The world wants clean energy. Renewables are rapidly proliferating, setting new records in project deployment and investment. Hundreds of new companies and traditional market players are seeking to capitalize on opportunities in carbon-free power generation, energy storage, grid optimization and more.
And although wind, solar and other clean energy sources are increasingly being added to system operational and planning models, technological shortcomings will make it almost impossible to achieve 100-percent clean energy generation for decades to come.
In fact, as the electricity industry continues its transition to clean energy and the “electrification of everything,” the overarching challenge of renewable integration now is seen as the largest obstacle facing the industry. This marks a first in the 15-year history of Black & Veatch’s Strategic Directions Report series, which has mostly identified aging infrastructure as the primary challenge facing respondents.
As the industry moves forward, realistic expectations, careful planning and massive investment will be required to power the energy transition.
Setting Expectations
Seventy-five percent of respondents to the Black & Veatch 2021 Electric Report survey indicate they are directing their capital toward clean renewable energy investment, yet less than 10 percent believe a 100-percent clean energy generation model has been validated. While many industry leaders have publicized aggressive decarbonization commitments, this data describes an industry with high hopes but limited confidence.
There is an abundance of great ideas for decarbonizing the electric grid, but the roadblocks to realization are just as plentiful. The best real estate for renewable energy has already been developed. Land acquisition is getting harder, and site productivity challenges are increasing. Access to commercial roofs is getting harder, and concerns about structural integrity are growing. Storage costs and project funding concerns highlight the difficulty of remodeling a one-way grid to accommodate energy generation from sources far and wide.
We note this lack of confidence repeats sentiments found in our recent Corporate Sustainability Goal Setting and Measurement Report, in which hundreds of leading private sector sustainability respondents and business leaders indicated they are making decarbonization commitments, but they do not believe the technologies needed to achieve these goals are available yet.
ROI Concerns are Real
Lack of confidence also may stem from disappointment with the production and financial return on clean energy assets already deployed. As distributed energy generation through renewables has gained traction, many have built out solar and wind capacity. With solar specifically, one-quarter of respondents reported their systems were producing less electricity than expected. This may be due to aggressive energy forecasting in solar project financial modeling that did not reflect the manufacturers’ projected system decline.
Industry concerns about renewables at scale center on three major barriers, with cost being the largest. The popularity of this response could be influenced by current global supply chain issues driving up the cost of solar and wind units, as well as the need for robust supporting technologies and modules to counteract intermittency.
As generation shifts from natural gas and coal, regulations require — and customers demand — a level of dispatchable energy generation that renewables cannot provide.
Energy storage, both short and long term, is viewed as a critical piece of the green energy transition, yet more than one-third (36 percent) of respondents are not planning to build any storage to offset the fast ramping and high variability of wind and solar. A little more than one-quarter (26 percent) already have built or are building storage, while 38 percent are planning to build.
Likely, reluctance to build storage is related to both the cost as well as the limited types of storage available. As a new and evolving technology, storage can be cost-prohibitive for any smaller energy providers, and it has yet to become cost-competitive with natural gas.
Similarly, most battery storage development has centered on short-duration lithium-ion batteries that have achieved a production scale and cost decline that tracked solar modules. However, lithium ion is best suited to rapid charge/discharge scenarios and cannot provide the long-term storage required in the energy transition.
In places like California, for example, where hourly shifts in demand and in supply from renewables are massive, the norm is ramping simple cycle gas turbines. In areas where seasons impact solar production and days or weeks of storage may be needed, or in a clean energy world where more traditional baseload generation is unavailable, the storage challenge must be overcome.
The combination of regulation, public and shareholder pressure, and an industry embracing its role in stopping climate change is pushing the electric industry to shift to low- or no carbon generation, even as it isn’t sure how to get there.
Overall, the 2021 data describes an electricity industry that intends to move to clean energy, without only partial plans of how to get from point A to point B. Utilities are evolving their business models to be more competitive and innovative in the distributed energy resources (DER) space (52 percent); longer term, they expect that DER will dominate utility service offerings (61 percent in 15 years.)
As the energy sector works toward aggressive decarbonization goals — think “100-percent carbon free by 2050” — meticulous planning and calculated investment are crucial.
