Future of energy – and decline of centralised generation – explained in 70 seconds

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CEO of NRG, the US utility whose portfolio of coal, gas and nuclear generators is nearly as big as Australia’s entire grid, explains in 70 seconds why the era of centralised generation is nearly over. The future is solar, storage and EVs.

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Last month we reported on how US utility giant NRG saw the changing future of energy – one that is based on distributed generation – solar, battery storage, mini and micro-grids, and electric vehicles.

NRG CEO David Crane made it clear that he saw the future in tapping the huge potential of the “millennial generation”, who will account for most of household spending power over the next decade – several trillions dollars – and which will be open to new forms of technology.

crane2Crane says the history of the telecoms industry tells us that the incumbent who fully embraces the future technology will be the winner. That future technology will emerge through the internet and virtual presentations – big data incorporating the information from solar, storage, electric vehicles and inverter – and the new generation will be comfortable with that.

The judgment by NRG is important. It is the biggest privately owned centralized generator in the US, with large nuclear, coal and gas assets in a 50GW portfolio that nearly matches the size of Australia’s entire electricity grid.

But Crane says that is not the future. And last week, for the benefit of those who missed his company’s day long presentation in February, he broke it down to a 70 second spiel for analysts covering his company’s quarterly results. We thought it was worth publishing, because you don’t hear Australian generator owners admitting to this.

“Our industry is in the early but unmistakable stage of a technology-driven disruption of historic proportion. This disruption ultimately is going to end in a radically transformed energy industry where the winners are going to be those who offer their customers, whether they be commercial, industrial or individual customers, a seamless energy solution that is safer, cleaner, more reliable, more convenient and increasingly wireless.

“And I might add just generally more personalized than what is currently being offered to energy consumers through our current command and control centralized one size fits all wire and wooden pole system invented by Thomas Edison and seemingly last improved upon in his era.

“NRG , through our multiple initiatives in the smart home with home solar, distributed generation, reliability solutions, microgrids, electric vehicle charging, and portable solar and energy storage products, is positioning itself to win this long-term future in a way that no other power company is attempting.

“In the short to medium term we continue to execute across our consolidated and unrivalled asset platform in a manner that will allow us to win the next few years as the power plants of the post World War II era create a retirement tsunami washing across our core markets that will benefit us as one of the last men standing thanks to our substantial investment in environmental remediation over the past ten years.”

So, what Crane is referring to in the “tsunami” of plant retirements is  essentially the coal-fired generators whose departures will be accelerated by tighter emissions rules, ageing nuclear plants who can no longer get returns in a market that is relying less on a centralised grid, and gas plants that will be priced out of the market by cheaper wind and solar.

The key, though, is what happens to replace it, and it will occur at the local level

As Steve McBee, NRG’s head of NRG Home, the company’s new business that focuses on the residential market, traditional centralised energy service models are significantly at risk.

“We believe that the future eventually will belong to demand-driven decentralized models of service that empower individual consumers through sustainable energy solutions that are affordable, personalized, convenient, and reliable,” he said.

McBee said his task is to win business in a world “where we believe a growing share of the market is going to want and expect to generate and manage a larger share of their own energy.”

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  1. TCFlood 5 years ago


    There are still parts of this microgrid / distributed generation / storage / demand response model that bother me. It seems to me that if we really do eliminate all fossil fuel and nuclear generation, then there is a limit to how micro the grid can become.

    Wind in particular in some parts of the world will have to be as large as or larger than solar as a part of total generation. Wind is only suited to what we now call utility scale facilities and because of its variability (even if highly predictable) it will be a more important contributor when linked to other wind farms spaced at considerable distances from one another.

    In the US, the South West will be needed as the primary source of solar energy; the Great Plains states will be needed as the dominant on-land wind source. Local generation in many places in the US will not be sufficient.

    In local areas as large as several US states there can be periods of calm overcast. Thus the local storage will need to be sufficient for several days or even weeks on rare occasions. Rare or not, long outages will not be tolerable to the public.

    I realize that I have not said anything here that you don’t know, but I don’t get how the sort of pronouncements such as those reported here are realistic. If we assume that we always have local gas plants as 100% backup, then microgrids as I imagine are being described here might work, but I don’t think we want to continue using that much gas.

