emerging global electricity trends...source: gtm research, 2018 cagr: 82% (2017-22) 20x total growth...

by

Emerging Global Electricity TrendsOpportunities and Challenges

Romkaew Broehm, Ph.D.

April 22, 2019

for

Petroleum Institute of Thailand’s Public Lecture

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Introduction

Transmission

Distribution

Generation

What is changing in the electricity industry? What are the key drivers of these

changes? How do regulators and policymakers

respond? What opportunity exists? How might industry players shape

their strategies?

What is changing in the electricity industry? What are the key drivers of these

changes? How do regulators and policymakers

respond? What opportunity exists? How might industry players shape

their strategies?Customer

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The World Needs More Electricity

In 2018, the global electricity demand rose by 4%. It was led by China’s growing demand in the industry sectors and India’s building sector.

In 2018, the global electricity demand rose by 4%. It was led by China’s growing demand in the industry sectors and India’s building sector.

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

China U.S. India Europe Japan S. Korea

2018 Electricity Demand Growth (%)

Average

Billion toe

Primary energy consumption  by region(1 toe = 11.63 MWh)

Source: BP Energy Outlook 2019. Evolving Transition Scenario.

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2018 Demand Still Met By Coal

Source:  EPPONote:  On EGAT system only

Coal & lignite, 35,796 GWh, 17%

NG, 116,265 GWh, 57%

Fuel oil, 65 GWh, 0%

Diesel, 112 GWh, 0%

Renewables, 17,800 GWh, 9%

Hydro, 7,597 GWh, 4%

Import, 26,669GWh, 13%

2018 Thailand’s electricity generation mix

Thailand204,304 GWh

The World Still Isn’t Meeting Its Climate Goals

Three years after nearly 200 countries signed a landmark climate agreement in Paris, they are still far off‐track from preventing severe global warming in the decades ahead.  This month, diplomats from around the world are gathering in Katowice, Poland, to discuss stepping up their efforts.

By BRAD PLUMER and NADJA POPOVICH, 7 Dec 2018, NY Times

World26,700 TWh

2018 world’s electricity generation mix

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What Is Changing In Electricity Industry?

Transformation

3D3DDecarbonization Decentralization

Digitization

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What Is Changing In Electricity Industry?

Transformation

1st D: Decarbonization

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Growing Coal Needs in Some Countries

World Electricity Generation by Technology

Source: World Energy Outlook, IEA. New Policies Scenario

While some countries are cutting down their coal-fueled power plants, other parts of the world still plan to rely on them, e.g.,India and Indonesia.

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Development Path of Renewables – Phase I Government Subsidies

Phase I: Government Subsidies

Renewable Portfolio Standard (RPS)

A good example is the RPS program in the U.S. Renewables got a jump start from agovernment subsidy as early as 1997 (State of MA).

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Transmission Projects for Renewables

CREZ ($7 billion, in-service in 2013),

CAISO Tehachapi Renewable

Transmission Project ($3.2 billion,

in-service in 2016),

SPP Priority ($1.6 billion, in-service

in 2016),

MISO CapX2020 ($2 billion, in-service

in 2017).Source: EEI

Actual and Planned Transmission Investment By Shareholder-Owned Utilities (2007-2016)

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Merchant Transmission To Deliver Renewables

The SOO Green Project, 2,100 MW HVDC underground transmission line, is designed to serve as a renewable energy hub by connecting two of the largest electric power markets in the U.S.: MISO and PJM.

SOO Green attempts to replicate the model used to build America’s fiber optic network by burying an underground HVDC transmission line along an existing railroad.

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From De Minimis Scale to Credible Size and Impacts—Phase II

Phase I: Government Subsidies

Phase II: Increasing Scales

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Declining Costs Push Renewables To Compete with Fossil—Phase III

Phase I: Government Subsidies

Phase II: Increasing Scales

Phase III: Compete with Fossil Power

By the early 2020s, it’s cheaper to build solar & wind than operating existing coal power plant.

