Conference: Energy Transition Moving Too Fast

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Federal efforts to decarbonize the Electric Power industry need to slow down so that all of the pieces of this enormous undertaking can be aligned without making electric service unaffordable, according to speakers at an industry conference in Denver on October 4.

Four industry executives spoke at the Experience POWER event, organized by Access Intelligence LLC (Rockville, Maryland), and all bemoaned not only the rapid pace of decarbonization efforts by the Biden administration but also the lack of an integrated plan to ensure alignment between all segments of the industry while also attending to longstanding environmental justice shortfalls.

"We want to be the 'Just Say Yes' guys, not the 'Just Say No' guys, but we're in unchartered territory," Duane Highley, chief executive of Tri-State Generation & Transmission Association (Tri-State) (Westminster, Colorado), an electric cooperative that generates and transmits wholesale power to 42 member cooperatives in Colorado, Nebraska, Wyoming and New Mexico.

"We're trying to keep the lights on as the industry rapidly transitions," he continued. "We don't have a map for how all of the changes fit together."

Highley and other speakers at the conference said affordability, if not reliability, of electric service could be undermined by all of the changes that the federal government wants to make in the short period of time allocated for those changes.

For example:

• Electric generators are being tasked with fundamentally transforming their fuel mixes on two levels: first, continuing to close baseload coal-fired generators and building vast new amounts of renewable generation, and second, transitioning to use hydrogen as a fuel, despite its current scant availability and the lack of a transportation infrastructure.
• Electric transmission, seen by many as the key to decarbonizing the Power sector, still takes too long to build--an average of 12 years, one speaker told attendees--making it hard to see how the power segment could achieve full decarbonization by 2035, as President Joe Biden has pledged.
• Distribution assets continue to be hardened, at a cost of billions of dollars, but recent examples of severe weather, such as 2021's Winter Storm Uri in Texas and last week's Hurricane Ian in Florida, show that distribution networks remain vulnerable to extreme weather. That point is further underscored by climate-driven events like wildfires in the Western North America, which have destroyed billions of dollars of T&D infrastructure that also will need to be replaced.
• Investing the vast sums of money needed to achieve these and other goals contemplated by decarbonizing risks eroding the affordability and reliability of electric service, two longtime pillars of the electric utility industry.
• It is not at all clear how these various objectives can be accomplished without aggravating longstanding environmental injustices, particularly for low-income customers.

The industry as whole, and Tri-State in particular, are making progress on decarbonization in many areas, Highley told conference attendees, which numbered more than 800. For example, in response to its request for proposal (RFP), Tri-State recently secured about 1,000 megawatts (MW) of renewable generation at an average cost of about 1.7 cents per kilowatt-hour (kWh), a very low price. It plans to issue a second RFP, for as much as 2,000 MW of renewable generation. And the company has retired three of its coal-fired generators, and has announced plans to retire a fourth by 2025. Tri-State also is developing the capability to burn either "blue" or "green' hydrogen at its retired power plants.

He said: "Are we there yet? Not yet. I think we're about 50% of the way there."

Another speaker, Robert Chapman, senior vice president for energy delivery and customer solutions at the Electric Power Research Institute (EPRI) (Palo Alto, California), said his organization tried to inform the Biden administration that efforts to decarbonize would affect the reliability and affordability of electricity, but he did not say how administration officials responded.

"It's not clear to me how we can get to a decarbonized future equitably and affordably, while maintaining reliability." He, too, said decarbonization plans were proceeding too fast without an overall map or a clear plan for connecting changes across the industry and managing the impacts of change on customers.

Further, Chapman asked rhetorically, "As we plan to make significant capital outlays in the generation and transmission sectors, are we making decisions that take into account climate change?"

Chapman said "preserving technology optionality was critical to maintaining affordability and resilience." He urged an "all-of-the-above" energy strategy that preserved nuclear and fossil fuels in the generation mix: "You can't ignore them."

The nation's transmission buildout was necessary to accommodate the addition of so many renewable resources, Chapman continued, but changes need to be made to the transmission siting process to shorten the amount of time it takes to build a new transmission project.

Also, "you can't get to net-zero with hydrogen," but he expressed doubt that hydrogen costs can be brought down fast enough for the resource to become cost-competitive with other generation fuels, despite the Department of Energy's "Hydrogen Shot" initiative, which will pump at least $9 billion to develop hydrogen as a generation fuel.

And then there is the need to transport that hydrogen to power plants. Today, the EPRI executive said, natural gas pipelines and gas-burning power plants can accommodate a blend of 20% hydrogen and 80% natural gas before the hydrogen starts to have a negative impact on equipment. But equipment will need to be modified to accommodate higher blends of hydrogen going forward.

Agreeing with the session's other speakers, Thomas Smith, power solutions director of energy development for Caterpillar Electric Power, a unit of Caterpillar Incorporated (NYSE:CAT) (Deerfield, Illinois), said, "We don't want to over-promise and under-deliver" when it comes to decarbonizing the power sector or the broader economy. He expressed uncertainty over how different objectives will be prioritized.

Another conference speaker, Thomas Pyle, president of the Institute for Energy Research (IER) (Washington, D.C.), agreed with the other speakers that the energy transition is proceeding "a little too fast. We need to throttle it back a little to allow for more reality. If government puts its thumb too heavily on the scales, that sends the wrong signals." If the U.S. intervenes too heavily in energy markets, "that could put the U.S. on same path as Europe, which is an absolute mess on energy."

Pyle, a free-market enthusiast, criticized the rapid shift to renewables in the U.S. power mix. "Coal, oil and natural gas accounted for 80% of energy use (in the past), and even after spending trillions of dollars building renewable generation, coal, oil and natural gas are still expected to account for about 80% of all energy use in 2030, 2040 and 2050."

"China and India are building a lot of new coal plants. They're doing what they have to do to dominate the world. We need to be grown-ups about this. We need to move as fast as we can (in the energy transition) without hurting other people."

"We are absolutely trying to move too fast for the power sector," said Chapman, the EPRI executive. "We have a huge opportunity, let's not miss it."

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).