Evgeny Dod is looking ahead to a world where technological breakthroughs could have a profound effect on the operation of electricity systems. “The power industry is a very conservative sector but I do think we seem to be on the brink of real system-wide changes in many areas of electricity and in the energy industry as a whole,” he says.
He believes that the changes on the way are “multifaceted” but he singles out electricity storage technology as having the greatest potential significance. “We are on the verge of creating large and relatively cheap, efficient rechargeable batteries,” observes Dod. “It will cause a fundamental conceptual shift, changing the way large grid construction is conceived.”
“I believe, in the next ten years, we will see large scale, industrial production of rechargeable units that will allow us to reconfigure our approach to issues of baseload and peakload power and the construction of additional grids. I think that the whole concept of electricity storage will change our view on how basic fuels such as gas, oil, coal, etc. are used.”
He stresses that electricity storage won’t be the only big improvement. “Clearly, there are significant and promising projects relating to transmission technologies. They are sure to yield a concrete breakthrough,” he says. “But this process is complicated by the fact that huge resources and production capacities are needed to move from scientific research results to actual production. For instance, just replacing all the cables and power lines is, in itself, a huge process. On the other hand, building thousands of storage blocks of 1,000 MW each is a relatively quick and efficient process.”
The potential of large-scale storage needs to be viewed together with renewable energy and more efficient transmission. “If you take the three together – then that’s a fundamentally different setup. This model removes the need to lay expensive transmission lines to remote, isolated areas. In the far east of Russia, for example, you could have communities linked to different standalone systems – with different costs.”
Other trends will also be important. “The oil price situation will promote new trends such as shale gas, new sources of energy and coal,” says Dod. “These will remain at the fundamental core of the whole energy sector. But, in my view, it is energy storage technologies that will be the transformative breakthrough. It has the potential to be the key issue that will change the world.”
The survey uncovered considerable doubts about programmes to boost energy efficiency but Dod disagrees. “I think that energy efficiency is a very promising area and I don’t share this scepticism. There are very effective and interesting programmes working to cut energy use in production and in the household.”
However, he stresses that clear incentives are important if consumers are to adopt energy efficiency technology and habits. “Everything depends on them having serious incentives. From an economic perspective, these should be material incentives, so that they can be measured. All too often, organisations and individuals are not very interested. It won’t happen until people are able to really see how much they have saved and be able to use what they save for themselves more directly. This is particularly the case in areas such as the public sector where, typically, the person using the electricity is not the person paying for it.”
Finally, Dod also anticipates big potential for electric cars. “I believe that by 2030 the share of electric vehicles, at least in big cities, will be no less than 30%. The key issue is battery life and charging time. In cities, compact ordinary electricitypowered vehicles are our future. I’ve even ordered a car like that for myself – a Tesla, I think. 95% of all our transport within the First Concrete Ring (Moscow region ring road) that has a mileage of up to 100km per day should be electric-powered. It’s environmentally good and clearly profitable for electricity companies.”
Christopher M. Crane says the path ahead for the power utilities industry needs to be a flexible one: “We need to plan for a natural evolution while allowing for revolution: embracing what we know we can do cheaply while creating an environment where future solutions that best provide clean, affordable, and reliable power can easily access the market when they are ready.”
Crane expects such evolution will see “the oldest, dirtiest plants retiring to make way for low-cost energy efficiency, operational enhancements and expansions at existing plants, new assets that leverage newlycheap natural gas and, finally, some more expensive solutions supported by legislative efforts. While there is some chance that our world will be defined by disruptive paradigm shift, there is also a very real possibility that the world will follow a natural progression from where we are today, particularly in the United States.”
Crane points to “a number of important developments under way that could materially change the dynamic of the electricity world.” Among the many changes taking place, he says: “technological developments have unlocked major shale gas resources for development at very low costs and globalisation continues to de-regionalise commodity prices, making competition for resources more global. In certain parts of the world, a fairly depreciated asset base will begin to require retirements, while in other parts of the world, distributed generation may allow emerging markets to skip much of the centralised build-out altogether.”
