The Coming Crisis in Electricity Generation

Davis Swan | Apr 23, 2013


For more than 100 years electricity generation and distribution systems have evolved to become one of the most reliable services imaginable - one which has been the foundation of the industrial expansion and prosperity of the developed world. Our society is totally dependent upon this and even relatively short and localized interruptions in the power supply (for example during the Sandy superstorm) cause major disruptions to everyday life.

The reliability of the system depends upon a rather delicate balance of supply and demand that varies throughout the day and throughout the year.

Huge thermal base-load steam turbine generation plants that can reliably provide the same power output 7x24x365 are the foundation of the system in most parts of the world. Historically these have been fueled by coal which generates "dirty" (in some cases toxic) ash and a lot of CO2. More recently single cycle and combined cycle natural gas plants have played an increasingly important role. These plants are cleaner and much more efficient than coal plants in that they transform more of the energy generated by combustion into electricity. The disadvantage of these plants is that natural gas has historically been much more expensive than coal.

In regions where there are large rivers that drop hundreds of meters in a relatively short distance it is possible to build hydro facilities. These were the earliest source of large scale electrical generation and are still used extensively. Unfortunately, most of the best hydro locations in the world have already been developed.

Starting in the 1950's nuclear plants were added to the mix and generate a significant percentage of electricity in many countries (the highest being 75% of electrical output in France).

These base-load plants are designed to run all the time at a relatively constant output receiving a fixed price for the electricity generated. That is how they run most efficiently and a constant and predictable revenue stream underlies the calculations used to get the building of these plants financed and the operating costs paid. In most cases the payback on these facilities is achieved only after many years of operation.

When electrical demand starts to peak in the late afternoon and evening peaking plants come into play. These are typically single cycle natural gas turbine plants that can come on-line in a matter of 15-20 minutes or less. Because they run only during peak demand times the expectation is that the electricity they generate will command a higher average price. It is also assumed that they will be able to generate revenue most days although that varies with time of year and the weather. For example, very hot summer days and very cold winter days will result in higher peak demand than moderate days in spring and fall.

This complex balance of base-load and peaking power plants has been in place for decades and has resulted in a very reliable electricity supply. The most common source of power outages are storms that bring very strong winds, knocking down trees and branches that take down overhead electrical lines.

Over the past decade that balance has been disrupted by the introduction of renewable energy sources such as solar and wind. These are both unreliable in the sense that it is not possible to match supply with demand, and highly variable due to passing of clouds in the case of solar or frontal weather systems for wind. As an example, on Christmas day, 2012 Texas set a new wind generation record of 8.638 GW (26% of total supply) for a few hours. The very next day across the whole of Texas there was essentially no wind generated electricity available for 6 consecutive hours.

In most jurisdictions renewables are given priority access to supply the electricity grid regardless of whether or not there is demand. In order to balance supply and demand thermal generating stations have to cut back output, electricity is exported to neighbouring jurisdictions (typically at very low prices) or hydro stations "spill water" by redirecting the flow from penstocks to spillways.

As long as renewables made up a relatively small portion of total generation capacity the physical problems could be handled. But the economic issues are now coming to the fore as the development of renewables continues.

With base-load and peaking thermal plants now sitting idle (as spinning reserves) for more and more of the time the economics of running these plants has been significantly eroded. Many of these plants are marginally profitable or are actually losing money. There is no realistic hope that this trend will do anything but accelerate in coming years. As a result it is becoming increasingly difficult to get financing for the construction of new thermal generation plants.

In the United States the situation is particularly dire. The MACT regulations issued by the EPA in December, 2011 will result in the closure of many older coal-fired plants (estimates run as high as 34 GW of capacity or more). Plans to replace this capacity are both vague and uncertain. For example, Georgia Power's announcement that 2 GW of coal-fired capacity would be shuttered by 2015 was justified by the addition of 2 nuclear powered plants in 2017 - plants which may well run into significant construction delays. What happens between 2015 and 2017 (or later)?

Texas already has inadequate electrical generation reserves as highlighted in a strongly worded letter from the North American Electric Reliability Corporation. In an effort to get utilities to build new base-load generation facilities the Texas regulator (ERCOT) is raising the maximum peak price for electricity to $9,000/MW-Hour. The hope is that if you let a base-load plant charge 170x the average annualized price for the few hours that it is not idle then construction of the plant still makes sense. Call me a skeptic but I have to say "that dog don't hunt."

In Europe various studies referenced in Paul-Frederik Bach's excellent blog postings outline similar issues.

