January has traditionally been POWER’ s forecast issue, and there’s one overriding prediction I feel confident making: The speed of changes will continue to exceed the power industry’s ability to fully comprehend and address those changes. That’s not meant as a put-down. It’s intended to light a fire under readers to develop innovative solutions and prove me wrong.
Imperfect but Necessary Predictions
There will always be unknowns, but every business has to make informed guesses about where things are headed to ensure survival. Few predict all the correct details.
Take NRG Energy. Its long-time CEO, David Crane—famous for promoting renewables and distributed generation and for promises to disrupt the industry—resigned in December after announcing a “reset” of the company’s organization. The changes Crane predicted are happening, but other unanticipated conditions—cheap natural gas in particular—are also engineering the road forward.
And when consulting firm McKinsey & Co. looked back at its predictions from 2007 for the energy sector, it found that in the areas of solar, wind, batteries, unconventional oil and gas, and energy efficiency, it “got the direction right, but not the speed” (change was faster). On the other hand, McKinsey saw a brighter future for nuclear back in 2007, before the Fukushima disaster, ongoing cost overruns for new nuclear units, and cheap natural gas.
It’s easy to find fault with imperfect predictions after the fact, but without forward thinking, we won’t be prepared for the future. Here are some factors that are shaping the latest projections.
Fuels in Flux
Since April 2015, for the first time, the U.S. generated more electricity from natural gas than from coal. Also last year, some utility-scale wind and solar projects beat the price of gas-fired generation, and the Nuclear Energy Institute predicted more closure announcements for merchant nuclear plants in deregulated markets. I don’t know anyone who predicted all of those developments even five years ago.
Surprising shifts can be seen internationally as well. A decade ago, few would have predicted that Middle Eastern countries would shift from fossil fuels to renewables and nuclear power, yet many are. “Oil- and Gas-Rich UAE Banks on Nuclear Power” in this issue provides one example. Meanwhile, many nations are going into overdrive to develop renewable capacity, for fuel security as well as environmental reasons. See the lead story in this issue’s Global Monitor for more on this issue.
Sometimes it seems as if the professional prognosticators are running to catch up with the speed of reality. For example, IHS last October revised its predictions for 2016 global solar photovoltaic demand upward from already bullish projections to a total of 65 GW. The increase was prompted by “an acceleration of projects in the United States, ahead of the solar investment tax credit (ITC) expiration; and, second, faster growth in China.” And last August, a Citibank report (“Energy Darwinism II: Why a Low Carbon Future Doesn’t Have to Cost the Earth”) predicted that global growth in solar power through 2020 could be at least 65% higher than estimates from the International Energy Agency. Its projections for wind were also higher.
Climate Change and Cybersecurity Concerns
The nature of the changes facing the power industry range from familiar ones involving the cost and availability of fuels (see “The Energy Industry in Xinjiang, China: Potential, Problems, and Solutions” in this issue), to the challenge of managing regulatory compliance in evolving power markets and coping with the effects of climate change on power infrastructure around the world.
It’s worth noting that generators aren’t the only ones struggling to respond to all of this change appropriately. Regulators will be playing an increasingly important role. In his installation remarks last November, the incoming president of the National Association of Regulatory Utility Commissioners, Travis Kavulla of Montana, told his fellow state commissioners, “each of us has a view on the most important environmental regulations of our era, which are those concerning carbon-dioxide emissions from new and existing power generation facilities. Some of us may challenge them; some of us may support them. But in either case, we should acknowledge that we are living in a new context where environmental considerations appear to be the major force driving the procurement and dispatch of resources.”
More recently, Kavulla underscored the importance of both utilities and regulators becoming informed about and taking action on cybersecurity. His worst-case prediction: If a multi-month cyber catastrophe hit the power sector, “I don’t know that investor-owned utilities would survive the potential nationalization of the industry that would follow,” he said in an interview with EnergyWire.
The good news is that the public is increasingly aware of cyberthreats and beginning to understand how critical it is to have a grid that’s reliable not only in the traditional sense but also resilient in our cyber world.
When other traffic is moving fast and unpredictably, you don’t pull off the road. You minimize distractions, pay closer attention, and deploy the best available tools to reach your destination safely. In today’s cars, that might mean using bluetooth communications, spoken navigation, and “smart car” features like heads-up displays and lane-change sensors.
For the power industry, as I show in “Big Data and the Industrial Internet Meet the Power Plant,” those tools might include smarter data collection, monitoring, and analysis. That new tools designed to provide greater intelligence about equipment, fleets, and markets also present turbo-charged challenges should be no surprise.
The journey ahead is sure to include some new scenery, vehicles, and passengers. We thank you for including POWER and powermag.com among your navigational guides. ■
—Gail Reitenbach, PhD is POWER’s editor.