Perhaps surprisingly for a company in the business of selling natural gas and diesel burning reciprocating engines for ships and power generation, Wärtsilä has not shied away from embracing the challenge of decarbonization. A few years back, the 189 year old Finnish company published the Path to 100 study, which embraced renewables as the most cost-effective set of technologies to drive power system emissions toward zero by 2050. Of course, as skeptics never fail to point out, “the sun doesn’t always shine, and the wind doesn’t always blow.” Indeed they don’t, thus renewables require a supporting cast of dispatchable technologies to maintain power system reliability. The Path to 100 study identifies battery storage and flexible thermal generation as natural teammates with intermittent renewable energy. Both technologies are highly flexible tools for power grid operators to deploy when needed. Legacy baseload thermal generation such as coal plants and natural gas steam plants can be retired only once the replacement flexible dispatchable capacity is built. Ultimately, clean fuels such as “green” hydrogen (or ammonia, or methanol, or synthetic natural gas…more on that later) can decarbonize the final 10 – 20% of emissions from the electricity grid.
The Path to 100 study is a vision that puts power system reliability first and relies primarily on technologies that exist today. This commitment to a rational, cost-effective approach to power system decarbonization is a big reason why I decided to join Wärtsilä after spending over five years leading the resource planning and procurement consulting practice at Ascend Analytics. I’ve just completed my first six months here at Wartsila in my new role as Principal, Markets, Legislative, and Regulatory Policy. In this series of four blog posts, I review why I believe in Wärtsilä's vision and why you should too.
This first post is a review of the role natural gas generation plays in today’s power system. In the following post, I will discuss how natural gas can be leveraged to aid in the transition to a net zero carbon power system. In the third post, I get into the nuts and bolts of how utility planners value power resources, and how we need to update our tools and techniques to make sure we’re picking the right resources for the power system of the future. In the final installment, I’ll discuss the prospects for clean fuels and how they could be the final piece of the decarbonization puzzle. These posts are adapted from a presentation I gave at an EUCI Conference on “IRP Best Practices” that was held in Denver this past spring.
Today the US has nearly 500 gigawatts (GW) of natural gas capacity, which is by far the largest source of electric generation by installed capacity compared with 200 GW of coal, 132 GW of wind, 61 GW of solar, 100 GW of hydroelectric, and 95 GW of nuclear. The amount of energy produced by each resource type varies depending on operational and economic factors. A nuclear plant runs all year round except for refueling outages whereas a natural gas combined cycle power plant may only produce half as much energy as it is capable of and a natural gas peaker plant may only run a hundred hours per year. In resource planning parlance, peakers provide mostly "capacity," to keep the lights on when the load is near or at its peak as opposed to "energy" needed day-in and day-out.
Natural gas is also the number one fuel for energy generation, having surpassed coal in 2015. Renewables continue their upward trend, such that this year renewables (including hydroelectric) provided more energy to customers in the US than nuclear and coal. The following EIA chart shows that gas and renewables are on the upswing while coal is in secular decline.
The fracking revolution is largely responsible for the growth of gas in the power sector. Beginning in the early 2010s, oil and gas drillers started combining horizontal drilling with hydraulic fracturing to access “tight” shale deposits, thereby opening vast new inventories of oil and gas to be produced cost-effectively. A decade of cheap gas less than $5/Million metric British thermal units (MMBtus) has helped make coal power increasingly uneconomic, leading to many coal plant retirements.
Gas recently experienced an upsurge in price, largely due to an imbalance in supply and demand coming out of the pandemic as well as increased demand in Europe for liquified natural gas (LNG) after economic sanctions on Russia went into effect. As of this writing, gas in the US has returned to its familiar equilibrium around $3/MMBtu and production has rebounded since the pandemic related slowdown. Gas storage inventories higher now than the five year average and there appears to be no visible reasons why American electricity consumers won't continue to enjoy low priced domestically produced energy.
The substitution of coal with natural gas and the recent rise in renewable generation is a major reason why United States greenhouse gas emissions peaked in 2007 at six gigatons of carbon dioxide, declining to just under five gigatons in 2022. Nevertheless, the US is not on course to meet the 1.5 degree Celsius emissions targets of the Paris Accord. According to the IEA, in 2022, global emissions from natural gas increased 89 million tons, more than offsetting the 69 million ton decline in coal emissions. In the near term, deploying massive amounts of renewable energy, promoting energy efficiency, and encouraging beneficial electrification such as electric vehicles and heat pumps are the only feasible options for accelerating decarbonization. Perhaps in the 2030s, advanced nuclear will find success, but that is a topic for another day.
