Adapt to survive the coming sea change in industry structure

The Combined Cycle Users Group’s (CCUG) 2017 Annual Conference, held in Phoenix the last week of August, left few stones unturned with respect to plant O&M and management issues. Plant managers, consultants, insurers, vendors, and even an executive or two moved from immediate “pebble” subjects—such as Belleville washers for HRSG manways—to “boulder” size trends like grid-scale energy storage and electric-vehicle (EV) infrastructure which promise to upend in the coming years the industry as we’ve known it. 

Boulder issues. A senior director for generation from an area utility set the stage in the keynote. He focused on three topics: safety, which should never go out of style; asset management; and regulatory and technological trends. While much of the talk was the typical “how great are we,” a few golden nuggets were discernible.

The speaker’s team implemented a safety program focused on counting “active” things, not reactive incidents. In the active category are training events, observations, drills, and actions which lead to positive reinforcement. “When you are good at safety,” he said, “you get good at lots of other things.” While no startling revelation, it’s something that’s easy to forget, as an incident case history later in this article reveals.

In the area of asset management, his team and facilities are focused on detection and prevention of significant equipment mishaps, rather than reacting to problems as they arise. Part of this effort is to carefully place equipment in priority. Most readers will understand this as reliability-centered preventive or predictive maintenance strategies, and immediately get the connection to safety.

Don’t be reactive, in other words, be proactive.

He concluded by reviewing several of the overarching trends affecting the utility business, including these:

      • Aggregators and resellers inserting themselves among utilities, generators, and ratepayers.

      • Consumers renting rather than owning.

      • Thirty percent of today’s workforce doesn’t work for a specific company.

      • Climate-change events.

      • Digital “platform” companies changing the business interface with consumers.

      • The general decline in per-capita electricity consumption.

      • Expansion of EVs to a predicted 50% of the vehicle fleet by 2040.

      • Reduction in cost of grid-scale lithium-ion type batteries from $1000/kWh to $270/kWh over the past few years.

Of these, grid-scale storage probably has the best chance to rock the world of gas-turbine facilities because they are envisioned to compete directly for peak-load supply and ancillary services. Much later in the program, Jason Makansi, consultant and president, Pearl Street, Tucson, Ariz, offered a status report on grid-scale storage. In particular, he noted the variety of functions large-scale batteries are being deployed and demonstrated to undertake around the country—including as part of microgrids, frequency regulation, black-start capability, avoiding NOx emissions and priority pollutants from gas-fired peakers, filling in around renewable generation, and others. 

Makansi also noted that the business is maturing, albeit in fits and starts, and reported on the bankruptcy of a major European battery supplier who only entered the US market with ambitious manufacturing plans just a few years ago. “Affordable home- and commercial-based storage begins to separate ratepayers from the grid,” he said.

For existing gas-turbine and combined-cycle facilities, the key threat is that as more fuel-free electricity, subsidized or otherwise, is offered into the grid, locational marginal prices decline while combined cycles are forced into greater cycling and dispatch, escalating maintenance costs.

With economic home and building storage on the cusp of commercial expansion, competitive kilowatt-hours from rooftop solar PV, so-called smart home and building design and devices (for example, smart thermostats), Makansi posited the emerging world of the “YouTility,” where behind-the-meter electric producing and consuming infrastructure challenges the “size of wire” required from the grid to every building, and perhaps disintermediates the utility itself.

Makansi urges utilities to consider such infrastructure as simply an extension of the grid itself, especially because of the two-way interface, and apply the traditional rate of return infrastructure business model which has worked well over the last century.

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