Achieving Grid Reliability with Renewables

Executive Overview

The energy transition is driven by the goal to decarbonize the energy used for transportation, buildings, and industry. Lacking a low-cost way of removing greenhouse gases from the air, the solution is to electrify as much as possible with clean power. In 1990, coal accounted for 54.6 percent of the total electricity generated in the US. This number steadily decreased over the years, to less than 17 percent in 2023. While the electric grid decarbonization has already made progress, the proportion of power generated by renewables must grow substantially to achieve clean power. 

There are many multi-faceted management decisions and operational plans that need to be made by RTOs (Regional Transmission Operators), ISOs (Independent System Operators), regulators, and utilities of all sizes. There are financial and reliability benefits that are driving “behind the meter” (BTM) generation and storage which is adding to the complexity. Municipal power companies, rural cooperatives, commercial, agricultural, and residential customers are increasingly generating power and interacting with the larger power grid in new ways. There are many opportunities and risks for suppliers of hardware, software, and services to the electric power industry.

The next decade will see solar and wind generation as the dominant source of new power, further displacing dispatchable fossil power plants. The US installed about 33 GW of Solar PV in 2023 which is up from 21GW in 2022, but the Chinese PV installations were a staggering 216.9 GW eclipsing its record of 87.4 GW from the previous year as seen in the chart below. In a single year, China installed more PV power than the US has installed in its entire history. Grid and transmission operators in the US have a very large interconnection queue as they plan how to integrate renewable power and FERC order 2023 is pushing to reduce this queue which can delay interconnections by up to five years. One might ask how China managed the integration of this much power in a single year. 

Technologies such as biofuels, geothermal, and tidal power will play a relatively smaller role. In the short term the grid will retain the existing hydro and nuclear base load, which will provide about 25 percent of the grid power. Wind and solar will eventually provide nearly half of all US grid power by 2050.

This is a complex problem, and solutions will vary by geographical region, weather conditions, the specific characteristics of the local and regional generation mix, and by the anticipated new electric loads such as EV charging, heat pumps, and eventually green hydrogen production at scale. The key grid operator themes at ISO New England below resemble issues across the US, Europe, and Asia:

Managing Risk

Existing reliability risks during extreme weather will be amplified by increasing restrictions on carbon emissions and a prevalence of limited energy resources (gas/renewables). There are limits to how much risk can be mitigated through the market. New England is learning from the response to extreme weather events in other regions.

Transmission Expansion

More transmission will be needed to interconnect and deliver large scale renewable energy to meet state policy goals (separate from reliability needs).

Adapting the Market Design

Electricity markets are adapting to encourage energy storage, clean peak power, demand response, with changing circumstances and policy objectives. 

Planners must model the weather, utility generation assets, behind the meter solar generation and storage, new customer load profiles due to EV charging, new heat pump HVAC systems, the load from green hydrogen electrolyzers, how smart meters are evolving, how customers will behave with time-of-day pricing and how effective aggregators forming virtual power plants will be to achieve useful levels of demand response. 

Modeling weather and human behavior has uncertainty and risks. Renewables will create significant gaps that must be predicted, and multiple measures must be put into place to ensure these gaps are filled and the grid is reliable as the energy transition progresses. In the short-term gas peaking plants and to a lesser extent coal fired plants are filling these gaps. 

This means grid planners must model and simulate a progression of scenarios and each scenario will have a range of actions to reduce risks. Understanding the characteristics of generation, energy storage, the electrical distribution system, regulations, and the changing load profiles is essential to develop plans that will keep power costs low and power reliability high. This report will provide an update on these various technologies and the solutions that utilities have already deployed, are planning to deploy, and the technical and administrative obstacles ahead. 

The Supply of the Grid Power

Solar

 The US will install between 1600 and 3600 gigawatts alternating current (GWAC) of solar capacity by 2050. EIA projects that renewable energy will provide 35 percent of the total U.S. electricity generation by 2035, up from 22 percent in 2022. EIA's Annual Energy Outlook (AEO) consistently underestimated solar and wind energy growth and EV sales. The DOE Solar Futures Study released in 2021 presents a more optimistic outlook, projecting that solar PV generation could reach 40 percent of the US electricity supply by 2035 and 45 percent by 2050.

From a supply chain view there is a worldwide abundance of Chinese made solar PV panels available and increasing PV panel production outside of China. China dominates the supply of PV panels with about 80 percent of the world market share. The US has tariffs on Chinese panels and other incentives to encourage the development of US suppliers. The cost of PV panels, inverters, wiring, racking, and installation will continue to fall. 

