The Evolution in Electric Generation Capacity
By: Luminous Team
Tags: Electricity, Renewable Energy, Energy

Much attention has been paid to how electric generation capacity is evolving in the United States. While total capacity remains relatively stable around 1,200 GW, the energy source mix has evolved due to several factors including regulation (to some extent) and cost (to a greater extent).

Luminous analyzed US data on currently operating plants as well as planned additions and retirements to understand how this evolution is expected to play out over the next seven years (see graphic below).

Overall, fossil fuels will continue to decrease from 66.94% in 2020 to 63.98% in 2027. Coal and petroleum will lead the fossil fuel decrease (together they go from 22.31% to 18.88%) as older plants give way to renewable and natural gas (growing from 44.63% to 45.10%) sources that are more abundant, more flexible, and less complex to operate than coal plants. 34.8 GW of coal and 2.6 GW of petroleum power plants are scheduled to be retired by 2027, with no additions in coal and 5.5 MW of small, petroleum power plants operating as microgrids for critical infrastructure (i.e., hospitals and data centers) or supporting rural communities in remote Alaskan locations.

Nuclear will decrease from 8.22% to 7.56% as 8.1 GW scheduled retirements (Entergy, Exelon, PG&E), will be offset only by 2.8 GW additions (Georgia Power “Vogtle” in Waynesboro, GA, and UAMPS “Carbon-Free Power Plant” located at the Idaho National Laboratory near Idaho Falls, ID). Although nuclear power plants present several complexities, including long and expensive permitting, construction and commissioning, they can serve two purposes:

1. Baseload, to provide for the minimum level of demand — Georgia Power will be a traditional large-scale nuclear with two identical 1.1 GW reactors; and

2. Flexible load, to complement intermittent renewable resources like wind and solar — UAMPS plant is being built as a series of twelve 60 MW reactors.

The conventional hydroelectric share will decrease slightly (from 6.51% to 6.35%) as small additions offset small retirement. Due to its broad environmental impact, no large-scale hydroelectric power plant is scheduled to become operational. Hydroelectric plants are by far the oldest operating in the United States. In fact, the 3.8 GW of hydroelectric power capacity available today became operational 100 years ago, between 1891 and 1924. No other technology, except for one small gas-fired plant built in 1915, is operating in a plant that old.

After a record year, with the addition of 23 GW of onshore wind turbine generating capacity in 2020, onshore wind will continue to grow (from 10.4% to 11.6%) at a slightly slower pace than in the past decade, sustained by the lowest Levelized Cost of Energy (LCOE) of all energy sources.

In 2020 the only operational offshore wind farm was the five-turbine 30 MW facility in the waters of Block Island, RI. Over the next few years, more than 2 GW are expected to be added, principally driven by two large projects: Vineyard Wind in MA (0.8 GW) and Ocean Wind in NJ (1.1 GW). While much excitement is driven by the decreasing cost of this technology, its high LCOE (approximately 2.1 times the LCOE of onshore wind and 1.7 times the LCOE of large baseload natural gas), the lengthy permitting process, and the pressure of interest groups are slowing down its adoption in the United States.

Due to the continuing decrease (83% in the last decade) in the cost of generating panels, solar photovoltaic (PV) is now approaching the LCOE of wind (solar PV is 1.15x wind) and may soon even surpass it. By 2027, 35.2 GW of solar photovoltaic are expected to be installed, and none retired. This will increase the share of solar from 4.1% in 2020 to 6.2% in 2027.

While other energy sources such as biomass (wood, wood waste, and other waste), other gases (landfill and others), municipal solid waste, and geothermal, continue their technological maturation and cost reduction, their deployment will remain driven by highly localized circumstances, including local regulation, interest groups, public opinion and, most importantly, the regional long-term availability of the fuel sources. As a result, planned additions will only compensate for scheduled retirement and their share will remain flat.

Storage will grow from 1.92% to 2.42%, driven by the growth of utility-scale Lithium-Ion batteries (from 0.14% to 0.69%), which will more than compensate for the small decrease in Hydroelectric Pumped Storage (from 1.78% to 1.73%). Overall, storage will remain a small component of the energy mix, as the growth in batteries is led by IPP and followed more cautiously by Electric Utilities (see our analysis The Emergence of Utility-Scale Battery Storage.)

In terms of sectors, the generation capacity mix will remain flat over the next seven years, with Electric Utilities at 54%, IPPs at 43%, and Commercial and Industrial with the remaining 3%.

While there is much discussion around how lax or stringent environmental regulations will impact the industry, the strongest and most immediate driver behind the change in the electric generation capacity mix remains cost. Therefore, the technologies with the lowest LCOE will either continue to retain a large share (natural gas) or grow at a fast pace (wind and solar).

By putting the Spotlight on customers and understanding fundamental industry drivers, Luminous can help you identify and maximize growth opportunities.