Key Takeaways:
Many major independent system operators (ISOs) in the U.S. are changing how they evaluate capacity due to an increase in severe weather and the rise of renewable energy sources, as noted by Wood Mackenzie’s Senior Analyst Patrick Huang during a recent panel discussion.
These changes may lead to a reduction in capacity accreditation for various energy sources, including renewables, energy storage, and thermal generation, according to Huang.
Karl Meeusen, director of markets at Wärtsilä, highlighted that these reforms complicate resource planning and create a higher demand for more adaptable generation options.
Observations:
The move towards a more inclusive energy approach could encourage utilities to explore innovative generation technologies that were previously deemed too costly, as discussed by Meeusen at the event organized by Wood Mackenzie.
Historically, utilities have hesitated to deploy reciprocating internal combustion engines due to their significant initial costs. However, the recent capacity accreditation changes could enhance their profitability, given their ability to quickly adjust energy output compared to gas turbines. Furthermore, their modular design can lead to more reliable performance, Meeusen explained.
For instance, a utility could choose between adding 100 MW of capacity with five smaller reciprocating engines or two larger gas turbines. If a turbine fails, the energy loss would be greater than if one of the smaller engines goes offline. The likelihood of all five engines failing simultaneously is considerably lower than both turbines failing at the same time since more units reduce the overall risk, Meeusen noted.
“With more modular and granular resources, the loss is less impactful,” Meeusen pointed out.
Battery storage also has a role in providing reliability, particularly during peak demand times or when solar and wind generation decreases, according to Meeusen. However, battery systems may struggle during severe weather, as their operational cycles are limited, and prolonged outages can significantly reduce their lifespan and increase costs over time.
Wärtsilä is also investigating alternative fuels like hydrogen, ammonia, and methane, finding that their engines performed well with a test using 20% hydrogen fuel. Although using hydrogen for base load generation may not be feasible economically, it could serve as a long-term energy storage solution.
“Investing all your resources in one single stock would raise a red flag; similarly, a diverse energy portfolio is essential,” Meeusen concluded.