Gas and renewables boost power efficiency
The metrics are very different, but global power market’s two growth engines are making efficiency gains
Combined-cycle gas turbine (CCGT) power generation is the most efficient way of converting thermal energy to electric energy. Renewables may be catching up on some of the oldest, most wasteful oil-fired plants, but remains largely the least efficient. Given its free and inexhaustible primary energy supply, though, its gains now matter far more than its headline number.
Indeed, it is arguable that the very meaning of efficiency in power generation should be differently defined depending on whether the generator is conventional or renewable. In conventional generation, it obviously refers to the proportion of electricity derived from a given thermal input.
78.4GW – US coal generation decline since 2011
But, in the renewables sector, it is more effectively a measure of how much generation capacity can be installed on a given area. The former matters enormously to hydrocarbon producers, as higher efficiency translates into lower inputs; the latter helps reduce renewables output prices, as increased efficiency conversion of wind and solar for the same price translates into lower capex and to lower electricity prices for end-users.
CCGT leap forward
The latest CCGT plants are over 62pc efficient, compared with around 40pc for smaller open-cycle plant and of just 43pc for the latest supercritical coal plant. Figures from the US Energy Information Administration (EIA) show a consistent rise in gas-fired power efficiency while coal and oil-fired efficiency remains flat.
In leading OECD markets, CCGTs are steadily undermining coal plants as major baseload power providers. Installed US coal generation capacity, for example, will, by the end of 2019, have declined to 233GW from its 2011 peak of 311.4GW, according to the EIA. In the EU member states expect coal generation capacity to decline by nearly 60pc by 2030, with the remaining 60GW of installed capacity mainly in Central Europe.
In emerging markets, previously inexorable growth in coal capacity has slowed or halted in nearly all major markets, and in particular in China and India, where strong development of renewables generation at progressively lower prices continues.
Efficiency improvements are also changing the shape of utilities worldwide
Solar efficiencies have steadily risen since the photovoltaics market took flight in the mid-2000s, boosted by panel production capacity surpluses and high OECD feed-in-tariffs. In 2010, the average commercial panel’s ability to convert solar energy into electricity was approximately 15pc. Efficiency is now 20pc for most widely-available panels, and higher for newly marketed bifacial installations. Such improvements have enabled PV developers to contract long-term power purchase agreements at less than $0.02/kWh in markets such as Mexico and Saudi Arabia.
Unlike gas plant, though, renewables generate power intermittently, which makes them dependent upon back-up when neither sun nor wind is available. In the PV sector in particular, intermittent oscillation can be very frequent, causing grid instability. These challenges are creating demand for power storage to allow for energy arbitrage and frequency support. To date, this demand has largely been addressed by Lithium-Ion batteries, although other technologies are evolving.
New utility model
Efficiency improvements are also changing the shape of utilities worldwide. In OECD countries, most utilities are favouring the rapidly developing new technology in gas and renewables.
But some firms are going even further than simply shedding coal and getting into gas. They are moving towards a distribution-only strategy by selling their conventional generation assets and remaining as generators only of renewables power and as transmitters or distributors of energy. This trend was pioneered by European utilities, but the US’ Eversource Energy has made a similar move, suggesting the trend could go global.
20pc – solar efficiency
Hydrocarbons producers may be worrying about the demand impact. In the OECD, coal power generation appears to be in terminal decline. Oil-fired generation is also vanishing, and even gas producers are finding it challenging to access potential growth markets which are being squeezed both by the surge in renewables and by the demand impact of the efficiency surge. In effect, in certain markets, new ultra-efficient CCGTs are out-competing older gas plants, with gas demand actually decreasing even as new capacity is added.
Nor are all stakeholder convinced by gas as a ‘clean’ generating fuel. Legislation such as that passed in New York recently is an example of gas being shut off from a market it could effectively and efficiently serve, due to political opposition. Indeed, some gas demand forecasters are largely giving up on the likelihood of a surge in new gas demand for baseload power in a number of markets and focusing instead solely on the prospects for gas generation as a backup to dominant renewables.