Planning concurrent shifts in Power Generation

With so much change in fuel sources, the power generation sector has some significant challenges to tackle

The pressure to reduce the concentration of Co2 in the atmosphere is driving a significant change in power generation management.

The combined forces of a growing source of cheaper fuel generation from renewables (solar and wind), the continuing high levels of global Co2 attributed to fossil fuel combustion of above 40% of all global emissions, along with the continued increasing demand for electricity as heat sources in buildings or in factories are being replaced from fossil burning to electricity-driven heat pumps and other equipment for greater efficiency the power generation industry is arguable undergoing a sea-change on the creation and dispatching of energy.

Emission reductions are needed across all sectors. It will be a ‘combination effect’ of coal-to-gas switching, deployment of new generation gas-fired power plants designed for hydrogen within the fuel mix and plenty of opportunities for upgrades to existing gas-fired plants.

The impact of generation through wind and solar is pointing to a future of electric or clean energy. There are also pushes for reducing power sector emissions by upgrading the transmission grids, building in storage and looking for more at reducing individual electricity consumption by for more demand-side energy management.

Demand-side energy sometimes called the first fuel or the fuel you don’t need to use, is looked at in terms of electrical intensity through more efficient methods and solutions. As appliances, LED lighting and energy-conserving measures are deployed close to or at the final consumption points of buildings or final production plants.

The proportion of electricity in final energy dramatically shifts from 19% to a technically maximum 65% of our needs. This includes the adoption of heat pumps in buildings. Electric vehicles become the vehicle of choice, and induction stoves replace many of the unhealthy cooking methods we have today (coal, wood, charcoal etc.).

The further potential for electrification, 35% of final energy, depends on breakthrough innovation in processes and fuel conversions to generate higher heat. These include Shipping, Aviation and certain high intense heat industry processes of Chemicals, Cement, Iron & Steel.

With transport having Co2 emissions running at 25%, Buildings 9% and Industry at 26%, the source of energy, its ability to perform and what it entails in changes is a massive set of individual challenges.

Today all of the Power Generation providers are looking hard at adjusting their fuel sources to accommodate (rapidly) increasing renewable alternatives. Still, the vast majority of invested assets in fossil fuel generation need to be managed as a bridge into the future. Natural Gas will be needed for the next thirty to forty years or even longer.

To modify existing plants or determine future power generation purchases, the three key points driving the thinking are 1) increase operational efficiency, 2) improve ramp rate and 3) improve reliability.

Then you have a wish list of rather objectives that need to be worked upon with OEM providers. These include adjustments and wishes into 4) improved availability, 5) increased power output on demand, 6) extend plant lifespan, and 7)improve fuel flexibility, interchanging fuels.

There is also a constant need to keep extending and securing 8) health and safety, 9) reduce cyber vulnerabilities, 10) Reduce Co2 emissions through new technology applications (CCUS), 11) Reduce other harmful gases of methane, nitrous oxide and fluorinated gases and 12) through digitalization and other efficiency methods improve and maintain stability and maintenance.

All of these forming the wish list of power generation providers are tough, even in stable fuel markets. Still, with price/ demand volatility and the continued march of renewables and the demands for green energy, this is a very challenging set of times.

The positive point is the power industry has the technical capability and a complementary suite of solutions; if the long-term goal fixes on decarbonization with renewables and supported and complemented by natural gas power as its core strategy intent, it can manage the energy transition.

To shape power generation needs global and local understanding. Collaboration, building in increased flexibility, determining the tactics to meet the existing and future conditions and making the right power generation investments give optimization and adaptability in rapidly changing market conditions.

Conditions that are influenced by changing regulations, the balance between managing stable fuel supply and intermittency of renewables, the shift from public to private ownership, a need for cross border collaboration and exchanges and the climate pressures and commitment made locally and globally.

Shaping the Power Generation sector

I recently viewed a Power Generation survey conducted a year or so back and found it valuable to what motivates change. It was centred on the Middle East Power Generation sector and conducted by Siemens to help them understand future power generation’s underlying trends.

This Siemens survey had as the main question to the survey: “Which trends do you think are currently having the biggest impact on the power generation sector in your region“.

Now in reading this, we have to recognize this is the Middle East with an abundance of oil and gas, but are the trends similar for other regions of the world? The responses I would suggest are certainly reflecting a global movement; the ranking orders might vary. They bring out the opportunities and challenges all power generation is going through presently, I would think.