    • CHARLES KACPERUK 5 years ago


    • Giles 5 years ago

      We won’t need to. Storage will reduce a lot of those requirements. though how much is yet to be seen.

      • Motorshack 5 years ago

        I agree, Giles.

        We might want to keep in mind that millions already live totally off the grid, with little trouble, and even fossil fuel backup (assuming it is necessary at all) can be part of a micro-grid as well. Lots of people with vacation cabins, for example, have solar PV, small wind turbines, batteries, and a small gasoline generator for occasional backup.

        The point here is that fossil-fuel-based power generation may be somewhat more efficient at conventional grid scale, but why run enough generators to power a province when at any given moment only a few townships may be short of sun and wind?

        Similarly, while the best renewable energy resources may be in places like the Great Plains and the desert Southwest, the sun shines and the wind blows everywhere. Just not quite as much. So, you need bigger collectors and better storage, not necessarily huge quantities of backup.

        Also, “storage” means different things for different applications, and in some cases it is already literally dirt cheap. I have some neighbors who get 75% of their winter space heating from a simple greenhouse attached to the south side of the house. The storage component of the system is the dirt floor of the greenhouse, which absorbs solar energy all day, and then gives it back for hours after sunset. No marginal cost at all, and no moving parts either, but still perfectly adequate for the job.

        Mind you this is in New Hampshire where we presently have a good four feet of standing snow on the ground.

        There are also proven designs of somewhat greater sophistication that store heat all summer, and give it back all winter, and again it is the soil under and around the house that is used for storage. The best of these have no backup, and no moving parts, yet keep the house with a few degrees of 70F all year round. Google “passive annual heat storage”.

        In short, Mr. Flood has given us a classic example of what logicians call the “straw man fallacy”: contrive a deliberately weak argument, put it in the mouths of your opponents, and then attack its weak points – all the while ignoring the real data and logic that your opponents would choose for themselves.

    • Chris Fraser 5 years ago

      It would be better for us to improve our understanding of how the centralised energy generation system wastes energy, then understanding how efficiencies would reduce the amount of energy needed to be generated, prior to setting those generators in a distributed manner.

  2. disqus_3PLIicDhUu 5 years ago

    A coming rash of EV’s, will be interesting in the mix, as a central grid may need to maintained at high capacity levels, to fast charge vehicles on the road, at charging stations.
    If a half million EV’s hit the road, some looking for say a 50kWh fill in 10 mins or so, that’s a lot of capacity required, only really available from existing grid infrastructure, even servo’s with attached MW solar farms and storage, would need to use bidirectional flow, to maintain a facility that might have a dozen cars line up, after sun down.

    • Mike Dill 5 years ago

      I think that EV’s will be smarter than that. I can plug in now, and the car will wait for the price of the electricity to to go down before charging. A smarter grid and better price signals would make this even easier.

      If the price point is high enough, I may want to sell some of the energy in my battery back to the utility.

      • disqus_3PLIicDhUu 5 years ago

        I don’t think EV energy consumers will have time for the convenience of time of use.
        Overnight charging is probably the only time they will have control, to deliver say 6kW continuous, for the 8hrs, to give the 50kWh, that might be needed, for some.
        So the main grid would be needed to accommodate this high level of nighttime load
        Then there’s times that they drive distances and then need a charge on the road, especially those people that drive a lot.

        • David Osmond 5 years ago

          While there may be some requiring 50 kWh overnight, a typical driver covering ~15,000 km/yr (41km/day) will only need about 8 kWh. Plenty of spare capacity in the grid for this level of charging, and plenty of spare time overnight for this to be done in an intelligent & flexible manner via a smart charger which monitors the spot price of electricity.

          • Mike Dill 5 years ago

            I have a charge point at my work. if the daytime solar causes negative wholesale electric rates, i should be able to get in on that deal.

            my commute is 30km, so i am willing to leave work with a half-full pack if they pay me for it.

