There is an increasing interest in what the electrical grids of the near future will have as generating assets and loads, as evidenced by a short memo from Secretary of Energy Rick Perry this past week. see memo below.
This 4-14 Memo is quite interesting for what it says, and what it does not say. Others have reacted (apoplectically and hysterically, in some cases) to the absence of the word "environment" or derivatives thereof.
The Secretary did use the words reliable and resilient, affordability and fuel assurance, technologically advanced, affect the economy and national security, diminishing diversity of generation mix, changing nature of electricity fuel mix, previous policies to decrease coal-fired power generation, market-distorting effects of federal subsidies, regulatory burdens, but no mention of environment.
First, the overview of what the Secretary is doing here. This is entirely my judgment and not based on any insider information. This 4-14 memo is part of the President's policy and campaign promises to revive the US coal industry. Most of the coal production has provided electric power in conventional, Rankine-cycle steam power plants. Recent regulatory changes by the Obama administration resulted in many coal-fired power plants closing. Essentially, the coal-fired plants closed because they are now required to remove various pollutants from their stack gases, but cannot afford to retrofit the plants with the pollution control equipment. This is a part of the "regulatory burden" the Secretary referred to.
The balance of the intent is to study grid reliability as baseload power is reduced, primarily from coal-fired plant closures. For background, in recent years the overall US grid has had nuclear and coal-fired plants retired, with natural gas-fired plants, solar, and wind power plants installed.
So, there is the intent: can the policies of former administrations that brought abrupt closure of so many coal-fired power plants have an adverse affect on grid reliability, resiliency, and electricity affordability? Next, how can the Trump administration justify bringing back coal-fired power?
Second, a brief analysis of each of the terms featured above, with emphasis on coal-fired plants and renewable power plants..
Reliable and Resilient
Electrical power grids are required, by law, to provide safe, reliable, affordable electricity to consumers of all types, be they residential, commercial, industrial, transportation, or other. It is interesting that the 4-14 memo does not mention safety. Perhaps that is simply assumed. Some states also require an environmental aspect of generating plants, based on pollutants such as sulfur oxides, nitrogen oxides, particulate matter, and in California's case, carbon dioxide emissions.
Reliability on a grid means that the power is available when the consumer wants to use the power, or on demand. The electricity must meet certain quality standards, such as but certainly not limited to frequency and voltage. Interested readers are encouraged to read the IEEE publications on grid reliability.
Resilient means the grid supplies power as required under any scenario, planned shutdowns, emergency shutdowns, long-term drought, but not necessarily severe weather events such as ice storms, tornadoes, and hurricanes. Generating assets are expected to stay online during severe weather, but transmission and especially distribution lines will likely be disrupted for a short time. As an aside, the NRC safety regulations require that a nuclear plant be shut down in advance of a predicted hurricane that could or will put hurricane-force winds at the nuclear plant. The grid must take all this into account.
Coal-fired plants historically have good reliability and resiliency, that is, if they have sufficient fuel on hand. That topic is addressed next.
Affordability and Fuel Assurance
Affordability is not only a goal for electrical power grids, but is required by law. The agencies that oversee electric utilities typically allow the electricity rates to provide the utility a modest return on investment, such as 10 percent. The idea is that the electric utility should not get rich by having an exorbitant return on investment, such as for example alcoholic beverage companies enjoy. At the same time, a utility cannot just break even else the bonds that finance spending would go unsold.
The crux of the matter is that different generating technologies have different wholesale costs for the power produced, if all are to obtain the same 10 percent return on capital employed. Many studies of actual investments, and projected investments have been performed and typically conclude as follows: lowest-cost generating assets are natural gas-fired combined cycle plants (CCGT), natural gas-fired steam plants, large high-pressure coal-fired plants, and hydroelectric plants. The most expensive, or highest-cost are nuclear, simple cycle gas peaker plants, solar thermal, and offshore wind. The others are somewhere in the middle, solar PV, onshore wind, geothermal, and a few others. Nuclear plant advocates will dispute this, of course, but they cannot rationally defend their position.
