I was recently reading some predictions about what the electrical generation industry would look like in 10 years. There are many widely divergent opinions reflecting a large amount of uncertainty in future developments. I decided that I would write two blog postings which express my worst fears and best hopes for the renewable energy sector over the next 5 years (my already "iffy"clairvoyance gets really fuzzy after 5 years). This is the worst case scenario.
Unfortunately, in my opinion this is also the most likely scenario.
2013: A major grid failure/blackout will take place in Texas after a storm front cuts wind production across the state by more than 10 GW in less than an hour. Texas reserves are already low and problems at any large thermal plants would leave ERCOT unable to deal with such a large change in wind production. This will make a lot of people in Texas question the continued development of wind projects but no firm policy change will take place.
2014: After fall 2013 elections in which Angela Merkel is ousted as German leader there will be significant reductions in support for solar panel installations and wind development. The impact on the “green” energy industry across Europe will be severe.
Spain will close down a number of large electricity generation facilities due to over-capacity and will terminate financial support for their large CSP plants leading to several closures. This will send a very negative signal to CSP developers worldwide who will suddenly find it very difficult to get financing for new projects.
Up to 15 large coal-fired plants in the United States will close in order to meet MACT emissions regulations. Reserves in several states will drop below historical averages but it will be impossible to get new plants financed because of a lack of firm revenue projections due to preferential grid access given to renewables.
2015: At least one of the Hawaiian Islands will place a moratorium on new solar panel installations after mid-day penetration of solar energy reaches 25%. The grid operator will be unable to deal with the variability of this distributed generation and will successfully lobby the legislature to dramatically slow down the development of solar power throughout the state. There will be a significant down-sizing of the solar panel installation industry in Hawaii.
In the mainland U.S. a further 15-20 large coal-fired plants will be shut down because of MACT. Reserves in many states will effectively drop to zero as the economy strengthens and electricity demand starts to rise for the first time in a decade.
Regional “brown-outs” will become common and a serious debate will begin about the near-term future development of renewables. Utilities will still find it very difficult if not impossible to get the long-term financing required to build new generation including gas-fired plants because of lack of revenue certainty.
Grid operators in Arizona and California will report significant issues trying to deal with distributed generation as solar-panel electricity production reaches 25% mid-day in both states.
Texas will put a moratorium on further development of wind resources.
Consolidation in the large utility sector will gain momentum as utilities continue to absorb the costs of decommissioning coal-fired plants with little or no increase in revenues.
2016: There will be at least one severe regional blackout as grid operators are unable to deal with the variability of distributed generation and rapid changes in wind energy.
States that had formerly been able to stabilize the grid such as Arizona with nuclear and Washington and Oregon with hydro will now find their own reserves insufficient to backstop renewables in California and Texas. The transmission inter-connections between these states will be working at full capacity and even that will not be enough to address the issues. Environmental groups will continue to oppose development of new high-voltage transmission facilities through protests and law suits.
By the end of the year a number of states will declare a moratorium on the further development of wind and PV solar until a national strategy as been developed including a comprehensive intergovernmental co-operation framework for sharing costs and resources across states and with Canada. Everyone involved agrees that this effort will take a number of years to put in place.
In the fall elections the Republicans will win both the Presidency and both houses of Congress. All subsidies to renewable energy generators will immediately come under review.
2017: Global surface temperatures will continue to be flat, falling significantly below the 5% probability projections of existing climate models. In addition, the arctic ice pack will expand reaching extents not seen since the 1980’s
(Please note: I am NOT a climate change denier. But as someone with scientific training and a lot of experience with complex computer models I am willing to acknowledge the scientific possibility that these models may not accurately predict climatic changes over short periods of time – i.e. 10-20 years. And this is my Worst Case scenario for renewables)
Climate change scientists will be forced to acknowledge an incomplete understanding of how the earth’s atmosphere and oceans are reacting to increased levels of CO2. The level of skepticism amongst the general public will rise as will complaints about the costs of supporting the installed base of solar panel and wind generation. Financial support for renewables will suffer further cuts.
Without any significant additions to the generation fleet the North American grid will continue to experience brown-outs and regional blackouts as a large amount of intermittent renewable generation continues to get preferential access to the grid.
Most states will now have enacted moratoriums on the development of wind energy resources. The wind energy development and solar panel installation industry in North America will largely collapse impacting 10’s of thousands of workers. Investors will shun the industry for at least 5-10 years.
2018: The largest incumbent utilities will propose that renewables must enter the Merit Order Market whereby they must guarantee delivery of a specified amount of electricity at fixed prices, putting them on a truly level playing field with traditional thermal generators.
These utilities and their financial backers also pledge rapid construction of new Combined Cycle Gas Turbine (CCGT) electricity generation plants which they claim would actually reduce CO2 emissions more effectively than the further development of renewables. As a precondition they demand an end to all explicit subsidies for renewables and the elimination of all Renewable Portfolio Standards.
Facing a public that has grown tired of the constant instability in the power supply and rising electricity rates the conditions set by the major utilities are accepted.
Wind energy producers very quickly find that they are unable to meet the requirements of the Merit Order Market with the result that they can only rarely get access to the grid when the winds blow steadily for many hours at a time, and even then for only a portion of their production. Many smaller wind generators are bankrupt by the end of the year.
Because of the variability of Photo-Voltaic solar only a portion of electricity generated from utility-scale solar plants can be marketed. Extensive implementation of Time-Of-Use pricing reduces the value of electricity generation between 10:00 am and 2:00 pm to almost nothing because of the glut of PV Solar in that time period. Residential installations of solar panels no longer provide any significant financial benefit to homeowners. Utilities start to add a grid access fee for these installations which will cause some homeowners to simply disconnect older solar panels.
By the end of the year the utility industry in North America looks very much like it did in 2000. Wholesale prices, although they remain deregulated in some states, will be controlled by very large utility companies through the Merit Order Market. Retail prices for electricity will actually start going down as new CCGT plants are added to the generation fleet.
For many supporters of renewables, myself included, this would be a very disappointing outcome. For readers that may dismiss this as an outlandish and impossible prediction of what could happen I will offer up two examples that illustrate that such changes in the energy generation and distribution environment have happened in the past.
Up until the 1930's most people lived on farms and had no electricity. For irrigation and water pumping purposes most farms had windmills which actually worked quite well much of the time and had minimal operating costs. But when rural electricification spread throughout the U.S. as part of the "New Deal" farmers quickly stopped using windmills even for the purposes that they were quite good at in favour of electric pumps. This change took place despite the fact that electricity was quite expensive compared to the "free" availability of wind energy. The main reason for this change was the unreliability of windmills.
In the 1980's the largest utility-scale solar power installation in the world was constructed in California. Despite the fact that the facility incorporated never-before-tested technology the SEGS plants have delivered reliable electricity to the California grid for more than two decades.
So what is my point?
Shortly after the last plant came on-line the company that constructed the plants went bankrupt because certain tax credits originally provided to support the project were cancelled.
This experience sent a global chill throughout the solar power industry and it was more than 15 years before another similar plant was constructed in Spain. And that despite the fact that Concentrated Solar Power plants can be equipped with Thermal Energy Storage so that they can run 7x24x365.
As I have stated in many other blog posts I believe that we need to change the focus of renewable energy development if we are to avoid this "Worst Case Scenario". Continued develop of PV Solar and Wind will not allow us to transition to a sustainable energy environment. A much more complex and multi-faceted approach is required, as outlined in my Sustainable Energy Manifesto.