By the early 2020s, it’s cheaper to build solar & wind than operating existing coal power plant.

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Disruptive to Existing Thermal Generation

Projects

SCEAlamitos Power

Center100MW(2021)

FPLBabcock Ranch74.5MW Solar

10 MW Storage

Kauai Island Utility Coop

Lawai Project 28MW Solar

100MWh Storage(2019)

APSMaricopa County

65MW Solar50MW Storage

(2021) Tucson Electric Power

100MW Solar30 MW Storage

S&C ElectricMinster Project4.2MW Solar7MW Storage

Xcel1,000MW Wind700MW Solar

275 MW Storage

Advent of Renewables + Battery Storage

Tucson’s solar+ESPPA was bis at less than 4.5 cents per kWh, below an incremental cost of natural gas-fired power plant.

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Will Batteries Out-compete CTs?

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

0

100

200

300

400

500

600

700

800

900

1,000

8 10 12 14 16 18 20

4‐Hou

r Battery Cost ($/kW

)

4‐Hou

r Battery Cost ($/kW

h)

Battery Lifetime (Years)Sources: EIA AEO (2017). NREL (2015). Peaker Replacement Values from Lazard December 2016 Report (Page 14). Brattle Assumptions .

CT $1,092/kW

Adv. CT $672/kW

Zinc Peaker  Replacement $648/kWh

Lithium Ion Peaker Replacement $949/kWh

Lithium Ion Peaker Replacement $417/kWh

Zinc Peaker  Replacement $258/kWh

63%2005-2030

Battery Storage

Source: The Brattle Group (2018)

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But New Landscape Looks Different

Transformation

2nd D: Decentralization

Distributed Energy Resources (DERS) are generation behind-the-meters. These include, but not limited to, solar photovoltaics, small winds, fuel cells, energy efficiency, demand response, energy storage, EV, and microgrid.

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Growing Solar Rooftop

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Growing Numbers of Smart Technology Being Deployed At the “Edge” of the Grid

Distributed Storage(U.S. capacity, MW)

060

1,200

2013 2017 2022

Source: GTM Research, 2018

CAGR: 82% (2017-22)20x total growth in 5 yrs

0

250,000

1,200,000

2010 2017 2025

Electric Vehicles(U.S. annual sales)

Edison Electric Institute and IEI, 2017

CAGR: 22% (2017-25)5x total growth in 8 yrs

EV Charging Infrastructure(U.S. annual sales)

Edison Electric Institute and IEI, 2018

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Increasing Roles and Responsibilities of DSO

Vlerick Business School surveyed more

than 2300 DSOs in Europe, and found

that by 2020:

• DR will become mainstream (70% of

the survey)

• EU will have 80% rollout target for

smart meters

• 37% believes that it will be common

for customers to self-supply their own

electricity.

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DERS Introduce Customers With Choice

Transmission

Distribution

Centralized System with Supply Hierarchy Decentralized System with Two-Sided PlatformShifts to

Transmission

Distribution

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The Third Change is Digitization

Transformation

3rd D: Digitization

i

Software is eating the worldMarc Andreessen (2011)

Software is eating the worldMarc Andreessen (2011)

For the electricity sector, software is eating the grid from the edge, i.e. DERs have brought the grid into its Internet of Things (IoT). For the electricity sector, software is eating the grid from the edge, i.e. DERs have brought the grid into its Internet of Things (IoT).

▀ Various policies and programs such as TOU and DR

▀ Home Network that allows a homeowner to control home appliances, lighting, media and home security from mobile phone

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Emerging AI Grid Components To Integrate Customer Engagement and DERs

EV Charging Station

End-User Technology

Smart Appliances

Solar, Wind,

Storage, Microgrid

Infrastructure

ApplicationsCustomer Services

Next Generation of Computing-Cloud and Connectivity with 5G or LPWA*

* LPWA = Low-Power Wide Area

Transmission and

Distribution Grids

Billing& Data

Management

“With all the hype around IoT, many analysts were predicting there would be more than 20 billion connected devices by 2022.”