Wind

The Wind Vision report released by the DOE in 2020 projects up to 404.25 gigawatts (GW) of wind capacity could be installed by 2050 under a scenario with wind supplying 10 percent of the country's electricity in 2020 and growing to 35 percent by 2050. https://www.energy.gov/eere/wind/wind-vision.

Onshore Wind: Total capacity: Approximately 184 gigawatts (GW)

• Operational: 118 GW

• Under construction: 18 GW

• Permitted: 40 GW

• Proposed: 8 GW

Offshore Wind: Total capacity: Approximately 51 GW

• Operational: 0.4 GW

• Under construction: 2.3 GW

• Permitted: 19 GW

• Proposed: 29 GW

The northeast coast of the US has desirable shallow water of the Georges Bank while the west coast is typically deep water requiring more expensive and less established floating wind turbines.

According to American Clean Power (ACP), states have established 84 GW of offshore wind procurement targets to date. Vineyard Wind began offshore construction in late 2022, achieved steel-in-the-water in June, and completed the nation’s first offshore substation in July. The first turbine was operational in October 2023, and they are now pushing power into the grid. Vineyard Wind is an 806MW project with 62 turbines and is the first of many offshore wind projects. 

While offshore wind construction has begun, supply chain issues have emerged which have increased costs and slowed several early projects. The offshore industry is seeing international competition for ships, steel, cables, turbines, and transformers which have increased costs enough to make some projects uneconomical. High interest rates are also reducing the economics of projects. Once the US can provide the components, ships, and personnel to install the offshore wind at scale, the installation costs will decrease as shown in the table below. 

Offshore wind has more stable wind and has a higher-capacity factor than on-shore wind. Offshore wind developers have worked closely with the Bureau of Ocean Energy Management (BOEM), other environmental organizations, and the fishing industry to win public support and avoid lawsuits that plagued earlier offshore wind projects. On shore wind locations can be difficult to site due to proximity with population centers, lack of sufficient wind resource and rural locations may need extensive transmission lines to move power to populated centers. 

Nuclear Power

Nuclear power has stalled worldwide, and a renaissance will be too late to help the climate in the next decade. BWR (Boiling Water Reactors) and PWR (Pressurized Water Reactors), designs have seen costs increase and along with safety concerns have made them unattractive with few new projects and plenty of public opposition following accidents at Chernobyl and Fukushima. Budget overruns and delays such as experienced with the relatively proven PWR design at Vogtle units 3 and 4 in Georgia, have dried up demand for new conventional nuclear power. 

Despite these setbacks there remains a broad and well-funded effort to reinvent nuclear power. Small modular reactors (SMR) and many other advanced reactor designs are attempting to address the cost issue by modular construction methods and some designs address the safety concerns by new reactor designs that do not depend on electric power or pumps to cool the reactors during a shutdown. There are many public and private companies that are competing to build the next generation of nuclear reactors. 

Potential Fission Companies

There are more than fifty companies developing new reactors, including established players like GE Hitachi Nuclear Energy and Westinghouse Electric Company. NuScale Power has a leading position with early regulatory approvals but has struggled with cost increases and stockholder lawsuits. TerraPower, along with newer entrants like Terrestrial Energy and Oklo are also in the mix. In addition to various uranium and waste fuel cycles there are many companies looking to commercialize a thorium fuel cycle reactor. Thorium developers include: Flibe Energy, Elysium Energy and Thor Energy.

Potential Fusion Companies

There are more than 40 companies that are seeking to unlock nuclear fusion, including established energy giants like Enel and Mitsubishi Heavy Industries, and Helion. This includes Zap Energy and HB11 Energy, and well-funded ventures like Tri Alpha Energy and TAE Technologies and Commonwealth Fusion Systems founded in 2018 by MIT scientists and engineers, and it is backed by a consortium of investors that includes Bill Gates, Jeff Bezos, and Google. The ITER, (International Thermonuclear Experimental Reactor) is the largest experimental reactor expected to exceed break even energy with a cost of $23 billion. ITER is expected to begin producing fusion reactions in 2035 and if successful it could be the basis to begin design of a large fusion reactor intended to make electric power. There is no guarantee that fusion power reactors could be built cheaply enough to compete with other options.

Table of Contents

Executive Overview

• The Supply of Grid Power

• Future Demand For Grid Power

• Storing Power on The Grid

• Grid Management

• Recommendations

ARC Advisory Group clients can view the complete report at the ARC Client Portal. 

Please Contact Us if you would like to speak with the author.

Obtain more ARC In-depth Research at Market Analysis