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Your Power Plant Is About To Be Replaced: Be Prepared for These Technology Adoption Challenges

Alex Forbes

Trends such as the solar power duck curve and consumer energy storage pose technology adoption challenges, as the role of power plants evolves.

Anyone making an investment decision to replace a power plant today is doing so in a very different business environment than the one in which that plant was built. Technology adoption challenges may have multiplied and become more complex, but they are also creating unprecedented opportunities. This is evident in California, where disruptive technologies, climate-friendly energy policies, and innovative commercial models are coming together to create a vision of a new energy world.

It is a world where renewable energy sources play an increasingly larger role in the energy mix. Customers can also be suppliers and the primary role of a distribution utility is to provide a plug-and-play grid that enables energy business to be conducted in new ways—by everyone involved. Where California is leading, others will follow.

The Duck Curve

One disruptive trend impacting all aspects of the electricity supply industry is the rise of intermittent renewable energy sources such as wind and solar power. California now has so much solar power that demand for other forms of generation ramps steeply downwards and upwards as the sun rises and sets, leading to what has become known as the duck curve. This is because, when average daily load curves are plotted for the years from 2012 until 2020, the result looks remarkably like a duck, as the belly gets lower and lower.

Ramp rates today can be as steep as 10 gigawatts (GW) over three hours, and California's Independent System Operator (CAISO) projects that rates could rise to 13 GW over three hours as more solar capacity is added to the system. Such steep ramp rates are possible because more than half of California's generation capacity is gas-fired. This provides a lot of flexibility in operation, but there are clear implications for the economics of those plants.

A related trend is the rise of distributed energy resources (DER), as customers increasingly adopt rooftop solar, onsite energy storage, electric vehicles, and energy management systems.

"California is at the forefront of the power system transformation towards a cleaner, more diverse future with reduced carbon emissions," says utility Southern California Edison (SCE) in a white paper published last September. "The state is home to 50% of the nation's private solar systems—more than half a million businesses and homes. It boasts more than 200,000 plug-in electric vehicles (PEVs)—40 percent of the nation's PEV sales with a goal of 1.5 million by 2025." SCE estimates that DER penetration within its territory could more than double to over 12 GW in the coming decade— the equivalent of 12 nuclear reactors.

As the increasing penetration of variable renewable energy sources and the rise of DERs have a growing impact on load profiles, the need for flexibility will play a big part in any investment decision. This is true for not only today, but also the future, as power systems evolve in an industry that increasingly values flexibility.

A third disruptive trend is the rise of energy storage in both behind-the-meter and utility-scale systems, and again, California is blazing the trail. This is partly to mitigate the steepness of the ramp-up rates in the duck curve, but also to reduce dependence on gas following the crisis at Aliso Canyon, a leak at the natural gas storage facility. For the first time worldwide, SCE has invested in a hybrid system that brings together a gas turbine with a utility-scale battery to harness the advantages of both.

Leaving the Comfort Zone

Replacing a power plant involves challenges, but it also creates opportunities—a major one being the chance to acquire new technologies. In particular, adopting the latest digital systems can help an asset manager to better understand the plant and the business environment in which it operates. The benefits include more efficient operation and better management of plant outages. However, utilities commissions are only likely to allow generators to rate base such investments if their value to customers is clear.

Up to now, the adoption of new digital technologies has been slower than some expected, but that will change as asset managers realize the competitive advantages they can bring in an increasingly competitive world.

Another option is to work with an energy consulting team that carries out production cost modeling. Sophisticated digital models can give asset managers a deeper understanding of how well an asset will work in its target application and how to best resolve technology adoption challenges. That said, such models may not capture all the nuances of the market, and that needs to be factored into the analysis of the results. A key decision will be whether the cost involved is worthwhile, and that needs to be weighed against the scale of the investment and its operating life.

Building an electricity system of the kind that SCE aspires to will also require the ongoing involvement of governments and regulators to create a policy framework that is equitable for both suppliers and customers. "This transition will likely take more than a decade," says SCE, "which is why it must start now."

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