      • Ross Carroll 5 years ago

        I don’t think the day is far off when a company like Nissan or Tesla incorporate light of weight, moulded solar panels into the exterior of their cars to keep them topped up with power as they sit in the sun or travel about. Just today I read that Dunlop have a new car tyre that converts the heat from them, both in motion and sitting still in the sun, to electricity and fed back into the cars system. A car with these tyres, regenerative batteries exterior solar panels and a software run battery system could provide endless free driving energy. And go in no small part to taking some load off of any grid too I’d reckon. Although admittedly, from what I’ve seen of these past winters in the Northern Hemisphere that may not be such an option.

        • David Osmond 5 years ago

          I agree it would be nice Ross. Though unfortunately a car is unlikely to have enough space to put more than 250W to 500W of PV facing upwards, so it would probably only get a maximum of 1 to 2 kWh per day on average, if it’s parked in the open. This is only enough for about 5 to 10 km of driving. A lot better than nothing, but not enough for most.

          • Ross Carroll 5 years ago

            Hi David. I’ve been reading a bit more on the subject since I wrote this. Current panels are limited. But some great innovations are taking place.

            I’ve been reading about printable and flexible solar panels being developed here at my home town University of Newcastle. Now its not enough power to keep the batteries of a car topped up at the moment but with so many people and resources now working on panels and batteries I remain optimistic. The Nissan Leaf has a small panel array on the rear roof spoiler that takes care of the cabin electrics – that’s got to be a good start.

            Just today I saw a video on panels that are very small, like about 30 or so centimetres with 40% efficiency and two of them can supply the power for a good sized house – compared to at least 10 or so large ones now required. http://www.abc.net.au/catalyst/stories/4194517.htm

            I just have no doubt whatsoever that some bright boffins will make it happen and I hope, not far off.

          • David Osmond 5 years ago

            Hi Ross, it’s true we may be able to get some improvements on efficiency, to potentially double my numbers above. And new technology might mean we can also cover the windows, and possibly any other exposed surface of your car with PV.

            I also watched the Catalyst show, and felt it was quite misleading when it spoke about two of those small size panels to power a house. The reason they were able to is because there were big mirrors concentrating the sun’s rays onto the panels. So unless you want to drive around with a giant mirror or magnifying glass concentrating the sun onto your car, I’m afraid the daily range of a conventional looking car powered by its own PV is going to be very limited.

    • Peter F 5 years ago

      In fact most EV’s seem to be charged at work or home so they don’t often visit superchargers. The comments from many owners is one of the things they really like about their EV’s is not pulling off the road to go to the gas station. The superchargers that do exist are still almost all grid connected and the very few solar powered systems do need to have significant local storage to be practical

  3. WR 5 years ago

    When network owners start talking about micro-grids, that is probably code for setting up their own gas generation plants that will allow monopoly supply to their micro-grid. The gas generation would then supplement the PV at great profit to the monopoly owner.

    Outside of the tropics, the difference in PV generation between winter and the rest of the year is so large that you have to supplement the PV with other generation in the winter. The alternative is to run a massive surplus of PV-generated electricity for the other months of the year. That isn’t going to be very cost effective unless PV becomes so cheap that they may as well give the panels away.

    You don’t need much storage with even large amounts of PV and wind if you have some back-up despatchable generation from sources like hydro, biogas, imports of excess supply from neighbouring states or countries, and even small amounts of fossil fuels.

    I recently modelled the last 12 months (1st April 2014 up to the current date) of electricity supply to South Australia and Victoria, treating their combined totals for supply and demand as one grid. I combined the 3-hourly (midnight, 3am, 6am, etc) demand values from the AEMO for the two states. Wind supply was taken from the AEMO figures on the same 3-hourly basis as the demand figures. PV generation I estimated as the average of the SA and Vic values from the APVI website, again at the same 3-hourly intervals as the wind and demand values. I then normalised the PV capacity factor values by assuming that the average capacity factor for PV for the year was 3.8 kWh of energy produced by each kW of installed panels.

    I assumed that PV and wind would supply about 75% of the year’s energy. The best combination to achieve this was to have about 40% from wind, 35% from PV, with the remainder coming from auxiliary, despatchable generation as I defined it above (hydro, etc.). This combination of supply was supplemented with storage that equalled 50%-60% of the average daily demand of 160 GWh (in this case, 80-90 GWh of storage).