Beyond supply and reserve issues the economic disruption caused by renewables is producing some very strange consequences; in "green" Germany coal-fired plants are being used in preference to cleaner, more efficient gas-fired plants due to costs; in Ontario they are spilling water at "green and renewable" hydro dams in order to make room for "green and renewable" wind generation; the Danes end up using Swedish nuclear-generated electricity when the winds are calm even though they banned nuclear power generation; in Texas they are selling wind energy at negative prices almost 10% of the time because Production Tax Credits provide a profit.

Declining reserve capacity and uncertainty regarding the economics of new thermal plants will destabilize the electric grid. Rolling blackouts and/or regional grid failures will occur on a more frequent basis. These are the unavoidable consequences of continued aggressive development of renewable generation.

There are public policy initiatives that could make the transition to renewables less risky and disruptive but these would take time to implement. However, I personally don't see any public support or political will to try and slow down the introduction of renewables in order to proactively protect the integrity of the electrical system, particularly in North America and Europe. Instead, I fear that we will have to experience repeated significant failures in the system before the scale of the problem is fully appreciated.

Sometimes it seems like we just have to learn things the hard way!


Davis Swan is president of Debarel Systems Ltd.

Related Topics


Utility Grid Constraints - not well understood

Utility distribution systems were not traditionally designed for embedded power generation, and 2 way power flow. It seems that relatively few people understand the eventual harmful impacts of grid-connected distributed energy resources to our existing grids.

To give a simple example of the impact at the distribution level: suppose 5 homes are fed from a single phase 25 kVA transformer. Also suppose all 5 homes have 10 kW rooftop solar installed. The peak output of the inverters will occur at solar noon. At solar noon, the household electrical load will be relatively low (people at work and school) such that all inverters are backfeeding energy through the transformer. With 50 kW of solar inverter backfeed, the secondary wires and 25 kVA transformer will be overloaded, leading to failure.

If the utility has net metering, as mandated by state or provincial regulators, it will receive very little if any revenue from these 5 homes annually. If the secondary wires burn down or the transformer fails, then who pays for the system upgrades to support the five 10 kW solar installations on these homes? The answer is the utility, and every other ratepayer. Call it subsidies to those that can afford to install rooftop solar. Now if we multiply this scenario by say 500 rooftop solar installations for a given utility feeder, then we have reverse power flow on the entire circuit. The utility's voltage regulation equipment, protection equipment, and other infrastructure are simply incapable of supporting a high penetration level of DER. The bottom line is that an entirely new infrastructure needs to be built to support high levels of DER, yet no one will want to pay for this given the exceptionally high cost to re-build. 

The existing distribution grids are simply not plug-and-play for high penetration or concentration levels of DER. Utilities do not have enough engineering resources to address this problem, and we find ourselves in a very reactive mode with the legislative mandates pushing more and more DER onto our already fragile grids. Energy storage will be essential to accommodate high amounts of PV, yet no one will want to pay for this either. How do we educate public policy makers?

Three enormously powerful new generators should be developed

My website has a link to my compilation of "130 Electrical Energy Innovations". It starts with Brief Summaries of all of these devices.
Three of them are enormously powerful DC generators that maybe you can help us with - hydro-magnetic dynamo, electrino fusion power reactor, and micro-fusion reactor employing stable high-density plasma electron spiral toroids in neutron tube. Their particular Brief Summaries follow:
Hydro-Magnetic DynamoHydro-magnetic dynamos are scalable from 100 kilowatts to 1,000 megawatts. One doughnut-shaped, fuel-less 1000-megawatt hydro-magnetic dynamo is about the size of a two-car garage and can reliably run continuously for 25 years or more with little or no maintenance, no external fuel source, and no pollution. Needs $10 million and two years to research and build 1 – 5 megawatts fourth prototype.
Electrino Fusion Power ReactorA clean electrino fusion power reactor fuses electron sub-particles, “electrinos”, to generate 1880 megawatts for 100 years until shut down for refueling with 155 pounds of brass. By reversing the order-to-disorder arrow in the second law of thermodynamics, a $50,000,000 electrino fusion power reactor could be built which may also reverse all aging and disease processes within a one-mile radius.
Micro-Fusion Reactor Employing Stable High-Density Plasma Electron Spiral Toroids in Neutron TubeBased on ball lightning, safe, pollution-free micro-fusion reactor-powered generators could reliably generate electricity with capacities ranging from 10 kilowatts through 1000 megawatts at the cost of 10% of today's electricity. All transportation vehicles could be reliably and safely powered with micro-fusion reactors with substantially lower production, operating and maintenance costs and without poisonous emissions. The mass and cost of aircraft could be reduced by 70%, and space launch costs reduced by more than 95%.
For comparison Hoover Dam's 17 generators have a total nameplate capacity of 2080 megawatts.
A doughnut-shaped hydro-magnetic dynamo the size of a two-car garage is projected to generate 1000 megawatts of DC electric power.
An electrino fusion power reactor in size is approximately 10 feet x 10 feet x 80 feet. It is projected to generate a net of 1880 megawatts of DC electric power.
The micro-fusion reactor employing stable high-density plasma electron spiral toroids in neutron tube is projected to be scaleable up to 1000 megawatts of DC electricity.