Gus Vos, “What is LPWA for the Internet of

Things? Part 1: The Four C’s of IoT” (2018)

Digitization + Connectivity= Internet of Things

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Customers Become “Prosumers” – Opportunities

This also creates tremendous opportunities for:

Customers to control electricity usage

Customers to engage with other customers and new service providers

Source: PowerTree

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Challenges Facing Utilities and Regulators

This creates tremendous challenge for grid operators, traditional utilities and regulators, including relating to:

Resource planning much more uncertain with customers making some of the decisions themselves, albeit without full system-impact information or concern

System balancing, service quality, cost recovery, pricing, consumer protection, competition, equitable treatment of customers, and simplicity

Much more differentiation of customer classes and rate designs needed to capture variations in customer DER use and consumption profiles

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Emerging New Business Model

Case Study: Southern California Edison (SCE) proposed to invest $2.3B through 2020 to expand the distribution utilities’ capabilities and roles to be Distribution System Operators (DSO):

• Reinforce local grids to manage distributed energy resources

• Add advanced sensors, communications, and automation to monitor the distribution system in real time to minimize disruptions and maintain reliability

DSO is a significant advancement toward how to best use and manage distributed generation

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Utility’s New Product – U.S. Green Tariffs

Source: SEPA

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NY Utilities’ Demonstration Projects

To understand business model of new energy of DERs and the development of DSP, NYPSC has allowed incumbent utilities to propose demonstration projects with 3rd parties.

Cenhub Market Place: Central Hudson partners with a tech company to build an on-line energy product to provide customers knowledge and tools for effective total energy bill management

Clean Virtual Power Plant: Coned partners with DER providers to integrate solar and storage to provide the system wide efficiency; fuel and resource diversity and system reliability and resiliency

CONnectED Homes Platform: Coned partners with tech companies to build a marketing platform targeting residential customers to manage home energy usages and their bills

Energy Marketplace: Iberdrola partners with a tech company to launch an online marketplace for customers to buy energy products and services

* http://www3.dps.ny.gov/W/PSCWeb.nsf/All/B2D9D834B0D307C685257F3F006FF1D9?OpenDocument

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A Utility Smart Grid Demonstration Project

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Could You Continue to Live in Deny?

Traditional Cable Subscribers vs. Netflix

Blockbuster files for  Bankruptcy

Hulu laun

ches

“Neither RedBox nor Netflix are even on the radar screen in terms of competition”

Blockbuster CEO, Jim Keyes

“It’s a little bit like, is the Albanian army going to take over the world?  I don’t think so.”

Time Warner CEO, Jeffrey L. Bewkes

“This has been an era of experimentation, and I think it’s coming to a close.”

Time Warner CEO, Jeffrey L. Bewkes

Amazon

 laun

ches 

Prim

e Vide

o

Charter Cable files for  Bankruptcy

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Which Path Will You Choose?

Incumbent Evolution

Emergent Revolution

Legislative Innovation

RegulatoryInitiatives

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Thank you

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Presenter Information

Dr. Romkaew Broehm is an economist with over 25 years of in-depth experience in the electric power industry. She has assisted clients in the areas of market reform, market oversight, and alternative energy resources. She also has led numerous studies in network transmission simulation, strategic bidding behavior, marginal cost studies, and generation and transmission asset valuations. Dr. Broehm also authored books and articles. Her latest article is on Economic Framework for Compensating Distributed Energy Resources, Electricity Journal (October 2018).

Prior to founding RPB Energy Economics LLC, Dr. Broehm was a principal at The Brattle Group. She also holds a Lecturer position at Boston University’s Economics Department.

ROMKAEW P. BROEHMPrincipal │ CambridgeRomkaew.Broehm@rpb-energy.com