Executive Summary: As the Power Sector Transforms, Opportunities Rest with Embrace of Renewables, Modernization | Black & Veatch
2020 Strategic Directions: Electric Report

Executive Summary

As the Power Sector Transforms, Opportunities Rest with Embrace of Renewables, Modernization

Executive Summary: As the Power Sector Transforms, Opportunities Rest with Embrace of Renewables, Modernization

From the Atlantic Coast of the U.S. to Asia and all parts of the world, evolution of the global electric industry has been rapid, relentless and most certainly complex.

Renewable energy drawn from solar and wind, both on land and offshore, continues to accelerate, resulting in the world’s power providers needing to thoughtfully invest in ways to accommodate it on the grid. Calls for a decarbonized electric sector are rising to a crescendo from activists, shareholders, states and countries, many of them already having set ambitious green energy mandates. More than ever, there exists a need for a balanced portfolio that spans fossil fuels and cleaner, more environmentally friendly options, with an eye toward battery storage and hydrogen — a rising star in the next frontier of power generation.

All the while, regulation continues to create new dynamics, and traditional methods of simply operating a power utility with generation, transmission and distribution assets separately are giving way to a more integrated approach. Electric vehicles (EVs) and electrified fleets — everything from buses to industrial trucks and equipment and enterprise cars — are growing in numbers, pressuring power providers to meet charging needs.

After 130 years, the power industry is being repowered as sweeping changes are guiding more focus for a consistent, methodical adoption of innovative practices to ensure the sector’s relevance. And as assets become increasingly distributed across utility networks and owned and operated by third parties, management of the grid is becoming more localized, demanding rigorous attention.

Now more than ever, consumers expect their power providers to be progressive and proactive, further emphasizing the need for reliable, resilient energy supplies.

Our latest Strategic Directions: Electric Report — backed by a survey of more than 600 power utility stakeholders — offers a clear picture of the challenges and opportunities that come with such transformation.

Across the landscape, some things haven’t changed. Aging infrastructure remains the chief focus area among one-third of respondents, down 13 percentage points from a year ago. But the issue of renewables remained the secondary attention grabber, relatively unchanged from 2019 with more than one-quarter of survey takers. Geographically, while aging infrastructure universally was the top challenge among three in 10 respondents in the Northeast, South and West, renewable energy was top of mind in the Midwest at 32 percent.

But while the undeniable sweep of change — much of it centered around the quest to lower the carbon footprints of power generation — is rattling the industry, utilities are finding that reducing emissions through renewables doesn’t necessarily compromise resiliency and reliability.

Power providers are developing technology transformation strategies and roadmaps, business cases and regulatory blueprints to support sustainability objectives and unlock new business models that such makeovers offer. By combining these technologies, resiliency and reliability can be delivered and perhaps bolstered beyond traditional norms.

2020 Strategic Directions Electric Report

These themes are explored in this year’s report, along with a litany of weighty topics:

  • Power Transmission: With the push for decarbonization, the expansion of renewable energy — both at scale and local, combined with reliability concerns tied to the aging, long-term shifting utilization of the grid — is changing how investment dollars are allocated across the system. So how does that change ripple back to the multibillion-dollar buildout of renewable generation?
  • Emerging Technologies: As the power industry responds to changing consumer behaviors, unpredictable load patterns and an increasing use of distributed energy resources (DER) and other customer-driven nuances are transforming technologies. Innovation increasingly is based on digital information and communication technology, including artificial intelligence, augmented and virtual reality, blockchain technology and robotics. However, the continued advancements in hydrogen, battery energy storage systems and small module reactors also are explored in the report.
  • Rules and Ratemaking: While one of the power industry’s great advantages should be clarity in its business activities, focus on the regulatory side is deepening as the sector’s decision-makers adapt to an increasingly competitive energy marketplace that appears to bring more unknowns by the day.

The Road to Renewables

The U.S. Energy Information Administration is predicting that solar and wind energy will dominate American generation in 2020, accounting for three-quarters of all new generation. Coalfired power production, which last year plunged to its lowest level in more than four decades, is anticipated to continue its decade-long slide, dropping by an additional 13 percent in 2020.

Reflecting that surge of renewables — and their pivotal place in an evolving energy picture — nearly half of respondents to Black & Veatch’s survey say they’re committing much more or somewhat more investment in local renewables at least in the short-term. That outpaces capital spending on such things as distribution, transmission and other DER.

That expected buildout gets more telling over the next five years, with eight of 10 respondents forecasting that more of their spending in new generation capacity will be directed at solar arrays on land, followed closely by energy storage (79 percent) and eventually microgrids and other DER (65 percent). Financial commitments to coal-fired generation ranked last, with just 3 percent planning to boost their spending but 60 percent anticipating “much less” funding.

At least in the near-term, the survey shows, abundant, competitively priced natural gas is expected to remain a key part in the power generation equation — most likely as a backup, covering for the intermittency of solar and wind energy — as coal usage continues to decline.

2020 Strategic Directions Electric Report

Hydrogen, Battery Storage Essential to the Scenario

In many countries, utilities have been aggressive in melding hydrogen into their generation mixes, using electrolysis technology that culls the element from water.

But in the U.S., as Black & Veatch’s survey results show, deployment of that gas as a power source is still developing, perhaps because of its relative novelty. More than four in 10 respondents said they would consider hydrogen for fuel cell storage, nearly double those who cited its potential use for transportation fuel for fleets and as an option for peak generation. Fewer than one-fifth said they see it as a source of backup power or a component of a microgrid, with just 9 percent mulling it for baseload generation. Three in 10 respondents said they would not consider deploying it at all.

Battery storage appears to hold the key, given its utilitarian role as a veritable Swiss army knife capable of consuming, supplying, conditioning and storing electric energy. Such storage allows typically non-dispatchable resources like wind and solar energy to be used precisely when the systems need them most, helping balance load and generation across time and space. When it comes to hydrogen, advanced storage will enable seasonal shifting of renewable energy, stockpiling solar energy in the summer for use in generating power in the winter.

As the costs of battery and other types of longer duration storage decline over time, accelerated adoption should follow, making existing power plants — with their access to transmission and developed infrastructure — excellent candidates for hosting storage.

The bottom line: Integration is more than a buzzword, illustrated by the fact that power plant decision-makers are discussing how to best have their operations work collaboratively with renewables and, more deeply, pairing things like hydrogen and renewables with storage.

As more utilities and developers rethink their power generation mixes and adapt to the economic and environmental merits of renewables in an ever changing power ecosystem, it’s incumbent that industry leaders with whom we work — along with regulators and other stakeholders — meet the demands of tomorrow’s energy mix with cleaner, greener options. Customers and solutions providers with deep experience in the engineering, construction and operations of energy assets must come together in a collaborative manner.

Resiliency, sustainability and reliability are riding on it.

Mario Azar

About the Author

Mario Azar is president of Black & Veatch’s global power business. He leads all aspects of the business serving global power generation and delivery clients through comprehensive planning, consulting, engineering, construction, program management and combined engineering, procurement and construction (EPC) solutions.

Azar has more than 30 years of global leadership roles in power and oil and gas with breadth of experience in adapting to global changing markets. He has overseen multiple power and oil and gas businesses spanning the globe.

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