Renewables provide cheap energy, but they provide little capacity. In a fossil fueled and nuclear power supply mix, energy and capacity are assumed to be bundled in the same technology. Grid operators dispatched gas and coal plants to generate the energy customers required and it was dispatchable and controllable enough to keep the grid in balance. Now utility planners unbundle energy and capacity, choosing to deploy renewables to fill the system energy need and dispatchable technologies to make sure that energy is delivered exactly at the time when its needed. Storage is an obvious solution, but the most commonly deployed lithium-ion battery technology can only cost-effectively store 4 to 6 hours of output. Natural gas generation is still heavily relied on to provide capacity when needed, especially during extreme weather events such as heat waves and cold snaps. For example, the following chart shows the California Independent System Operator’s (CAISO) system on September 6, 2022.
California has in many respects led the push for renewables. CAISO has 16 gigawatts (GW) of solar and 8 GW of wind. Typical peak demand in the late summer is 50 GW. On September 6, CAISO almost had to shed load in rolling blackouts, if not for an unprecedented “amber alert” that went to every Californian’s phone pleading for urgent reductions of electricity use. Solar provided significant support during the day, however by the time the sun set all that was left the keep the system afloat was natural gas generation (imports are largely gas generation). CAISO’s 2 GW of batteries were critical from 6 – 8 pm, and they will be increasingly asked to carry the resource adequacy burden. But just a quick glance at all the gray area in the generation chart shows just how far away CAISO is from serving hot summer days with renewables and storage.
ERCOT, the Texas grid operator serving 26 million customers, famously experienced a major grid failure in 2021’s Winter Storm URI. An extremely rare cold snap froze power plants and lowered natural gas pipeline pressure causing unprecedented outages in the thermal generation fleet.
The chart above shows the amount of capacity forced out by cause between February 14 and 19th, 2021. Between Sunday and Monday, 20 GW rapidly dropped offline. Mostly “weather related” freezing of gas fired power plants, but some fuel limitations like low gas pressure and frozen coal piles. A nuclear plant lost about half of its output due to pipes freezing. And yet, when you look at what resources were able to stay online, you still see that gas is by far the most available resource.
Wind generation, for which Texas is by far number one in the country for total megawatts deployed, was high earlier in the week but then dropped off to very little. Solar provides little energy or capacity in the winter. Four-hour battery storage can only do so much when the cold snap is several days. Again, we see just how hard it is to quit gas for reliability.
I think there are many lessons to be learned from Winter Storm Uri, including that climate change will make extreme weather events more common. If Uri was a one in one hundred-year event in the past, it might be a 1 in 30 year event going forward. Also ERCOT was not expecting the amount of load that showed up, which results from a combination of lots of population growth and unexpected plugged in resistance heating load. These trends further underscore the urgent need to ensure reliable and dispatchable power will be available. Texas needs to continue its efforts to make sure generators harden their facilities against extreme weather and assure more investment is made in the gas production, transportation, and storage systems needed to maintain gas flow during extreme weather events.
It is also a good reminder of a fundamental resource adequacy principle that states there is no such thing as perfect capacity. During Winter Storm Elliott in 2022, 46 GW or 23 percent of PJM's generator fleet experienced an outage, mostly natural gas generators. Every technology comes with its own set of risks. Deploying a diverse portfolio of assets is the best strategy to minimize exposure to unexpected shocks. Natural gas generation can improve its reliability by adding dual-fuel capability and maintaining a week of diesel fuel on site. (Wärtsilä's engines have duel fuel capability and the Finns really know how to design equipment that withstands very cold weather)
This reliability problem experienced in Texas and across the country posed by winter cold snaps has a name in the resource planning field, dunkeflaute, which is German for cold windless days. NorthWestern Energy in Montana shows this problem very clearly.
Here again we see NorthWestern’s power system gets lots of wind energy early in the cold snap, however suddenly the wind drops off and the rivers start to ice up, reducing hydro output as well. In this case NorthWestern’s thermal fleet of Colstrip coal plant and several gas plants cannot meet load for three days straight. They are forced to rely on their neighbor utilities to provide excess capacity to keep the lights on. Adding more wind and solar in this case simply won’t help, dispatchable capacity with at least 100 hours of continuous output is required, and at least for today and the near foreseeable future, natural gas is the only option. We’ll talk about some potential alternative technologies that can fill this role in future posts.
Today natural gas plays a foundational role in our power system. Getting off gas for climate reasons will be a herculean task taking decades. Renewables can significantly reduce the need to burn gas to make energy and thus reduce emissions, but the dispatchability and unlimited duration of gas generation makes it essential for reliability for the foreseeable future. In part 2 of this series, we’ll look at how not all gas generation is alike, and that the road to decarbonization requires continued investment in flexible gas generation while simultaneously retiring legacy gas plants no longer suited for the highly renewable grid.