The road to renewable: how and why the power industry is changing

Renewable energy is an undeniable force of change in the power industry. It’s altering the way governments, utilities, and consumers think about energy and it’s forcing power companies to transform their operating and business models.

But what, specifically, is driving the change? And why now?

Essentially, it boils down to three main factors:

• Government mandates that support renewable energy and storage
• Investments in technology aimed at reducing reliance on fossil fuels
• The increasing affordability of renewable energy and storage technology

Government mandates

All around the world, governing bodies are increasingly promoting the use of renewable energy over fossil fuels. Europe has been particularly progressive in integrating renewable energy sources into its electricity supply over the last 10 years. While Europe may be leading the charge, it’s not alone. In the U.S., many states are in the process of establishing target dates for greater reliance on renewable energy, if not 100% dependency. Hawaii, for example, plans to transition completely to renewable energy by 2045. While this is the most aggressive mandate in the U.S., states such as California, Nevada, New York, and Arizona are not far behind in their goals for their renewable portfolio.

It’s worth noting that the influence of governments is not restricted to renewable energy transition. For example, on February 15, 2018, the U.S. Federal Energy Regulatory Commission voted to remove barriers to electric storage resources participating in the capacity, energy, and ancillary services markets operated by Regional Transmission Organizations and Independent System Operators. This is expected to result in energy storage becoming a viable technology for improving operating efficiency and resiliency of the electric power system.

Investments in Technology

Not surprisingly, the focus is on advancing technology to meet these new demands. Since 2013, over $1 trillion has been invested globally in renewable energy, creating nearly 10 million jobs. And it’s paying off: disruptive technologies in the renewable energy and storage markets have grown exponentially in recent years and they continue to evolve.

This is particularly evident in the storage market, where the automotive sector is driving the rapid commercialization of the lithium-ion battery. Fueled by the innovations of Tesla and a number of countries setting non-fossil transportation targets, virtually every major automotive manufacturer around the world has announced electric vehicles in its lineup over the next several years. Naturally, this has resulted in an intense focus on battery technology advancements and cost reduction to enable mass market availability.

The lithium-ion battery has already proven its value in the power distribution arena by successfully resolving the intermittency challenges of renewable distributed energy resources (DERs) such as solar and wind. This has established a very strong business case for utilities to leverage lithium-ion batteries for operational objectives such as demand response, peak management, resiliency, capacity dispatch, and power quality metric improvement.

The U.S. government’s ruling underscores the market’s confidence in energy storage performance and the ability for lithium-ion battery technology to contribute effectively to an integrated grid. The ability to plan, schedule, and dispatch the battery storage capacity, either at grid or residential scale, provides additional value to the collective distributed energy resources asset. It also demonstrates how storage can be a valuable component in a decentralized distribution grid.

Affordability

Altogether, government mandates for reduced fossil-fuel consumption and continuous advances in power generation and storage technology have led to one of the biggest disruptors in the power industry: affordability for the general market.

Renewable energy sources such as solar and wind can now compete with conventional generation technologies on a cost per kilowatt hour generation basis. According to the International Renewable Energy Agency, onshore wind projects are achieving an average cost of $0.06 per KwH and solar PV is coming in at $0.10 per KwH, versus fossil-fuel electric generation ranging from $0.05 to $0.17 per KwH (IRENA, Renewable Power Generation Costs in 2017, www.irena.org.)

Once again, this can be attributed to three factors:

• The competitive procurement process required for new power plants
• A larger pool of experienced developers and suppliers
• Cost efficiencies arising from technology advancements and economies of scale

At the same time, storage technology is becoming increasingly affordable. Lithium-ion batteries are dominating the market due to their greater scale and lower commercialization cost. Thanks to ongoing research and development – not to mention demand – renewable energy power storage options are close to reaching viability for the residential market.

What are your feelings about the forces driving change in the power industry? Are the plans to transition to renewable energy realistic? Is storage technology going to help the industry address demand? Let’s keep the discussion going – share your thoughts below.

Young Ngo