Power sector is witnessing a transformational change not seen in last several decades. For over a century, coal and gas proved to be the major source of energy for electricity generation. Hydro and nuclear provided green alternative though with a higher capital investment and longer construction cycle.
Researchers worked hard over the years to achieve goal of high efficiency low emission (HELE) plants through increase of steam pressure and temperature. The odyssey of sub- to super- to ultra-super critical plants orchestrated human propensity of extracting extra ounce from same quantity of fuel. The quest for HELE required research for new alloys that could withstand higher thermal stresses. Of late, the growing environmental concerns, world over, forced power plants to adopt SOx and NOx reduction techniques. While the conventional fossil-fuel plant continuously evolved to remain ahead of other sources of electricity generation, climate change clamour in COP21 altered the global atmosphere resulting into transformational changes being witnessed today.
The erstwhile lesser advantaged solar and wind energy sources, suddenly became cynosure of global imagination. These developments, especially in China and India, are creating huge disruptions. Globally prices of renewable started falling and it was expected that by 2020 it would outcompete fossil-fuel plants. However, the way things moved, such situation has come in 2018 itself. Forbes recently reported that 65 per cent of India’s coal power generation is being sold at higher rates than renewable energy bids in recent competitive auctions.
World today is changing faster than it changed in the previous century. Technology is bringing about a paradigm shift in mankind’s perception, globally. A simple mobile phone has completely changed our life and has replaced several of yesteryear’s gadgets. Car engine designed on Otto Cycle is quickly getting replaced by simple battery powered electric-motor engine. In near future, robotics may emerge as key to manufacturing dominance in place of cheap labour as we saw in China. For BPO jobs, English speaking Indians may get replaced by AI. Evolution is the key to survival in a fast changing world.
Power sector is also evolving fast. Billions of dollars are being pumped into the R&D of solar and wind. The clean energy investment in solar and wind has reached $333.5 billion in 2017. The growth of renewable is at a speed unheard of for fossil fuel based plants. In 2017 alone China installed 52,000 MW solar plants. In India, capacity of solar grew from 5,800 MW in 2016 to 20,000 MW in 2017. Capacity of wind power grew from 26,800 MW in 2016 to 33,000 MW in 2017. Even the oil and gas rich middle-east countries are establishing large solar plants. Abu Dhabi is building an 1,170 MW solar plant whereas Dubai Solar Park will have 1,700 MW at the end of 2020 and may end up with 5,000 MW by 2030 if plan goes well.
On the other hand, new order for coal-fired power plants is slowing down. Most of the EU nations have vowed a moratorium on new investments in coal plants after 2020. Britain committed to get rid of coal as a source of power by 2025 whereas Canada committed the same by 2030. Several other countries have decided to reduce their dependence on coal-fired plants. As a proof of reduced electricity production from coal-fired power plants, US EIA recently reported a year-over-year fall in CO2 emissions.
In this strained backdrop, conventional plants are further losing their competitiveness due to various reasons like long gestation period, higher capital requirement to control emissions, water shortage and demand side response. While installed capacity is growing demand is not growing as fast due to invention of energy efficient equipment. Lighting demands around 18 per cent of the electricity consumed in India. By converting to LED Lighting, around 100 billion units of electricity demand can be reduced annually. Low PLF is becoming order of the day. Recently in India, an 8.5 per cent rise in power demand led to only 1 per cent rise in PLF of coal based plants. Such low PLF regime affects the operational revenue stream and makes it more challenging to quickly recover investment. While construction of nuclear plant takes 5-10 years and Coal Plant needs 4-5 years, a 10 MW wind farm can be built in three months, a 50 MW in six months and a 100 to 500 MW solar farm can be built in around eight months. The power economics tilts fairly in favour of renewable energy
In near future, several other prevalent global theories are likely to be challenged. Instead of digging deep into earth for coal and oil, human being will be looking for vast tract of barren land rich in sunlight or strong wind. A massive project in Tunisia’s Sahara Desert is hoping to make the solar power export dream to Europe a reality. A 6,000 MW Asia Renewable Energy Hub at Australia plans to export solar and wind energy to South Asia. Europe also plans to invest in MENA countries to import cheap and clean energy. Countries with vast tract of open land may become rich by exporting energy in place of today’s oil or coal exporting rich countries. While offshore wind farms are common now, offshore floating solar farms are likely to be the future. With no space limitation, less dust and natural cooling provision, sea may become future source of mega solar plants. Apart from renewable’s accelerated growth; its reliability is also increasing due to continuous development in Energy Storage System (ESS). RES, ABB and Tesla are emerging fast as global ESS player. AES and Siemens launched Fluence Energy on January 11, 2018 to provide technology solutions for ESS and immediately bagged its first order of 100 MW lithium-ion based battery storage installation in California. ESS is definitely going to be the next growth engine of power sector. The accelerated growth in the utility-scale energy storage market poses a disruptive threat to conventional power generation.
Do you still remember Kodak Moments? Yes, the favourite travel accessory and the fifth most valuable brand of 90s is nowhere to be seen now. A company having $16 billion revenue in 1996 failed to evolve in changing times and went into oblivion in less than 15 years. Similarly, Nokia, the yesteryear’s market leader in mobile phones, lost to Samsung as the former failed to respond to market dynamics. There are many more examples where companies could not see the writing on the wall and lost to emerging technologies. With renewables becoming reliable, countries dependent on import of oil and coal for their energy needs, are surely going to look for solar and wind.
Combining this with climate-change clamour will lead to accelerated demand for Solar and Wind all over the world. The demand for coal based power plants is likely to fall further even after some sponsorship from countries like US, Japan, China and India. Europe’s push for clean energy has caught up with a $300 billion global coal trading market. Coal-trading activity slumped by over 30 per cent in 2017, mostly due to renewable push. General Electric’s prized acquisition of Alstom Power in $10 billion, less than three years back, is underperforming and GE has already started to rejig its power portfolio. Are we again witnessing some Kodak Moments? It is too early to predict such a scenario, but the threat is definitely looming large. Windows Phone could not survive the onslaught of Android technology, though Apple is smarting through continuous evolution. Conventional fossil-fuel fired power plants need an “Apple Moment” to ward off the unprecedented threat!
(The writer is a power sector professional)