There are “any one of a number of technological developments” that could have “the possibility to upend the demand and/or supply sides of the power sector,” according to Crane. Technology is also changing the way consumers interact with the industry: “Younger generations are becoming increasingly technologically savvy, networked and interested in the broader impacts of energy consumption – an important combination that could drive real change in how customers interact with the power sector or how policy makers shape the industry.”
Crane stresses that “clean, affordable and reliable electricity is essential for maintaining a developed standard of living and a robust economy.” He points to natural gas as a central element in delivering this balance: “We believe that in the near-term, with sustained economically priced natural gas, that combined cycle generation will be the preferred choice for base and intermediate load supplies of affordable electricity at least for the next decade.”
“New nuclear is attractive as an efficient, clean, and low-carbon option, but in competitive markets where we operate, the generation produced would not be competitive with projected market prices for some time,” observes Crane. “As an alternative to building new nuclear plant, we are increasing the output of our existing fleet through modifications that will enable us to significantly increase the capacity of our fleet.”
Government-mandated energy efficiency programs, such as those found at Exelon’s three regulated delivery companies, ComEd, PECO, and BGE have an important role to play according to Crane. “These programmes at our utilities have been quite successful in achieving their goals, and reasonable energy efficiency programs can be part of a broader approach to cleaning the generation supply stack in a cost-effective and reliable manner.”
But he also points out that “energy efficiency is a tough nut to crack. In many areas, it represents a largely untapped resource in the stack to free up additional capacity and generation. One of the biggest obstacles is the difficulty of finding a way to monetize its benefits. Commercial property owners have no incentive to invest in energy efficiency because their tenants pay the energy bill. Homeowners may struggle to finance the upfront cost of efficiency investments, or they may simply be uncomfortable taking the risk that they will not fully recoup the investment, even when payback periods can often reasonably be measured in months.”
World demographic trends mean that energy efficiency will be an important part of future energy policies in the view of Brian A. Dames: "Energy efficiency can make a significant contribution but in order to be effective it requires supportive policy frameworks that enable large scale deployment of technologies." He points out that developing countries have an opportunity to build efficiency into their growth and development models: "Developing nations are not likely to grow their demand along the same trajectories as taken by the developed world. Energy efficiency will probably be built into the roll out plans right from the beginning."
But this won’t happen without design and direction: "In order to be effective they need to either be legislated and enforced or incentivised through demand response tariffs. Subsidies for energy efficient appliances could also to be funded from carbon tax funds. A cost-reflective pricing environment also will incentivise investment in energy efficient technologies as well as in R&D in alternative and more efficient technologies."
Automation will play an important role in making energy efficiency more certain: "Technologies that can be hardwired into the system and do not rely on human behaviour will be required for high levels of sustainability." Ultimately, Dames expects that: "Price parity will be a key factor that makes energy efficiency programmes sustainable. Also, with the increase in the cost of energy it can be expected that energy efficiency initiatives will become self-funded and, as such, sustainable."
Dames sees nuclear power as a potential ‘make or break’ issue: "The world could make an about turn on nuclear technologies when their carbon footprint and inherent risk are better understood by the public." He also points to a number of energy ‘game changers’ including smart demand management systems, new fuel sources such as shale gas and energy storage: "Energy storage has a high potential to become cheaper as storage density increases and this will enable the use of small amounts of power by loads as and when required, especially in response to pricing signals."
He highlights the potential of high efficiency solar: "As the cost of PV comes down and the efficiencies climb, it is conceivable that almost every residential and small commercial dwelling will have some form of solar augmentation. Solar might impact wind’s dominance as the preferred renewable energy source, especially in regions such as Southern Africa."
The transition to such a future could present some intriguing developments: "The wealthy sector of the market may be the first to adopt clean or ‘off grid’ solutions which will put a financial burden on the utility to pick up those customers that cannot afford to go for self-generation."
Dames says that this could lead to "the possibility that the utility is seen as a back-up to the alternate renewable system and this will raise interesting funding and sustainability issues for the utility. Money from revenues may fall and cost to serve the remaining customer base could rise. In addition to this, distributed generation and higher overall efficiencies could result in differing power flow with the resulting changes in transmission grid investment."
