Since its inception at Shell in the late 1960s, scenario planning has become an important part of corporate strategy. Business forecasts often come with the assumption that business will continue as usual. The value of scenario planning became evident to Shell during the OPEC oil embargo in 1973/1974.
The year before, in 1972, one of Shell’s scenario narratives was the changing of price-setting dynamics from consumers to large-scale producers. The what if scenario became the groundwork for corporate planning in the years to come: the company found itself months ahead in tactical decisions.
There are a few constraints that Shell used for their scenarios to ensure they were applicable. First and foremost they need to be not only probable but also plausible. Rather than only relying on a numerical probability that something could happen, the scenarios needed to have the confidence of the planners that it might happen. There is always a probability that you will get into a car accident. However, a scenario in which you get in an accident because you are distracted with a cell phone and / or fatigued is more plausible. Shell’s scenarios were meant bring greater self-awareness of the current situation, by allowing different stories of the future to be told than the status quo.
Earlier Oilprice noted the current state of decay that the U.S. electrical grid finds itself in. One of the challenges listed were Large Power Transformers (LPTs), their long lead times for replacement, cost of replacement, and considerable age in the U.S. grid. The scenario proposed herein is that the U.S. should choose to limit the replacement of LPTs, and look to modernize the grid in ways that negate the need to replace most LPTs. This can be done through adapting several technologies that the U.S. currently has at its disposal:
- Increasing the use of grid-level storage on many different time scales to absorb shocks to LPTs and increase their usable life
- Using distributed generation to decrease local-level loads
- Removing many industrial loads from the grid, or turning them into local power supplies through local Combined Heat and Power (CHP) plants
- Increasing the efficiency of the U.S. electricity system
- Increasing the deployment of a smart grid in the U.S.
Grid level Energy Storage Systems (ESS)
“Storage” in the grid is similar to what shock absorbers are to cars. There is a certain amount of “standard” grid storage inherent in the grid itself: in the transmission lines, transformers, and in the spinning turbines in hydro and thermal power plants. The grid was designed to function very well in its design conditions, in a similar way a Toyota Corolla was designed for city and highway driving. However, the older the car is, the gentler you need to be when driving around sharp corners or over a bumpy road. Now imagine taking this car off-road. The transient loads such as the duck-shaped demand curve in California put more strain on the shock-absorbing parts of the grid system. These shocks on components such as transformers can often lead to disastrous consequences. Related: Renewable Energy Storage Could Be Worth $90 Billion Per Year
Although transformers have automatic shutoff mechanisms if shocks too large come through, these mechanisms can sometimes malfunction. Overheating can cause a short, which will ignite the mineral oil meant to cool the transformers. Some of the applications of ESS and their required sizes are shown below:
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LPTs are particularly vulnerable to frequency and voltage instabilities. Lithium ESS can be used to supply power during voltage sags and absorb excess power during voltage swells. However, one of the primary economic reasons for grid-level storage today is to maintain grid frequency (±1 percent of 50.00 Hz and 60.00 Hz in in Europe and the USA respectively). The time scales involved are less than one second to ensure power is supplied instantaneously at the rate required. The response system is similar to balancing a stick on your finger: you can balance it, but your hand must constantly adjust. By installing these ESS shock absorbers in the grid, the life of the current LPT infrastructure can be extended.
Distributed Generation and Micro-Grids
However, as the time scales are increased, load-levelling systems can remove the need for some LPTs. Further down the grid at the distribution and micro-grid levels, load-leveling and time-shifting can be done in areas with installed distributed generation capacity. If smaller local plants, such as biomass, are installed in a distributed generation grid, a local grid can be created that at any time can be de-coupled from the national grid, such as the town of Feldheim in Germany.
Combined Heat and Power (CHP) capacity
The U.S. has a total CHP capacity potential of 240 GW, or about a quarter of all U.S. electrical capacity.
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However, comparing 240 GW of cogeneration capacity in the spectre of the grid is not comparing apples to apples due to losses in the grid, and heat losses. CHP plants have less line losses, and require less total power produced for the same end use. If you consider the efficiency gains from moving to CHP from grid-supplied electricity, CHP can supply over a third of U.S. electricity demand.
As the cost of electricity goes up, the payback time for installing cogeneration will drop significantly, and more industrial, commercial, and institutional facilities (e.g., universities) will opt to install CHP for their electricity and heating needs.
Efficiency gains: further load reductions
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While things such as CHP improve energy efficiency, there are five times as many companies looking to increase energy efficiency than there are electric utilities in the U.S. As U.S. utilities have come to understand, if you can’t beat them, buy them: utility companies have turned to buying out energy efficiency boutique companies to increase their service offering to the public. By having this expertise in-house, utilities can target demand reductions in the most vulnerable parts of their grids, which is often the least expensive way to adjust the energy demand-consumption equation.
Although today more energy is rejected or wasted in the U.S. energy system than used productively, efficiency gains in recent years have stalled U.S. electricity demand for the past decade. According to the American Council for an Energy-Efficient Economy, the U.S. has already increased its energy productivity, a good measure of energy efficiency, from $152 of GDP per MMBtu to $167.5/MMBtu, a 10 percent increase in five years.
Smart grids: cities powering themselves
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Smart grids integrate sensing, communications, and control grid technologies with field-level devices to improve the reliability and efficiency of the grid. These are the devices necessary to make towns such as Feldheim in Germany work. Their adoption in the U.S. is rising exponentially. Related: What The Fall Of OPEC Means For Global Oil Markets
At a higher level of the grid, the 2003 blackout in the U.S. Northeast which stretched all the way to Canada, outlined a lack of awareness of what is happening on the grid in real-time. Synchrophasor technology using devices called phasor measurement units (PMUs) measures the instantaneous voltage, current, and frequency at substations has since been deployed, and continues to be deployed all over the U.S. grid. PMUs provide data 100 times faster than conventional supervisory control and data acquisition (SCADA) technology, and will help facilitate the large-scale adoption of grid-level storage for voltage and frequency control.
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Repercussions for those requiring LPTs
If the U.S. chooses to go down the path of CHP, distributed generation, ESS, efficiency gains, and smart grids rather than improving the high-voltage grid, this could mean very difficult times for large-scale electricity generators that rely on LPTs. Those companies producing electricity that rely on LPTs for transmission need to take a sober second look at the dynamics of the grid system below them to determine whether the grid will continue to require their generation capacity. These large generators could simply become unprofitable to operate or even stranded assets at worst in areas where these other options are adopted to reduce the need for a larger capacity grid.
This information is meant to paint a plausible scenario of the U.S. grid in the near future – that the U.S. opts to focus on technology that it has at its disposal rather than import large, cumbersome-to-transport LPTs. Although there are many benefits to having a more dynamic, responsive, and robust electricity grid, there are repercussions to those requiring a larger grid to gain a profit.
By Matt Slowikowski for Oilprice.com
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