POWER July 2012 - 60

ELECTRIC POWER 2012: WHERE THE GENCOS MEET
Innovation Required as
Gas Displaces Coal
Panelists at the ELECTRIC POWER Keynote and Roundtable Discussion in
Baltimore in May wrestled with a range of issues. But despite calls for
a " balanced portfolio, " an " all-of-the-above " energy strategy, and predictions
of " more changes in the next 10 years than in the last 100, " the
focus of attention appears to be the decidedly mundane displacement
of coal by natural gas.
By Jason Makansi, Pearl Street Inc.
I
t may not rival the newest iPad for cool
technology, but the power generation
industry is embracing pragmatism as
low-cost natural gas from shale resources
turns the dispatch order on its head. The
challenges posed by natural gas, as well as
forecasts for electric power demand for the
next 25 years, were the primary focuses of
attention during the 2012 Keynote Session
and Roundtable Discussion during ELECTRIC
POWER, which was held in Baltimore
from May 14 to 16.
Arshad Mansour, senior vice president,
research and development (R&D) at the
Electric Power Research Institute, kicked
off the session with a presentation that
focused on transformative technologies.
He said the power industry had gone from
4,000 MW to 47,000 MW of wind energy
in 10 years, that 10,000 MW of demandside
capacity had entered the markets, and
that the real cost of electricity, adjusted
for inflation, is lower today than it was 30
years ago. " The system is being turned upside
down, and we will see more change
in the next 10 years than in the last 100
years, " Mansour said. The industry, he
said, is built on innovation.
Mansour used the phrase " nodes of
innovation " to refer to materials, environmental
controls (including those for
water), and consumer technology. With respect
to the last, he noted that three million
" new iPad " tablet computers were ordered
the first weekend they were offered.
But perhaps change is not the same as
innovation. When asked during the Roundtable
Session to list the top three things
that keep him up at night, Mansour responded,
" operating existing plants in new
operating modes, " referring to the need for
coal-fired plants to become more flexible
now that gas-fired plants enjoy a competitive
price advantage and the fact that
wind energy largely enjoys " must-take "
56
contracts. Flexible lay-up procedures, for
example, are needed for coal units forced
out of the dispatch queue due to new market
dynamics.
Clearly, a world of difference exists between
an iPad rollout and flexible layup
procedures for coal-fired boilers as examples
of innovation. In fairness, however,
considerable innovation is wrapped up in
how the power industry keeps aging power
plants in service. Remote inspection using
robotics, embedded sensors, and advanced
nondestructive evaluation techniques all
are examples Mansour shared. And new
materials technologies, he said, are being
applied to ultrasupercritical coal-fired
boilers. " At some point, the U.S. will build
new coal plants, " he predicted.
Demand Growth Crawls
At least two things are needed to innovate:
money, especially patient capital, and a
business model that encourages innovation
and new technology adoption. Arguably,
the electricity industry has neither
right now.
One reason for the lack of money was
mentioned in keynote remarks by Dr.
Howard Gruenspecht, acting administrator
of the U.S. Energy Information Administration
(EIA). Electricity demand growth
has declined so much that the country's
existing capacity base could suffice for
the next 20 years, he said. For an industry
that makes money by investing in infrastructure
and earning a rate of return on
invested capital, his comments may not be
an encouraging message.
Gruenspecht relied on the EIA's final
release of the Annual Energy Outlook
2012, which had not yet been made public
when he made his remarks. He noted
that demand growth averaged 1.0% a year
between 2000 and 2010 and is expected
to average 0.8% a year between 2010 and
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2035. He said energy consumption is not
forecast to return to pre-recession levels
until 2022. With regard to EIA estimates
of expected coal plant retirements-30
GW to 70 GW through 2035-he emphasized
that the EIA reference cases do not
take into account future policy decisions.
This means potential carbon restrictions
are not reflected in EIA retirement estimates.
Non-hydro renewable sources also
are forecast to more than double in the
time period.
The big change in the U.S. electricity
generation energy source mix is that
coal's share drops to 39% from 45%. At
the same time, natural gas increases its
share from 24% to 27%, and renewable
energy's share rises from 10% to 16%,
with hydroelectricity making up the lion's
share of that total.
None of this suggests an industry changing
at an iPad-like rate of innovation. The
fact is, the industry has relied on government-sponsored
R&D to supplement what
the industry spends, which, compared to
other industries, is paltry when viewed
as a percentage of total revenue. Taxpayers
already made a substantial investment
through the American Reinvestment and
Recovery Act for smart grid, renewable
energy development, and electric vehicle
projects. With the policy-making machine
in Washington and many of the states
bogged down over partisan wrangling,
funding for innovation is more likely to
shrink than grow.
Following the two keynote presentations,
Mark Crisson, president and CEO of
the American Public Power Association,
and Richard McMahon, vice president of
energy supply and finance with the Edison
Electric Institute, joined Gruenspecht and
Mansour for a panel discussion moderated
by POWER magazine Editor-in-Chief Dr.
Robert Peltier.
POWER | July 2012
http://www.powermag.com
POWER July 2012

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