What to Do Now
The current pause in electricity demand growth will not be without its own challenges.
Under ordinary circumstances, given a period of slow or no growth in demand, utility company planners might be able to rest on their existing fleet, but these times are anything but ordinary. Utilities will need to navigate through uncertain regulatory, economic, and technological waters. They will need to make decisions without complete information. Despite all the uncertainties, there are several areas that utility companies can pursue, regardless of how the uncertainties play out:
Renewable sources of energy continue to be the choice du jour. NERC projects about 260,000 MW of renewable capacity will come online over the next 10 years — roughly 96% of that is expected to be composed of wind (229,000 MW) and solar (20,000 MW). Industry participants will be challenged with integrating these intermittent resources.
There will likely be another dash to natural gas – fired power plants because they have low capital costs and short construction schedules, they are relatively easy to permit, and they emit fewer GHG emissions than coal plants. Plus, natural gas supply appears, for the moment, to be abundant again, thanks to advances in extracting gas from shale and coal bed methane. The price is right, too: below $3 per million Btu in fall 2009.
Expansion of the natural gas fleet will be necessary to act as backup capacity for all the wind and solar capacity being installed.
If wind generation is added, as projected by NERC, then by 2018 net generation from wind would constitute about 14% of total generation, compared to just 1.3% in 2008. Although adding 229 GW of wind in 10 years is unlikely, mainly due to supply chain and transmission constraints, reaching that percentage may create challenges in maintaining system reliability. The expansion of intermittent resources, greater reliance on natural gas as a baseload power generator, and the application of new technologies may create a less-reliable and inherently riskier power system.
In the future, the U.S. will require additional sources of baseload generation. To that end, plans for a new generation of nuclear plants are progressing, with the first round seeking federal loan guarantees. In addition, several integrated gasification combined-cycle facilities and coal-fired generation plants with carbon capture and sequestration are moving forward. However, carbon control regulation in the form of federal legislation that places a value on carbon emissions is needed to create greater investment certainty in these technologies.
Perhaps the most conservative and most predictable place for power companies to focus is on plant improvement and energy efficiency projects for the time being.
Whereas 2009 was a year of transition and uncertainty for the U.S. power industry, 2010 will be a critical year that brings greater clarity and lays the foundation for the industry’s direction for decades to come.
—David Eppinger is vice president and Roger Smith is director, corporate strategy for Fluor Corp.
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