Every one of the 13 decades that POWER magazine has been in print has been definitive for electric generation technology, policy, and business in some significant way, but few have been as transformative as the 2010s.
The decade opened just as the global economy began to crawl toward recovery from a historically unprecedented downturn that had bludgeoned industrial production and sent financial markets into chaos. As experts wrote in the magazine's January industry forecast in 2010, the effect on the power sector–as with other sectors–was dramatic. "The nation spent most of 2009 wondering if, and when, a bottom would form under a free-falling economy. The decline in power generation for 2009 will be the greatest drop going back to 1949–the earliest year for which the EIA collected data." The recession was so severe, they noted, the North American Reliability Corp.'s (NERC's) 2009 Long-Term Reliability Assessment forecast supply would outstrip demand in most regions through 2018. As such, the analysts concluded that, looking forward, "there is increasing acquiescence to the prospect that the power industry will be governed less by economics and more by government regulation and environmental policy in the future."
Their prediction was true somewhat. Heightened concerns about climate change–driven by a globally embraced urgency to act–propelled energy transformations across the world, resulting in a clear shift in power portfolios away from coal and toward low- or zero-carbon resources. Effecting a notable cultural change, the decarbonization movement has been championed by power company shareholders and customers, and some of the biggest coal generators in the world have announced ambitions to go net-zero by mid-century. However, the shift has also benefited from a hard economic edge. Transformations, for example, have been enabled by technology innovations that cracked open a vast new realm of natural gas supply, sent the prices of solar panels and batteries plummeting, and made small-scale decentralized generation possible, while the uptake of digitalization has soared, mainly to prioritize efficiency gains.
Following are five definitive changes that the world's power sector has seen since 2009.
1. The Rise of IIoT
Power plant automation was already well-advanced by 2009, when more facilities shed boiler-turbine generator boards and vertical panels populated with indicators and strip chart recorders, and adopted open systems using industry-standard hardware and software. By then, companies were already beginning to grasp the value of digital modeling and virtual simulation, as well as sensors and wireless technologies.
The definitive shift arrived around 2012 with the introduction of the concept of the "industrial internet of things" (IIoT)–a term GE claims it coined–which described the connection between machines, advanced analytics, and the people who use them. According to GE, IIoT is "the network of a multitude of industrial devices connected by communications technologies that results in systems that can monitor, collect, exchange, analyze, and deliver valuable new insights like never before. These insights can then help drive smarter, faster business decisions for industrial companies."
In the power sector, IIoT morphed into a multi-billion dollar industry, and it has since enabled predictive analytics to predict and detect component issues; it provides real-time production data (Big Data), which has opened up a realm of possibilities; and enabled software solutions–all which have boosted efficiency, productivity, and performance. Over the last decade, several companies have rolled out comprehensive power plant–oriented IIoT platforms, such as GE's Predix and Siemens' MindSphere, and driven the rapid development of technologies that benefit from them, such as fourth-generation sensors, Big Data, edge intelligence, as well as augmented and virtual reality. Separately, these and other digital possibilities have opened up a vast intelligence realm for other aspects of the power sector, including for grid–such as for forecasting, grid stability, outage response, distributed energy resource orchestration, communications, and mobility. Components manufacturing, too, is digitally evolving, with advancements in 3-D printing, development of new materials, and process intensification.
Looking forward, the possibilities are endless. Acknowledging how crucial a role digitalization will play in the sector's future, POWER and its sister publication Chemical Engineering launched the Connected Plant Conference in 2017. The fourth annual event will take place Feb. 25–27, 2020, in Atlanta, Georgia.
2. The Decentralization Disruption
Experts often point out that distributed power generation debuted when Thomas Edison built the Pearl Street power plant in 1882 (it was not actually the first "central" power station as is commonly thought–that honor goes to Californian George Roe, who began operating a plant in San Francisco in September 1879). After decades of development of "centralized systems"–owing to economies of scale and a supportive regulatory framework–the 2010s ushered in a suite of smaller (less than 100 MW), more efficient, and less costly technologies that could provide electrical and mechanical power at or near the point of use, such as natural gas and diesel-powered reciprocating engines, aeroderivative gas turbines, fuel cells, solar panels, and wind turbines, that allowed generators to meet local power demand, off and on the grid.