    The results showed that the peak supply needed from the auxiliary generation was about 60% of the peak demand value for the year as a whole, 6.3 GW of auxiliary vs 10.78 GW peak demand. The peak supply from the auxiliary (the 6.3 GW) was required in the first week of June when there was a week long period of low wind and low PV supply. The peak demand (the 10.78 GW) occurred during heat wave conditions in January.

    Peak demand required from the storage was about 9 GW. This should be easily achievable from a storage system of the size mentioned.

    When this set-up of 40% of yearly energy from wind, 35% from PV, 25% from auxiliary generation and 80-90 GWh of storage was used, the excess supply was about 7% over the year. This excess power was produced on days that were both windy and sunny, mostly in the spring and summer. This excess supply could have been exported to either NSW or Tasmania. About 3% of the supply was lost in the charge/discharge cycle of the storage (assuming 80% efficiency for this cycle).

    The results showed that PV and wind complemented each other fairly well. PV had a steadier output on a monthly basis but had a large seasonal variation between winter and the other 9 months of the year. Wind supply was more chaotic week-to-week but, on average, delivered more energy in the winter months than during the summer.

    The most interesting outcome from the modelling was that the storage capacity didn’t need to be anything more than about 50%-60% of average daily energy demand, as long as the system had the auxiliary generation described above. The most interesting thing about the storage required is that having more storage didn’t really improve system performance.

    The system basically requires enough storage to smooth out supply and demand on an average day. Once it has this, the gains in terms of reducing excess energy and lowering the peak demand value from the auxiliary are very small unless you go to ridiculously large amounts of storage. This is basically because the periods of low renewable supply tend to occur over an extended period of many days in winter, so you would need many days of storage to make up for this deficit. It would be much better to meet this demand through alternative generation than by using the massive amounts of extra storage (and PV/wind generation) that would be otherwise required.

    The image below shows a sample of the model output that illustrates the period of peak demand from the auxiliary supply. The horizontal axis of the graph shows a time-scale that runs from the last week of May through the first week of June last year. The horizontal intervals have a period of 1 day. The vertical intervals are in units of 5 GW of power. The green line shows the auxiliary supply, peaking at a value of about 6.4 GW at around midnight on day 65. The pale peak line running along the bottom of the graph shows supply from storage. The dark red line shows demand. The blue line shows the amount of energy remaining in storage divided by 3 hours. So if it falls by 5 GW, this means that the amount of energy stored fell by 5GW x 3hours =15 GWh.


    • Peter F 5 years ago

      Just a quick question. why did you not include Tasmania. I did an analysis from a different perspective and I have to say nowhere near as detailed as yours but Tasmanian hydro formed a key part of the dispatchable power/backup. Tasmania also has some fantastic wind resources which may well be out of synch with SA and Victoria so further smoothing the renewable supply curve

      • WR 5 years ago

        I didn’t include Tasmania because the APVI website doesn’t have reliable information for Tasmanian PV performance due to the small sample size. The reason I did the analysis for a combined SA/Vic is because those regions have good data for both wind and PV performance.

        • Peter F 5 years ago

          I am trying to put together a submission for a new energy policy for Victoria is it possible to get more details of your study

    • David Osmond 5 years ago

      Nice analysis WR. Can I ask, how did you get the data from the APVI website?

      Also interesting to compare your value of required storage with likely levels of home storage. In the next decade, it is quite feasible that many households will have ~10-20 kWh of batteries, with a prime motivation being to store and use their own solar generation. There are about 2.6 million homes in Vic/SA, so that would lead to about ~40 GWh of household based battery storage, or about half the total that you’ve estimated is required. Just need another half to come from businesses and the transmission & distribution operators.

      • WR 5 years ago

        I obtained the data from the APVI website by scrolling the pointer along the graph for each day, reading the values and then entering the data manually.
        It was a tedious business. That’ why I used 3-hour intervals. It was just too painful to take more frequent readings.

  4. Connor Moran 5 years ago

    This ‘moment-of-clarity’ from the corrupt incumbents is probably too late and duplicitous. NRG are one of the largest political donors in the US, purchasing candidates that will slow climate change response and extending the run of their stranded assets.

  5. Raahul Kumar 5 years ago

    This is a very interesting approach, let’s see how the utility does with this new form of decentralized distribution. I can’t help thinking it’s a prett bleak future for any kind of utility in those circumstances.

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