 100% carbon-free and 100% carbon-neutral?

A recent Wärtsilä whitepaper, “Pathways Toward 100% Carbon Reduction for Electric Utility Power Systems,” breaks down these terms and examines the costs and carbon reduction trajectories associated with these 100% targets. It explores what these different definitions imply for utility systems as they transition from fossil-dominated to clean energy dominated.

The findings of the whitepaper point toward utilities leveraging power-to-gas (PtG) technologies to meet net-zero carbon emission goals, rather than 100 percent carbon-free. In examining the cost of a carbon-free system versus a carbon-neutral system, the analysis concludes that electric utilities can achieve 80 percent carbon reduction based purely on economics, with no subsidies, mandates or renewable requirements by leveraging PtG.

Carbon free may be the ideal solution for utilities that have ready access to hydro or other carbon free resources that can provide firm capacity when wind and solar falter. But most utilities do not fall in this camp and must explore a wider array of technical solutions to meet decarbonization goals. PtG provides an additional degree-of-freedom in the planning process that unlocks new and exciting pathways towards decarbonization. This work shows PtG pathways provide the lowest cost for ratepayers while simultaneously attending to climate change concerns.

The United States can lead in the path to a 100 percent renewable future by investing in PtG to provide a cornerstone of the path towards what the Intergovernmental Panel on Climate Change (IPCC) is calling for: carbon-neutrality. In general, PtG will be a large part of decarbonization for flights, sea-freight and domestic shipping and automotive, supplementing the strides we are making with electric vehicles. The investment in power-to-fuels is already starting and will accelerate.

This will provide positive feedback loops and interplay among the liquid fuels industry, the natural gas fuel industry, and the electric utility industry that will be beneficial for all three in meeting decarbonization targets. What may still be needed, is the legislative and regulatory vision to make this possible, or at the least, not stifle it.

For example, many states openly allow biofuels to count as “renewable” for power generation. Allowing the same for renewably generated power-to-gas would provide a great deal of incentive in the adoption of this technology and hopefully accelerate a 100% renewable future.