Situation Not that Dire

If reliability issues are that imminent, the last thing you want to do is call for construction of new coal or nuclear plants, which take the better part of a decade (or more) to build and are prone to cost overruns, particularly nuclear and new coal plant designs.

What needs to happen is building in more flexibility into the grid as the penetration of variable, non-combustion renewables (wind and solar PV) increases, i.e. demand response, storage technologies, more energy efficiency to reduce demand, distributed power, and maybe some new natural gas - althought capacity factors still are not maxed out. These resources can be deployed much quicker and are cost-effecitve since they present far less financial risk.

From what I've read about Germany (including documents from the German transmission agency), the issues with reliability are not insurmontable.  The problem has been the pace of change.  In 2011, when the government shut 8 nuclear plants, the transmission agency did do a study to determine if they needed to switch on one of the shuttered nukes.  It found it didn't have to.  The problem that arose that winter was not enough natural gas under contract.  Blackouts were averted due to imports from Austria and elsewhere and there is now sufficient capacity to avert any catastrophes.  In term of local reliabilty issues, the problem is that solar PV in the south was expanded much quicker than tarnsmission build-out from north to south.  However, the duration of these distrubances is less than a few years ago.  So the sky is falling scenario just doesn't exist.

The strategy should be more variable renweables tied to a more flexible grid.  Baseload coal and nuclear are inherently inflexible resources, are costly, and polluting.  Their financial viability is now being challenged severely by advances in technology and the continuing drop in price of variable renewables.   

avert coming crises

Why don't we look at power poles as huge 'rubber ducky antennae?' get those discarded rubber tires out of the landfill and quit cutting timber and paying for steel or alloy poles?  and can we not develop (electro)magnetic cable attachment to poles, so that with the increase of stress from a tree or wind, the line will detach and be intact, ready to be reattached when event is over, like the magnetic cord attaches to the deep fryer?

This "crisis" is not privileged over other energy-related crises

With all due respect, Mr. Swan, there are crises coming at us across the board that will plague our entire economy and global environment and render this crisis secondary.  Many of them can be attributed to the energy industry’s unwillingness, in recent decades, to break from the 20th century paradigm of fossil fuel dependence.  These crises include local and regional pollution, global climate change, resource degradation and depletion, disease, desertification, international conflict, poverty and corruption in underdeveloped nations that fall under the “resource curse” when colonized by the fossil fuel industry. 

No sector -- utility system planning included -- is privileged with immunity from these gathering crises.  It is disingenuous to use fear of blackouts to deter us from taking steps to change our dangerous energy course.  Consider that, in the timespan of a single human lifetime, we have consumed the lion’s share of economically usable fossil hydrocarbon resources that took tens of millions of years to form and have been sequestered underground for hundreds of millions of years.  Extraction and use of the remaining fossil energy resources is certain to be even more environmentally damaging, within the lifetimes of ourselves and certainly those our children.  The new sources in which today’s market is investing certainly have their disadvantages.  But they have the advantage of being relatively (granted, not entirely) benign in their impacts and, even more importantly, inexhaustible on any time scale relevant to humanity. 

The conventional US energy industry simply must get past the stage of denial of the reasons for the trend to rid our energy system of excess carbon pollution.  The pressing question is to determine the technical requirements and system architecture that will enable these new sources to be integrated into the grid, so as to mitigate and minimize the problems to which your article alludes.  The technical literature on this topic is well-developed and rapidly growing.  Several foreign nations are achieving much higher rates of renewables penetration than the US while maintaining acceptable reliability.  It’s not that this can’t be done.  It can be done – it is being done in many nations around the world!  It’s simply that we here in the US are not yet doing it – or, at least, at anywhere near the pace that will be necessary to avert crises that will make your concerns pale in comparison.

Is It Time to Revisit Deregulation

Power markets have always been intensely political and heavily regulated. But since the late 1980s and 1990's Federal and state policies have fundamentally altered the power industry regulatory compact. A regulatory compact that stimulated the growth of the greatest economy the world has ever seen - the post-World War II US economic boom - by guaranteeing a reliable low-cost supply of electricity.

