Any professional coming to the Smart Grid industry from the information or communications industries will feel at home. One investment new comers have to make though is learning the actual business of electricity. That’s why I’m preparing a series of articles to bridge this gap.

 

This first article is about where it all starts, power generation.

 

The first things to consider are the various fuel sources for generating electricity. From what I’ve been able to make of the EIA reports released 2007, these are the main ones consumed, listed in order (data is U.S. market-specific):

 

 

At the same time, we have the following generation capacity:

 

 

This discrepancy will make sense after we examine the economics, environmental impact and technical limits of the various types of generation systems:

 

First let’s define a few terms:

 

Operational Flexibility is the measure of how fast a generator can increase its power output and includes how long it takes for a generator to turn on.

 

Load Curve is the graph of consumer demand vs time of day. This graph never starts at zero, there is always demand for electricity and this minimum demand is called the “base load”. Typically, from the hours of 11:00pm to 7:00am when most people are sleeping, the demand is pretty close to the base load. Demand usually increases after early morning and the demand during this period is represented as the “intermediate load." At some point the demand increases sharply, usually peaking early in the evening and decreases just as fast, and this phase is represented as the “peak load." An important fact to keep in mind is that the difference between base load and zero load is much greater than the difference between peak load and base load so more power needs to be generated to meet our base load requirements.

 

Now let's go back to examining the various generation systems:

 

Coal is the main fuel source for one simple reason: It’s as cheap as dirt. It’s also, quite literally, the dirtiest fuel source with the greatest global environmental impact. It turns out for coal, the operational flexibility is very poor, it takes days just to turn on a coal plant and hours to increase it’s capacity so coal is used exclusively to meet the base load. Now even though the base load accounts for the largest amount of demand, the rate that intermediate and peak loads are increasing in our society is actually much faster than the rate the base load is increasing so we need generators that have much more operational flexibility in order to meet the needs for peak and intermediate demand. Another less significant reason why fewer new coal generators have been built is because of government regulations and incentives over environmental concerns, however, this is becoming a more significant reason every year.

 

Natural gas generation has the lowest capital costs, very low operational costs and very high operational flexibility. Although its negative impact on the environment is significant, it’s much cleaner than coal. Unfortunately, unlike coal, it’s not dirt cheap. In North America, it’s the primary means of meeting the intermediate load and, apart from hydro, the only conventional means for meeting peak load. Many utilities and lobby groups who are proponents of “clean coal” technologies such as IGCC claim their technology falls into this category as well, however with benefits of a very cheap fuel source. I don’t know what is fact and what is hype.

 

Nuclear generators dwarf every other practical non renewable solution when it comes to capital costs. They also dwarf everything else when it comes to operational costs and have the worst operational flexibility of any generation system. However, for long term considerations, they are the cheapest power source. Despite their operational inflexibility, the degree of base load overcompensation that can be considered with nuclear technology, makes meeting the load curve much easier without a varied portfolio of generation systems. Because of this, the vision of a Smart Grid is very different in countries which rely on nuclear fuel as primary supplies. A side point, even though nuclear generators emit no greenhouse gasses or chemical pollutants, the risk of other Chernobyls is very real.

 

Hydro generation is the only mainstream generation system that uses a renewable and clean energy source. Although its capital costs are very high, the operational cost is relatively low and the energy source is free. It also has the highest operational flexibility of all generation methods The problem is we are limited to where we can build such facilities and, to this point, we will discuss the relation of distributed generation, renewable energy sources and the Smart Grid in our next article.

 

Understanding the relationship between the economics of various power generation methods and their technological limitations for meeting load curve is key in understanding the electricity market. The gross oversimplifications of this article are meant to only give an idea of why electricity has a variable value. In the next article we will continue and examine the future of power generation. We will discuss the view by the industry that demand response is actually another power generation system and, much more exciting, we will explore the future of renewables, distributed generation and energy storage. All these concepts are intimately tied to grid intelligence and, in fact, major reasons why we need a Smart Grid.

 

Following our discussion on power generation, future articles in the Grid 101 series will give a birds eye view of the current state of the transmission and distribution industry and their relation to grid intelligence.