Early in the decade, one often-cited driver for the movement were the constraints that typically involved the development of large capital projects, and transmission and distribution lines. The decentralization "movement" was also powered by gas network growth, the digital wave, and a growing need for resiliency. Later in the decade, as rooftop solar installations surged, falling costs for batteries also prompted their increased installation behind-the-meter, and power consumers were able to engage in demand response–which allowed them to alter their power consumption patterns and provide grid services, individually or through an aggregator.
Perhaps the biggest shake up the proliferation of distributed energy resources (DERs) caused over the last decade is to utility business models, as well as to electricity systems. The emergence of power-generating consumers–or prosumers–as formidable new market participants, who also have more control over their consumption, has created new competition (as well as opportunities) for traditional utilities. Meanwhile, it has expanded the role of distribution system operators and tasked transmission grid operators with ensuring they can use the new providers of system services and flexibility. The result: a definitive rattling of the decades-old conventional power landscape.
How the increased penetration of decentralized energy resources and the emergence of new market players–such as prosumers, aggregators, and active consumers–has changed the power landscape. Courtesy: International Renewable Energy Agency
To take advantage of new opportunities, companies have introduced an assortment of new business models. The decade, for example, saw a growing number of aggregators, for example, which pool DERs to create "virtual power plants" of sizable capacity to sell into wholesale markets. Also emergent are peer-to-peer electricity trading (an online marketplace for consumers and DER suppliers); energy-as-a-service models, which essentially support prosumers as they exchange their power; and community ownership models, such as community solar gardens.
The growth of distributed generation has been so pivotal in the industry that POWER organized the very first, resoundingly successful Distributed Energy Conference in October 2019. The second annual event will take place in October 2020 in Chicago, Illinois.
3. The Shale Gas Revolution
The boost in shale gas production, owing to increased use of two technologies, horizontal drilling and hydraulic fracking, since 2007 has been nothing short of astonishing. As IHS Markit noted for the eight-year period between 2000 and 2007, total U.S. natural gas production grew less than 1%. Between 2007 and 2017, output grew 41%. In 2007, it had generally been assumed the U.S. was poised to become the largest importer of liquefied natural gas (LNG); by February 2016, the nation's first new major LNG export terminal dispatched its first cargo.
Over the past decade, meanwhile, this natural gas abundance spurred a power plant building frenzy. As the North American Electric Reliability Corp. (NERC) noted in its latest reliability assessment, between 2009 and 2019, the North American bulk power system added 180 GW of new natural gas–fired on-peak generation, pushing up total natural gas capacity from 280 GW to 460 GW today. Over the next decade, 130 GW of new natural gas capacity (43 GW is already under construction or has approvals and 88 GW has been requested) is planned. 2016, specifically, was also a banner year for the industry because the nation's total installed capacity grew to 42%, and for the first time, the fuel generated 34% of the nation's power, surpassing coal to become the leading generation source. In December 2019, the Energy Information Administration (EIA) projected that gas generation's share of the total U.S. mix would rise to 37% in 2019, and 39% in 2020. Worldwide, natural gas-fired generation, which has tripled over the past 22 years, is set to surge nearly 50% by 2040, owing largely to the cheap shale gas supply, the International Energy Agency (IEA) said in its World Energy Outlook.
U.S. annual power generation since 2010. Source: U.S. Energy Information Administration, Short-Term Energy Outlook
The industry is watching the surging shares with some trepidation, however. Though natural gas power today provides much-needed system flexibility (because the bulk of it is generated by newer, more efficient turbines), a significant influx of natural gas generation "raises questions about how disruptions on the natural gas pipeline systems impact electric system reliability," NERC said. Meanwhile, an impending glut is worrying observers in the U.S., where cheap gas power threatens to economically displace other conventional modes of generation, including coal, nuclear, and hydropower.
As Sam Andrus, executive director at IHS Markit covering North American gas markets, told POWER in September, average natural gas prices at Henry Hub in 2020 could fall to below $2/MMBtu–a level "not seen in decades"–owing to a persistent oversupply. "It is simply too much too fast," said Andrus. "Drillers are now able to increase supply faster than domestic or global markets can consume it," he said. "Before market forces can correct the imbalance, here comes a fresh surge of supply from somewhere else."
4. Energy Storage Goes Mainstream
The dramatic rooting and proliferation of battery storage are perhaps the power sector's most significant stories of the decade. Long considered a "holy grail" that could transform intermittent forms of energy production into firm, baseload capacity, battery storage was elusive, hindered by high upfront costs and technical setbacks. But sometime between 2011 and 2014, a number of demonstration projects showed various technologies could optimize energy delivery. Around the same time, battery storage costs tumbled.
