Navigant Research Blog

Q&A: Doug Houseman of EnerNex on the Future of Utilities and Power Generation

Richelle Elberg — June 17, 2014

The release of the U.S. Environmental Protection Agency’s (EPA’s) long-awaited new rule on carbon emissions from U.S. power plants has heightened the debate over the future of power generation in this country.  Environmental organizations and renewable energy industry figures have suggested that wholesale replacement of fossil fuel-based generation with renewables is both achievable and desirable within the next few decades.

I spoke with Doug Houseman, vice president of Innovation and Technology at EnerNex, to get his take on the future of power generation and on utility industry challenges in general.  Houseman has 30 years’ experience in the global power industry and is widely recognized as an energy sector thought leader.  EnerNex specializes in engineering services and consulting to utilities, government, and private institutions.

Navigant Research: In a new report on power generation from renewable sources, Greenpeace suggests that smart grid investments will facilitate integration of extensive distributed generation, but later in the report it shows a “power plant value chain” where generation utilities disappear after 2020 and grid operators become state- or community-controlled.  What’s the logic there?

Doug Houseman: The implication is that the grid can mostly just disappear and that renewable energy will have the same ability to be scheduled as conventional power plants.  A peer-reviewed IEEE [Institute of Electrical and Electronics Engineers] paper I coauthored estimated that, if the U.S. were to use only wind energy, in order to deal with the annual cycle of wind and demand, the U.S. would need large amounts of storage – for example, pumped hydro, which is the most cost-effective storage available today for long-term storage.  We would need to take Lake Michigan twice and put it behind a 200-foot-high dam.  Solar and mixed renewable scenarios all require significant annual storage cycles.  If we move all transportation to electricity, those numbers would grow significantly – say, three to four Lake Michigan equivalents of pumped storage.

NR:  Plans like this rely not only on green generation sources but also reduced electricity and heating demand, thanks to more efficient electronic devices and energy-related renovation of the residential building stock.  Who pays for these innovations?

DH: The consumers will, which means that the people who have money will end up even better off than the people who don’t.  These devices will have a much higher initial cost than less efficient devices – unless the government intervenes in the market in a significant fashion, by either taxing the low efficiency devices heavily or subsidizing the high efficiency devices.  Since many energy-consuming devices have a 20- to 30-year life, even if the manufacture of low efficiency devices are banned, the resale of them through Goodwill and other resale shops will happen, extending use of these devices to the end of their useful life.

Also, to rehab the U.S. housing stock is not a simple process, but probably a 30- to 40-year process – 100 million dwellings will take time to completely rehab to the kinds of standards necessary.  Some of those rehabs will take tens of thousands of dollars to do, and in many cases the buildings will have to be vacant to do the rehab because of remediation issues (like mold) that will be found in the buildings.

NR:  Policy changes are also needed to dramatically change the industry.  Many observers suggest abolishing subsidies for fossil fuels and nuclear energy and transferring the socialized cost of pollution back to the energy sector via carbon fees.  Do you see any of these policy changes happening in the near term?

DH: Honestly, no.  The House of Representatives has proposed a major overhaul of the tax code, which removes many of the subsidies, but the Senate has indicated it is dead on arrival because of the depth of the change.  I doubt that a comprehensive plan can get through and that is the only way to actually act on all the possible subsidies.  Some say that any investment or R&D credits are subsidies, so the depth of the overhaul on the tax code would have to be extensive.

NR:  In the wake of Fukushima, environmental activists and national governments – including Germany and Japan – are working to eliminate nuclear generation.  Natural gas is often considered a “transitional” or “bridge” fuel source.  Your thoughts?

DH: The Sierra Club, the NRDC [Natural Resources Defense Council], and others have indicated that nuclear has a place.  The administration has indicated that natural gas will either need carbon capture or have to be transitioned out.  So electricity use will rise further (as will storage) as heating and cooling move to electricity, along with transportation.

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