Navigant Research Blog

Do Water and Electricity Mix?

— July 21, 2016

Plant - WaterThe water-energy nexus is the interaction between energy, water, and all the aspects of generation and distribution that are involved with each. Many times, this nexus is used to describe the amount of energy used to distribute water and wastewater between water treatment facilities and end uses. This energy use is by no means small. In the United States, energy generated for water ranges from around 4% to 19%; California alone consumes 19% of its electricity for water and wastewater. Variations in energy generation are caused by geographic differences; hilly regions need to expend more energy to pump water across variations in altitude, and arid areas pump source water from aquifers deep underground.

Another aspect of the water-energy nexus is the amount of water it takes to produce electricity. Certain generation types (such as hydroelectric) have an obvious liquid component, but others are less apparent. New innovations in renewable energy, while still consuming water, help to preserve the resource by utilizing more region-specific energies.

A Flood of Electricity Generation

In Hawaii, an ocean thermal energy conversion (OTEC) plant recently began operations. This OTEC plant draws in warm surface water from the ocean, vaporizing ammonia and spinning a turbine, which generates electricity. The ammonia is condensed by water extracted from deep in the ocean. Other types of OTEC plants do not use ammonia at all, but utilize vaporized ocean water to power the turbine. This is the first plant of its kind in the world, though it is worth noting that the United States has been researching OTEC technologies since 1974. Makai Ocean Engineering and the Hawaii Natural Energy Institute developed this 100 kW facility as a way to test the OTEC process, and the plant produces enough energy to power 120 Hawaiian homes for a year.

For cities farther from the water, solar power might seem like the way to go. However, to get the most out of solar, many plant operators are turning to auxiliary steam components. For example, the Ivanpah Solar Power Facility in the Mojave Desert of California utilizes heliostat mirrors to focus sunlight on solar power towers. These towers are heated by the solar energy, and steam is created to drive a steam turbine. The combination of steam power and photovoltaics makes this plant one of the largest solar installations at 377 MW capacity. In addition, its air cooling system means that other than the water used to generate energy, the plant uses 90% less water than other solar thermal technologies with wet cooling systems. However, there are drawbacks to solar power at this concentration. On May 19, 2016, one of the solar generating towers at Ivanpah caught fire due to improperly tracking mirrors that focused sunlight on the wrong part of the tower. There have also been reports of effects on wildlife, such as birds and tortoises. The issues in the development of high intensity renewable energy must be ironed out before these types of plants become widespread.

Renewable energy is important, and not just for the conservation of fossil fuels. Well-integrated renewable energy will utilize the natural resources of the region to produce sufficient electricity without wasting scarce ones. Traditional electricity production uses large quantities of water, but renewables (even those designed specifically to utilize water) can help conserve this. Producing energy may be a very water-intensive process, but many innovations in electricity production hold the promise that this market is becoming less thirsty.


Take Control of Your Future, Part I: Megatrends in the Utilities Industry

— April 29, 2016

Energy CloudThe pace and impact of change in the utilities industry is unrelenting. Each of the following megatrends is changing the way we produce and use power globally. Together, these megatrends are revolutionizing the industry.