However, as stated above, coal-fired plants are shutting down in record numbers because they cannot afford to install the required pollution abatement equipment.
Fuel assurance is a topic that has several aspects, most notably the variability of wind and solar power. This is no surprise, wind has always varied, and the sun's intensity at the ground is affected by many factors including season, and clouds. In fact, a notable event will occur in California's solar plants this year as a total eclipse of the sun occurs in August.
Coal-fired plants are touted as having substantial fuel assurance with 60 days or more fuel supply stockpiled at the plant. This is not always true, as coal deliveries are affected by rail shortages, shipping delays due to ice on lakes, and other reasons. see link to a recent SLB article on coal fuel supply problems.
A grid that is technologically advanced could mean any number of things. Recently, the term "smart grid" has been advanced. More on that in a bit. Coal-fired power is one of the oldest and not-advanced forms of power generation. Coal-fired power certainly predates nuclear power, modern solar PV, modern wind turbine power, and CCGT. There are and have been some advances in coal-fired power, however, such as pulverized coal, high-pressure designs, and more recently, coal gasification with gas turbines. It is not entirely clear if the 4-14 memo intends to investigate all the various forms of coal-fired power plants. Clearly, if any of the coal technologies were economic, they would have great market share. The fact is, they do not have much market share.
The smart grid concept has many aspects, however one aspect worth noting is the consumer has a display in his home or business that indicates the cost if more load is added to the grid. The consumer can then decide to flip the switch right then, or postpone the power consumption to a later time when price are cheaper.
A smart grid from the generation aspect can provide reliable power when intermittent generation is providing power, such as wind turbines and solar PV. One key aspect of the smart grid is grid-scale storage by batteries or other means. More on that below.
Affect the economy and National security
Economic effects due to grid reliability are well-known, where blackouts disrupt commerce. The argument for coal-fired plants is that they have been highly reliable (again, when fuel is available) and it's not their fault that blackouts sometimes occur.
What the Secretary means by including national security is a bit obscure. Certainly, military installations are grid-supplied. However, they also have more than adequate back-up plans for self-sufficiency when needed.
Diminishing diversity of generation mix
As stated above, coal-fired plants are closing in record numbers. The grid is stable, though, because more than enough wind, solar, and natural gas-fired plants are installed. On a state-wide basis, the generating mix in California has also changed. Specifically, half of the nuclear plants were shut down almost 5 years ago, and substantial solar power has been installed. The state has transitioned from 4 GW of nuclear and almost zero solar, to 2 GW of nuclear and 10 GW of grid-scale solar production. It is noteworthy that grid stability remains, and power prices have not skyrocketed.
The Secretary is more concerned with the national mix, and primarily the coal-fired plants located east of the Rockies. Those states do not have superb solar resources, but they do have outstanding wind resources in many areas.
Changing nature of electricity fuel mix
This is essentially the same as the previous topic, diversity of generation mix.
Previous policies to decrease coal-fired power generation
This is a direct reference to the various environmental laws that the Obama administration placed on coal-fired power plants. The result is clear, as above, with coal-fired plants closed or closing in record numbers. This is a tangential reference to environmental aspects.
Market-distorting effects of federal subsidies
The issue of federal subsidies for power generation has a long history and much debate. Various camps shout that the "other guys" are being subsidized, but their favored technology is not. Accusations abound, but a rational, fact-based analysis shows that almost every form of electric power generation has grants, loan guarantees, tax credits on investments, direct subsidies, regulations that favor that technology, and many more. SLB has extensive articles on this. Nuclear power, for example, has subsidies in the form of direct payments for new nuclear plants of 2.3 cents per kWh generated for the first ten years, complete indemnity under the Price-Anderson Act for harm caused by a radiation release (above a modest insured amount), changes to safety regulations to allow continued operation, new plant construction loan guarantees, direct subsidies for existing plants to keep operating as a jobs-protection program, and others. Nuclear power itself resulted from government research, and was promoted by Eisenhower as a way to show the world that atomic power has peaceful uses, not just the terrible destruction from atomic and hydrogen bombs.