So in the Middle East, the top three trends that were having the biggest impact were felt to be:

  1. The power /gas market liberalization
  2. Changing customer expectations
  3. Environmental regulation and New emission standards

Then the next three impactful trends

  • Decentralization of power generation systems
  • Demand growth and urbanization
  • Privatization of generation and distribution assets

Followed by these shifts taking place

  • The lower range of oil price
  • Growth in renewable power generation
  • Digitalization of process and operations
  • Emerging technology disruption (i.e. battery storage)

Other observations from this report

One area is the increasing priority of digitalization, looking to overcome or bridge the trend impacts. This will come in the form of 1) improving customer data collection and analysis, 2) process automation, 3) virtual power plant (VPP) for management of distributed energy sources, 4) modelling digital asset performance management through greater connected IoT, digital twins etc.

As digitalization grows as part of the solutions, an increased focus on 1) Cybersecurity, 2) the increased use of Artificial intelligence, and 3) Blockchain are all prioritized.

I don’t see these challenges and trends as different for all those involved in power generation globally as they grapple with a changing generation mix but are nicely summarized.

What I draw from this ranking of trends let me offer the following views.

It is the external factors of liberalization, changing expectations and standards that drive the power generation’s underlying changes.

If changes were not “forced”, then we would have no or slow change. The shift in thinking about managing power generation is then triggered, of considering new business models or ways to undertake business, then recognising the impacts driving the actual changes (oil to renewables, digitalization and alternative technologies).

The report states that it seems to be one of optimism as privatization gathers. This gives opportunities to open up a more flexible business model as deregulation continues, and options to build a business become more driven by market and consumer trends.

There is a shift taking place from the combination of an increased pace of regulatory change, raising expectations and demands for flexibility in pricing and energy choices by the final consumer, energy security of supply, and growing competition are all raising the potential for different business models and generation options to explore.

The opening up of previously monopolistic positions does recognize competition will come in different forms. This incentivises the incumbent to focus more on cost and performance, driving down operating costs and finding new ways to manage changing market expectations.

Change can be very uncomfortable for the incumbent.

It is always interesting as “market forces” shift optimism—a feeling of a new lease of life changes to one where change takes on harder meaning.

Eventually, what emerges when you undertake to change is that it suddenly requires different perspectives at the different stages of any change based on how markets’ open up and eventually take hold.

I found it a good prompting report for reflecting on important trends in Power Generation.


Carefully managing and resolving Power Generation

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Currently, renewables are the fastest-growing source of new power generation capacity and meet increased demand for electricity.

This renewable growth, expected to continue well into the future, is a combination of a growing public awareness of climate change issues, the realization that the continued scale of cost declines provides cheaper generation, continued advances in solar and wind technologies, and favourable policies have provided this dramatic shift.

I will be looking across power generation in a series of posts in the coming weeks- so taking this as my opening post.

Is this renewable shift enough on its own to manage the future Power Generation needs?

Wind and solar are still under ten per cent of global generation. However, in the last year of enforced shutdowns, imposed covid-related measures, renewables’ strength grew in its use as it offered increased flexibility to manage power generation differently.

Renewables are being constantly tested and validated in different energy demand needs. They are increasingly becoming a well-established part of the energy power generating mix. We must also remember the renewable that still contributes the most is hydropower, and we are only just at the beginning of tidal power. The whole renewable story for power generation is gathering increased momentum.

Predictions into the future between now and 2040 indicate a 3X increase in wind and a 6X increase in solar installed capacity. As we “tap into” water generation power, we combine the three natural available and abundant resources of the sun, wind and water we have available to us on this planet.

Dealing with well-entrenched power generators is going to be slow, painful, and needed.

Between the wind and solar, 75% of global net capacity additions up to 2040 will be in these renewables, so where does this leave those traditional power generators based on fossil fuel? The easy answer is still very well entrenched and in place.

Coal and current Gas plants have 30 to 40 years of productive life and can be extended and upgraded in selective core ways and replacement parts. The power generation mix of managing the existing and blending in the new will become critical to the energy transition’s success.

We are not going to see the dramatic shifts many expect away from fossil fuels but a planned transition over many years. Renewables will only be around par with coal and gas power even in 2040 unless the need to accelerate climate change determines more dramatic decarbonization changes. The change in power generation takes years and decades to translate and shift.