  1. The power of customer choice and changing demands: More customers want to control their electricity usage and spend, as well as when and what type of power they buy. Customers want the ability to self-generate and sell that power back to the grid. Amazon, Apple, Cisco, Google, Honda, Walmart, and many other large energy buyers have increased their focus on sustainable energy solutions. This trend, in turn, is forcing new power purchase agreements with the incumbent utilities in order to minimize their risk of losing significant load. For example, a second (Google was the first) major technology company, Cisco, has confirmed that it is using Duke Energy’s Green Source Rider to provide clean energy for its North Carolina operations.
  2. Rising number of carbon emissions reduction policies and regulations: The impact of COP21 will be significant. Navigant believes that the “hold” on the U.S. Environmental Protection Agency (EPA) is temporary, and state governments and utilities are not waiting. They are taking actions now to be compliant. In fact, sustainability objectives between government, policymakers, utilities, and their customers are much more closely aligned than ever before.
  3. Shifting power-generating sources: U.S. electric-generating facilities expect to add more than 26 GW of utility-scale generating capacity to the power grid during 2016. Most of these additions will come from three resources: solar (9.5 GW), natural gas (8.0 GW), and wind (6.8 GW), which together make up 93% of the expected total additions. Existing assets (coal, but also nuclear) are devaluing and are at risk of becoming stranded as source shifting continues and newer natural gas and renewable generation sources come online.
  4. Delivering shareholder value through mergers and acquisitions (M&A): New industry ventures and M&A are happening at a rapid pace. Exelon’s acquisition of Pepco, Southern Company acquiring SoCoGas, Duke acquiring Piedmont Gas, Emera acquiring TECO, etc. In search for shareholder value through scale and increased synergies, this is a path that utilities will continue to explore.
  5. Regionalizing of energy resources (interstate, north-south, global): In order to provide reliable and affordable power, more energy resources are being regionalized. For example, PacifiCorp and Puget Sound Energy (PSE) and, later this year, NV Energy is joining California ISO. One of the main drivers is to achieve the benefits to manage local differences with regard to renewables, wind, and solar. Another example is Florida Power & Light’s (FPL’s) investment in natural gas exploration and production companies in Oklahoma and gas transmission pipelines to secure fuels for its natural gas combined cycle plants in Florida. Meanwhile, the global availability and movement of natural gas has created an abundance of natural gas. Some of the world’s biggest entrants into the growing global gas market have considered investing in power plants and other big projects now that their multibillion-dollar exporter terminals are about to open, executives said at the Columbia Global Energy Summit on April 27.
  6. Merging industries and new entrants: Several industries, including utilities, oil and gas (O&G), technology, manufacturers, OEMs, etc., are merging around areas like renewables, distributed energy resources (DER), energy management, smarter cities, and transportation. Navigant sees many cross-industry movements, and one of them is increased crossover investments between the electric utility and O&G industries. We see utilities investing in natural gas assets. And we see oil companies making investments in utilities. We also see both making investments in new areas of opportunity, like renewables, DER (distributed generation, energy efficiency, demand response, energy efficiency, etc.), transportation, smart infrastructure and cities, and energy management. That’s why the announcement in April by French supermajor Total is not a surprise to me. Total announced the creation of a Gas, Renewables and Power division, which it said will help drive its ambition to become a top renewables and electricity trading player within 20 years. According to a statement by the supermajor, “Gas, Renewables and Power will spearhead Total’s ambitions in the electricity value chain by expanding in gas midstream and downstream, renewable energies and energy efficiency.”
  7. The emerging Energy Cloud: Old infrastructure is being replaced and geared toward an increasingly decentralized and smarter power grid architecture known as the Energy Cloud. The Energy Cloud is an emerging platform of two-way power flows and intelligent grid architecture expected to ultimately deliver higher quality power. While this shift poses significant risks to incumbent power utilities, it also offers major opportunities in a market that is becoming more open, competitive, and innovative. Fueled by steady increases in DER, this shift will affect policy and regulation, business models, and the way the grid is operated in every single region of the world.

These megatrends cannot be underestimated. They are accelerating transformation in the energy industry, enabling the entry of new players, putting pressure on incumbent players, and altering traditional strategies and business models. Organizations will need to adapt, and there will be winners and losers as this transformation takes shape. My advice to senior leadership of energy companies is to take an integrated, holistic view of the opportunities and challenges that are flowing from these megatrends. Only then will you be able understand the full impacts and path forward. And that is the only way you can really take control of your future.

This post is the first in a series in which I will discuss each of the megatrends and the impacts (“so what?”) in more detail. Stay tuned.

Learn more about our clients, projects, solution offerings, and team at Navigant Energy Practice Overview.


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