The industry's reaction was stunning. According to market research firm IHS Markit, installed global energy storage capacity grew exponentially from 0.34 GW installed in 2012 and 2013 to 6 GW in 2017, when it began to be incorporated more broadly into utility and power system planning across the world. At the end of 2018, according to the IEA, the world's installed battery capacity stood at 8 GW, and developers added 3 GW in 2018 alone. Driven by new flexibility needs, regional targets, and more dramatic cost reductions, the IEA predicts four-hour system costs could fall from $400/kWh to less than $200/kWh by 2040, when batteries could surge to 330 GW globally. However, that growth will require electricity market reforms ranging from scarcity pricing, operating reserve prices, frequency control ancillary services, and capacity mechanisms, some of which are already in place, it suggests.
As experts noted earlier this year, trends over 2019 show energy storage's growth will continue. Among developments they highlighted are that lithium-ion costs are plummeting; utilities are adopting energy storage and associated grid management technologies to help smooth peak demand curves and provide backup power; the industry is making steps toward safety; and innovation is continuing in alternative battery technologies.
5. Renewables Make Their Mark
In its latest World Energy Outlook, the IEA said that in 2010 solar PV generated only 32 TWh and wind about 341 TWh. In 2018, solar PV generated 592 TWh (just trailing total oil generation) and wind production was 1,265 TWh. By 2040, solar PV's share of the world's total generation is expected to soar to 11% (compared to about 2% today), while wind's share could reach 13% (compared to 5% today). The growth of wind and solar generation over the past decade is certainly remarkable, but the bigger stories are how they achieved crucial milestones in terms of installations, cost reductions, and technological advancements.
As the International Renewable Energy Agency (IRENA) noted in a recent report, annual solar PV capacity gradually increased until 2011, when prices began to fall. Between 2010 and 2018, installed costs of solar PV declined 74%, mostly owing to lower solar PV module prices and ongoing reductions in balance-of-system costs. As costs fell, meanwhile, the global weighted average capacity factor of utility-scale PV systems has been increasing. "Between 2010 and 2018 capacity factors increased from an average of 14% to 18%," said IRENA, which pegs the improvements to greater deployment in regions with higher irradiators; increased use of tracking systems; and improvements in system performances through improvements in inverter efficiency. And, as an assortment of experts have predicted, the future is sunny for solar. "By 2050, solar PV is expected to be among the cheapest sources of power available, particularly in areas with excellent solar irradiation, with 2050 costs in the range USD 0.014–0.05/kWh," IRENA predicts, for example.
The wind industry has also seen its share of immense milestones. In 2014, it garnered more than 1 million jobs to support the then-fledgling sector, and in 2017, it put online the first floating offshore wind farm (Hywind in Scotland), and secured a zero-subsidy auction bid for an offshore wind farm in Germany. Since then, turbines have been growing ever larger, vastly improving economics. "By 2020, onshore wind is set to consistently offer a less expensive source of new electricity than the least-cost fossil fuel alternative in most regions," IRENA suggests.
Another reason the growth of wind and solar has been such a distinctive aspect of the decade is because these resources are variable. Over the past 10 years, virtually every other power generation resource in regions in which wind and solar uptake has been substantial have been forced to ramp up their flexibility to remain relevant in future power systems. That includes hydropower, nuclear, and coal.
Along with supply-side flexibility, network operators are working to improve grid flexibility to better balance supply and demand by taking advantage of weather and resource diversity. Variability has also spurred demand-side flexibility efforts through distributed energy resources and electrification of end-use sectors, such as through "smart" approaches in transport, buildings, and industry, and digital technologies. Finally, the dire need for flexibility has ignited development of system-wide storage technologies to include battery storage and "power-to-x" applications, such as for power-to-heat and power-to-hydrogen.
The 2010s may have been extraordinary in many respects, but the 2020s are already shaping up to be even more interesting. The parameters for change are certainly different compared to the dismal place from which the 2010s began: The economy is thriving, and as NERC pointed out in December, peak demand–which has stayed flat and even declined in some regions since the 2008 economic recession–is set to tick upwards slightly. Despite the uncertainty, some wisdom that our experts doled out as the last decade opened still endures–and that is that decisions the industry makes today will lay the foundation for the power industry for decades to come.
–Sonal Patel is a POWER senior associate editor (@sonalcpatel, @POWERmagazine)