Then, in April 1996, FERC issued Order 888, a set of regulations that functionally separated generation from transmission. Simultaneously state regulatory bodies, pushed in part by heavy lobbying by Enron, further unbundled their electric utilities.

Before deregulation public utilities were vertically integrated with generation, transmission, and distribution falling under the state regulatory umbrella. And state regulators required power utilities to maintain sufficient capacity to meet peak day requirements plus maintaining a significant reserve. In return, the regulated utility was guaranteed the recovery of operating costs plus a reasonable return on its capital investment. Under the regulatory compact power utilities built and maintained approved amounts of excess (standby) capacity, bankers lent short to midterm money to support asset construction, stockholders purchased utility stock and received a stable stream of dividends, and the market was receptive to a steady stream of utility bond issues.

In short, prior to deregulation power generators built and maintained sufficient capacity to meet peak hourly demand even if the last unit of capacity was used once every five years. In return, the utility was allowed to roll standby capacity into its rate base and make a reasonable return on an underutilized asset.

In the deregulated market - where generation is no longer a component of base rates - there is little economic incentive to build the last unit of generation capacity. The generating capacity required to meet the occasional peak demand resulting from an occasional extended August heat wave.

Now, two decades later we are dealing with the fallout from the deregulation, The Coming Crisis in Electricity Generation.  A self-made crisis brought on through deregulation, a lack of investment in standby capacity, and a fickle supply of renewable power.

Under the pre-unbundling regulatory framework sufficient “excess” capacity would be in place to meet occasional peak power demands despite federal and state policy related to favorable tax policy for renewable energy, air and water quality regulations, energy efficiency standards, and renewable power portfolio standards.

Now the growing deregulation-driven nightmare is being addressed, in part, by demand-side management including making power more expensive during periods of peak demand. In return US industrial and commercial power consumers are becoming less competitive within the global business environment.

Maybe it is time to put the genie back in the bottle.

Electric generation crisis

Did I miss something in your article/ Where are the failures you mentioned?

"Instead, I fear that we will have to experience repeated significant failures in the system before the scale of the problem is fully appreciated. "

Unless you are referring to the shuttering of coal -generating plants as failures.

II would like to believe that there could be a solution to the issue of integrating renewables into the generation mix through the use of modern technology and forecasting models. I know that may sound a bit simplistic but in order to solve a problem you must start somewhere and not rule ANYTHING out.

Congratulations Davis!

An excellent column and analysis.  I've been saying the same things for five years now, I'm glad I'm no longer a lone voice crying wolf for there really is a wolf at the door.  The dubious threat of global warming has stampeded an entire political party and all its followers into pursuing policies that will lead to major disruptions in the power system.  Regulators in the United Kingdom were warning of the same thing in that country last week.  Intermittent renewables will not suffice for base-load generation and the Obama EPA is forcing the closure of coal plants.  As you predict, the wolf will get in the door and probably fairly soon.  Welcome to the reality club Davis, I'm a charter member.

Lack of logic in renewables integration

The manner in which we are going about reducing CO2 emissions borders on totally senseless.  Instead of finishing the R&D needed to bring the cost of solar PV down prior to implementation and instead of finishing the R&D needed to develop lower cost storage to time shift wind to the time it is most needed, we have given these techonologies production tax credits, cash grants, and feed-in-tariffs and/or have developed renewable portfolio standards that mandate the use of these renewables with complete disregard for the impact on grid reliablility and what these programs are doing to the electrical generation market. On top of that, the EPA has new rules in place that make it impossible to build even the most efficient of coal-fired units without utilising CCS which then makes the plant uneconomical.

With all the uncertainty thrown into the electricity market in ERCOT, developers are reluctant to spend any money on new facilities.  Therefore, the backup for intermittent wind and solar generation consists of older coal and gas fired facilities that waste fuel and their low efficiencies mean there is no significant reduction in CO2/MWh generated--especially since some of the facilities need to run in spinning reserve at part load to stabilize the output of wind and solar.

The approach of the DoE and EPA to reducing CO2 emissions has been incredibly lacking in common sense as well as being extremely costly and damaging to grid reliability.  The Federal government takes money from everyday working stiffs and non-green energy businesses to put into the pockets of a lot of large corporations, many of whom already have significantly high profit margins, shifting the tax burdens leaving small businesses and individuals with lower effective net incomes while having to pay more for many of the building materials they may need to do business because of the massive usage of concrete and steel per MW for wind farms and the long distance transmission lines to bring their power to load centers.  The poor availability of wind multiplies that impact when considered on a per MWh basis.