We are witnessing a shift from coal to gas in many regions. China and India’s position is radically different due to still relatively “young” investments in coal generating electricity in these countries. Coal still accounts for 40% of electricity generation and will remain that way for some decades to come.

Will decarbonization force the pace of change?

The acceleration of renewables alongside gas power can be the force to change the trajectory for climate change. The managing of gas power generation is going to be crucial in this decade to manage. Gas generation is continuing to advance the technologies for low or near zero-carbon power generation.

The future mix is dependent on the known variants we have today and often governed by the decisions made locally. These include resource availability, the current infrastructure, the existing policy positioning and the concerns over stability and security to meet the power demand are critical factors in the power generation mix.

In many ways, renewables, where an abundance of wind and sun can be providing electricity directly or can combine through water and hydrogen production, offers the very best solution path. Storage becomes critical to renewable advancement as well, but a different view expands upon at another time.

Using an alternative fuel can offset gas or compliment gas through both technologies to generate gas and hydrogen in the same gas turbine or blend them into a current or future pipeline.

Gas power is becoming positioned as a backbone where it co-exists alongside the continued advancement of wind and solar alternatives. As it dramatically reduces carbon emissions, this combination will be a significant pathway for advancing and accelerating coal assets’ retirement.

The continued abundance of affordable natural gas drives a coal-to-gas switch as this switch can reduce Co2 by half.

We do have the tools to do the job of shifting Power Generation.

The fuel mix needs to have far more climate change impact in existing and future decisions for future investment in coal, gas, or renewable options. No question, today the power industry does have at its disposal the tools to do the job of making an energy transition to radically reduce greenhouse gas emissions today and in the immediate future.

The question is not taking the technology solutions available simply on their own standalone merits but to build out complex power generation pathways that have this ‘pathway’ to decarbonize in each country and region at a growing scale that meets net-zero emissions by 2050.

The story we need to build in power generation is the scales, multiple choices, the breadth of options over transparent timelines and offer the technological depth of logic, economics and consideration to many local dependencies and national concern df energy security.

Use the Low or near zero-carbon Power Generation mix constantly in the future.

For decades to come, we will have power generation providers offer a suite of complementary solutions. The importance of balancing renewables based on the sun, wind and water, with gas-fired, nuclear, and smart grid and digital technologies is essential to get right.

We need clear decarbonization pathways, constant replacing the existing infrastructure and energy power generation systems. The replacements need to demonstrate the decarbonization way, consistently and aggressively reducing the dependence of high fossil fuel power generating capacity.

The need is to change today’s unacceptable greenhouse gas emissions levels dramatically. Still, realistically this will be a site, region and country step-by-step approach needing an organized and systematic process of designing the decarbonization pathway in each change.

We need to be alert and challenge vigorously when the desired power generation results planned to be installed only to extend existing power generation. Today we all very aware of all the known consequences. Regretfully they are far too often driven by political motivation or narrow considerations.

Be alert, defend and always have justified Power Generation that does not have renewables at its core is important.

Any future addition of new high GHG emissions by Power Generation needs questioning. Each plan needs to provide a decarbonization pathway in carbon capturing or the progressive moves towards renewable alternatives.

The power industry must frame the climate challenge and solution pathway into any future investment justification for any new, or renewing or even extend the life of existing fossil power generating assets. This pathway should be part of any investment decision.

There needs to be a clear recognition that any transition to a zero-carbon future needs “fuel solution” bridges. Investing in natural gas solutions over the next ten to twenty years is required to maintain and support the energy demands.

It is the technical solution and decarbonized pathway surrounding the investment that needs a deeper evaluation. Renewables will continue to attract far higher investments, but total generation capacity needs a mix of power generation solutions in the foreseeable future to ensure the stability of demand.

Decisions need to clarify and justify any investment position that does not provide carbon capture or zero-carbon power generation as central.

Any investments that fail on this transparency of not clarifying the decarbonization pathway must be publicly challenged and questioned by the investors. It is surely unacceptable with all the power generation options available when we are in this race to decarbonize.

It is down to the good judgement of making sound investment decisions based on decarbonizing what we have and finding balanced solutions that have an end goal of zero-carbon in the next thirty to forty years at the latest.