Middle Years: 2018-2022/The Age of Self-Sufficiency

Middle Years: 2018-2022/The Age of Self-Sufficiency

Gallup polling data identifies a majority of Americans unnerved by ongoing political instability in the Middle East. Geopolitical uncertainty leads to wildly fluctuating and sometimes abnormally high oil prices. In turn, this unpredictability threatens U.S. economic growth and drives public support for active disengagement from the region. News media coverage of the Middle East turmoil reinforces the notion that higher rates in the short term will lead to a sustainable and independent energy future in the long term.

As a way to achieve more energy independence, the U.S. doubles investments focused on electric system infrastructure. At the same time, annual increases in the federal defense budget are capped. Forced to do more with less, a number of U.S. military bases are completely off the grid by 2022. This military demonstration yields commercial applications that lead to innovations in technology and infrastructure. There’s now a greater reliance on modular, distributed resources that are low risk, have fast payback, and are situated in strategic, high-value locations.

Parallel to these developments, encouraging the growth of new power industry models becomes government policy. As a result, new utility business models and regulatory incentives gain momentum. The Energy Imbalance Market is increasingly operational and enables the integration of renewables while more efficiently utilizing gas. Some consumers invest in power systems providing an unprecedented level of self-sufficiency. These systems, which are often commercialized versions of military innovations, combine distributed generation, energy storage, advanced batteries emerging from the electric vehicle sector, information systems to enable energy efficiency and sophisticated load management, and other smart tools offered by emerging smaller players.

As more consumers become familiar with the possibilities and benefits of the changes described above, they now view energy efficiency and distributed generation as effective tools for lowering their energy costs. Public polls show a willingness to accept new rate structures necessary to accommodate the shift to energy efficiency and distributed generation as well as the entry of third party devices.

At the same time, ongoing extreme weather events focus more attention and investment on collaborative solutions. Maintaining infrastructure and support systems by means of climate-friendly, environmentally-efficiently actions take precedence. Utilities decide to bury both new and existing power lines in an effort to lower maintenance and repair costs. While hydro generation declines in parts of the U.S., increases in wind and solar power along with more gas generation balance the system.

These many innovations accelerate policy changes centered on clean energy solutions. There’s now acceptance of a Clean Energy Standard. California increases the RPS to 50%, while Colorado also boosts the RPS to 50%. Among other states, debates center on implementing a carbon tax or a cap and trade system as a way to raise revenue. The U.S. signs an international climate change treaty and agrees to enact policies to reduce greenhouse gas emissions. U.S. leaders in both government and business support these policies because they realize that innovation in the energy sector creates new jobs and industries. For example, a market for Concentrated Solar Power (CSP) with molten salt storage emerges. It becomes cost competitive and helps to balance both wind and photovoltaic power.

With the Chinese economy rebounding, American and Chinese companies sign joint-venture agreements to sell products and services in both developed and developing nation. Companies headquartered in California, other western states, and Canada lead the way through related investments. The U.S. and those European nations that remain on a slow growth path because of their fiscal austerity measures compete for highly valued sources of economic vitality. Government efforts to reduce deficits force them to target spending in a strategic fashion to spur economic development.

Technological innovations in the energy supply and distribution parts of the electric power industry accelerate because of what is happening in industries like IT (software and data storage), materials, communications, manufacturing, and nanotechnology. Cell phone applications for remotely monitoring and controlling energy management systems in the home and at offices become more widely available. Consumers know how to manage their power consumption, and, in a growing number of cases, live with grid-independent power systems.

Smart grid system applications now penetrate the distribution system of utilities creating new options for further use of distributed generation and energy conservation. Smart appliances and space conditioning systems develop into industry standards. Analytic tools needed to plan and operate distributed generation also improve. Additionally, advancements in supercomputing and big data management lead to improved weather modeling and forecasting while providing cost-saving benefits. Overall electricity demand growth in the WECC region goes flat.

During this time, the warnings of a boom-and-bust cycle in the natural gas sector are validated, albeit in partial fashion. It’s not so much a lack of resource supply, but rather the rapidly rising costs due to stricter air and water quality requirements that hinder the sector’s expansion. Because of the enactment of state laws to protect air and water quality from shale gas development, a slowdown in exploration occurs. Many small independent exploration companies collapse and are bought up by the traditional large oil and gas companies at substantial discounts. This consolidation takes several years to rationalize the industry, close down poor performing projects, and stabilize prices. As this consolidation process evolves, greenhouse gas restrictions tighten, further restricting the use of natural gas and leading to further price declines.

Efforts to introduce natural gas into the transportation sector don’t really succeed because hybrid electric vehicles already use gasoline very efficiently. Drivers decide that the costs of switching from an electric hybrid to a natural gas vehicle are prohibitive. Natural gas-fired generation used for peaking purposes is the single best way that the fuel can serve the transportation market. Natural gas is the cleanest short-term alternative in the event that new base-load or peaking generation is needed. Some utilities seriously consider options for new gas-fired base-load generation as a replacement for nuclear plants close to retirement.

Natural gas does serve as a transition fuel in a specific circumstance: coal-fired generation is destined for a complete phase out in all but a few limited instances in the WECC region. The historical cost advantages of coal as a cheap and abundant fuel for generation disappear because of the high costs of reducing or capturing greenhouse gas emissions. Sequestering carbon emissions turns out to be far more technically difficult and expensive than had been expected.