When it comes to electric cars and associated recharging infrastructure, Dames points out that: "The natural link to fill-up is probably more related to the providers of parking space than petrol retailers." He is sceptical that pricing models might mimic those in the mobile telecoms sector: "Wrapping of services like cell-phones make sense if the variable cost of supply like ‘air-time’ is virtually free, but if the supply is 'electricity' that has a high variable cost, then the wrapping model's economics change significantly."
But, despite the potential for a considerable number of technological advances, Dames concludes by stressing the need to be realistic about the nature of timescales in the power sector: "2030 is only 18 years away which is less than the half-life of most of the assets that make up the electricity grid. As such many of the assets we are commissioning today will still be around and thus changes will tend to be evolutionary rather than revolutionary."
Global answers and an increasingly global-scale industry will characterise the future power utilities sector as companies and policy-makers seek answers to the big questions of affordability, security of supply and sustainability.
According to José da Costa Carvalho Neto, the questions facing the world’s energy sector will need: “An intensification of the dialogue between the industry’s companies and national governments, international agencies and multilateral agencies, in the adjustment of trade-offs between global energy power policies and business plans.”
On the question of the search for a balance between affordability, security and sustainability, José da Costa Carvalho Neto believes that they can be complementary and that diversification will be important: “I do not think there is just one source that will change the game. A more diversified mix is likely to be the way. I believe that gas and nuclear will have a wider role to play in this future energy mix.”
Alongside the development of global answers, companies will need greater global scale to compete in a sector where the challenges of cleaner and smarter energy will be dominant considerations: “Companies that cannot face these new challenges will inevitably lose market share or even disappear from the market.”
Part of the requirement for scale comes from the need to control costs. Carvalho Neto sees definite dangers of rising energy costs, in part arising from the challenge of cleaner generation sources: “We emphasise the risk of exacerbated elevation of generation costs due to social and environmental requirements, mainly in the developed and emerging countries.”
In a world where fossil-fuels will still dominate, Carvalho Neto also highlights the challenge of “geopolitical matters together with the imbalance in the geographic distribution of fossil fuels across power markets and the location of the reserves to be explored.”
Scale and answers at a regional level reflect the global challenges. Brazil already has a strong focus on renewable energy. It is the largest hydropower producer in the word after China and policies to promote renewable energy have also spurred significant windpower capability. Carvalho Neto points out: “Eletrobras is the largest generator of electric power in Latin America and there is still great remaining hydroelectric potential to be used in the region, as well as the resumption of the expansion of nuclear generation, expanded investment in wind and biomass energy.”
In December 2008, the country launched its National Climate Change Plan, focusing largely on reducing deforestation but also containing provisions on energy efficiency and renewable energy. The energy efficiency provisions are significant says Carvalho Neto: “The action plan has the goal of a 10% reduction in electricity consumption by 2030 compared with a reference scenario.” Carvalho Neto also emphasizes “the electro-energy integration of South America and universal access to electricity” as very important.
Carvalho Neto foresees significant change in the decades ahead: “In the period to 2030, a lot of changes will occur in the global electric power industry due to global warming, the difficulties of and barriers to nuclear energy and of fossil-fuel sources and, in countries like Brazil, the construction of big reservoirs for hydroelectric plants.” He highlights “increasing use of renewable sources, such as the wind, solar, biomass and hydropower, including the development of run-of-river plants that do not need big reservoirs.”
Smart grids will be important. Carvalho Neto envisages: “A more informed, demanding consumer that has more options and choices, including the possibility of ‘auto generation’, with socalled intelligent energy supplies brought about by smart grids, smart buildings and smart homes acting together.” He also mentions visionary projects such as Desertec to bring solar and wind power from north Africa to Europe, as examples of the greater international collaboration that will be part of the future power world.
The survey covers 72 different companies in 43 different countries around the world, giving a unique window on the worldwide power and utilities industry viewpoint.
Huge demand growth. Investment and affordability. Cleaner energy. Smarter energy. Company strategies. Our report examines these and a range of other important challenges facing the sector in the period to 2030.
Energy efficiency? A transformed electricity system? Electric cars? Our 2030 scenarios provide a glimpse of what some key aspects of the world of electricity will look like in 2030.
A look at the main contrasts in results between different regions.