Coal-fired plants enjoyed a long, many decades period of exemption from the Clean Air Act laws under the "grandfather" clause.
Solar, wind, and other forms of renewable energy have various forms of subsidy, including investment tax credits, direct subsidy of 2.3 cents per kWh, and in some cases, construction loan guarantees. Renewables also have a priority in the generation mix, however curtailment certainly occurs under some conditions.
Finally, almost all of the hydroelectric power in the US was built by federal funds. The Hoover Dam and its power plants on the Nevada-Arizona border is but one example.
This is a reference to much of what is already written above, the various regulations on subsidies, environmental exemptions, but also state-mandates for Renewable Portfolio Standards (RPS). RPS typically requires utilities to obtain a stated percentage of all power sold from renewable forms. Such renewables include wind power, solar PV power, solar thermal power, geothermal, biogas, biomass, and small hydroelectric. Many states have RPS or a functional equivalent; California's RPS requires 20 percent renewables by 2010, 33 percent by 2020, and 50 percent by 2030. The state easily met the 20 percent requirement, achieved 27 percent in 2015, and has contracts for 43 percent by 2030. Hawaii has one of the most ambitious RPS, with 70 percent by 2040 and 100 percent by 2045. see link
The concern, clearly, is what will become of coal-fired baseload generating plants when RPS standards are implemented. It is notable that California has no problems with its substantial renewables, primarily due to the lack of exactly such intractable baseload coal and nuclear-powered plants. Flexible natural gas-fired CCGT provides California with more than adequate ability to meet power loads with approximately 10 GW of grid-scale solar, 4 GW of wind on a good day, and 2 GW of steady geothermal and other renewables.
No mention of environment
Memo 4-14 does not explicitly mention the environment, but as above, makes passing reference to such in regulatory burdens and previous Administration policies. This was very likely by design, as there is substantial pressure to re-open the pollution debate over coal-fired power plants.
Grids and Batteries
The major unknown at present is the technology for grid-scale batteries. SLB has several articles on grid-scale storage and batteries. The fact is, such batteries already exist and are operating in many locations. The problem today is their cost to install. That cost is steadily declining, however. Also, new battery technologies are in research and development. Great advances are being made.
The coal-fired power industry, and all those involved from mining, transportation, power plant design and construction, pollution control systems supply, plant operation, all are keenly aware of the dramatic transformation that awaits when, not if, such batteries do achieve reduced costs for installation.
Such batteries then allow wind and solar power to be stored as that power is produced, then fed back into the grid on demand for load-following or even baseload power.
An application already under construction in Los Angeles, California for Southern California Edison is to use solar-powered batteries to replace a costly gas-fired peaker power plant. Also in California, batteries are used on Santa Catalina Island to allow diesel-powered generators to run at a steady pace. The batteries are charged at night, then discharge to meet demand each day. Grid-stabilizing electronics already exist, the only issue is cost of the battery systems.
As with many technological advances, the early systems have a high cost and will supplant only the highest-cost production. This is the case today in Los Angeles, with the batteries replacing the high-cost peaker power plant. As more batteries are installed, as technology improves, costs will be less. As those cost reductions occur, less-costly power generation can be replaced.
There may actually be a need for a small amount of baseload, rotating-generator power generation such as coal-fired steam plants produce. (In California, coal is not allowed so that would be from natural gas-fired baseload power). Presently in California, where the grid peaks at approximately 50 GW, the baseload is approximately 30 percent of that at 15 GW. These issues are different for each state. Some of the key factors are the amount of industrial load and building cooling load. California, of course, has very little of either. Illinois, on the other hand, has the industries in Chicago and a great number of nuclear plants and coal-fired plants.
The results from the 4-14 memo from Secretary of Energy Perry will be quite interesting. The memo requires the study to be delivered in 60 days, so on June 18, 2017.
It will be interesting to see the arguments, and based on what facts, to keep existing coal-fired power plants open.
Roger E. Sowell, Esq.
copyright (c) 2017 by Roger Sowell - all rights reserved
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