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The Revolution In Electric Power Production

This week the Energy Information Administration (EIA) published its monthly Electric Power Monthly. The report covers data from 2007 through July 2017 and shows the incredible transformation that has taken place in the utility sector over the past decade. 

There has been a slight overall decline in utility-scale electricity generation since 2007. This decrease is rooted in the recession of 2007–2009 and the rise in energy prices since 2007. These factors prompted many customers to conserve, become more energy efficient, purchase power directly from a third-party supplier, or produce their own power.

These changes, combined with government regulations that favored low-carbon electricity generation, have resulted in a dramatic shift in the way electricity is produced.

Consider that in 2007, there were 2,016 terawatt hours (TWh) of electricity generated from coal in the U.S. By 2016, that number had fallen by nearly 40% to 1,240 TWh. 

Most of that 776 TWh loss was offset by a 483 TWh increase in natural gas generation, which reached 1,380 TWh in 2016. Coal generation was surpassed by natural gas generation in 2016 for the first time on an annual basis (although there has been some shift back toward coal in 2017). 

The other major increase in generation over the past decade came from renewables.

In 2007, renewables (excluding hydropower) accounted for 105 TWh of electricity generation. Hydropower added another 248 TWh. By 2016, those numbers had respectively risen to 344 TWh and 266 TWh, for a total increase over the decade of 257 TWh. 

The report breaks out solar photovoltaics (PV) into a separate category. The rise in the generation for solar PV is phenomenal. From 0.016 TWh in 2007, solar PV increased by a factor of more than two thousand through 2016 to reach 33.4 TWh of generation.

Nuclear power output was relatively stagnant over the period, initially declining from 2007 to 2012, but then rising and ending 2016 with almost the same production as 2007. 

One other item of interest from the report is the capacity factors for the different sources of generation. The capacity factor compares the power produced with the maximum generating capacity.

In 2016, nuclear energy led all sources with a capacity factor of 92.5% for the entire year, followed by geothermal at 74.2%, combined cycle natural gas at 56.0%, and coal at 52.7%.

It is worth noting that combined cycle natural gas has become the primary backup source for renewables, which explains why its capacity factor is lower than one might expect. As wind and solar power output change, these natural gas plants are ramped up and down.

Like geothermal power, the energy produced from landfill gas and biomass is not intermittent, and that is reflected by the relatively high capacity factors of 70.7% for landfill gas and 46.7% for biomass.  

Other renewables, due to their intermittent nature, lagged behind. The capacity factors for wind, solar PV, and solar thermal for all of 2016 came in at 34.7%, 27.2%, and 22.2%, respectively. 

To understand the significance of capacity factors, consider that if nuclear power has a capacity factor of 90%, and renewables are at 30%, it will take three times the installed capacity of renewables versus nuclear power to reach the same overall output over the course of a year. 

The overall breakdown of utility-scale generation in 2016 according to the source was 34% from natural gas (compared to 22% in 2007), 30% from coal (down from 49% in 2007), 20% from nuclear power, and 15% from all renewable sources. Overall, nuclear power and fossil fuels were responsible for 85% of net electricity generation in 2016.

For investors, the growth areas continue to be natural gas and renewables, while nuclear power output has been stagnant and coal continues a long-term decline.

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