Eric Ingersoll, CEO, General Compression
Recent authors in this column have addressed wind, nanotechnology and hydrogen, among other topics. These and other technologies have gained prominence in recent years, attracting significant government, industry and even consumer interest. This should come as no surprise.
Powerful forces are transforming the energy sector: dramatically higher fossil fuel prices, a rapid rise in power plant construction costs, new calls for carbon regulation and an emerging consensus that energy and national security are inextricably intertwined. Any one of these forces alone could be a profound driver for clean energy technologies, increasing the profitability of clean power generation and use. But together they have shattered the historical expectation that tomorrow’s energy paradigm will look much like today’s.
As a consequence, sudden, profound shifts have already occurred in some of the world’s largest markets, including electricity production, transportation, natural gas production and industrial and building energy use. These shifts are reshaping the energy space for regulators, utilities, developers and users alike. Many exciting concepts are being developed for possible implementation in a decade or more and we observe energy portfolios increasingly trending to favor low-carbon, increased-efficiency and renewable investments.
In the immediate term, we perceive tremendous market opportunity for new products and technologies in five main categories:
- Cogeneration, distributed generation and power recovery options offering rapid payback periods and high profitability;
- Large-scale renewable sources, which are dispatchable rather than intermittent;
- More efficient and profitable production of clean fuels including natural gas, especially “unconventional gas”;
- Cost-effective gasified solid fuels, including coal, refuse-derived fuels and biomass; and
- Efficient CO2 compression for enhanced oil recovery and (eventually) sequestration.
Each of these categories is currently the subject of considerable research and development efforts. Some, such as cogeneration, are already well demonstrated. As it happens, all of these categories are also often the subject of some heated debates: which is most important? which is most valuable? which is best?
From a market perspective, the most successful new renewable energy technologies will be those that satisfy three criteria:
- Commercially compelling (offering clear financial benefit over conventional alternatives, even in absence of additional incentives or regulatory constraints);
- Compatibility with existing infrastructure (inviting rapid and widespread implementation in the global energy mix);
- Complementary to existing renewables (maximizing net value of renewable portfolios).
It may seem obvious, but it bears mentioning that to be adopted on a global scale an energy technology must be economically compelling. A technology may be preferentially deployed in one region for local reasons, including government policy, but will only be selected in multiple regions if it also offers clear commercial value; it must be cost-competitive with conventional alternatives and offer equal or better financial returns to project developers and operators.
Likewise, much has been written here and elsewhere about the strengths and weaknesses of the existing energy infrastructure. It is clear that new technologies that are dependent on substantial revisions or upgrades to that infrastructure cannot be widely undertaken in the near term. For example, in many parts of the world (the United States included) transmission constraints range from moderate to severe. To be adopted at a significant scale, new renewable technologies must alleviate—or at least not aggravate—those transmission constraints.
Finally, whether new renewable technologies are seen as a replacement for conventional technologies or as a supplement to them, new renewable technologies which augment or enhance the value of existing renewable investments can in turn be expected to attract greater investment than those which either strand or diminish the value of existing renewable investments. How can a new renewable technology be utilized to increase the value of an existing renewable generation source, such as an operating wind farm or a cogeneration plant?
The notion of expecting renewables to offer clear commercial value as well as reduced dependency on finite resources has gained traction in recent years. Venture fund investment in cleantech and greentech has mushroomed, and business plan competitions such as Ignite Clean Energy (www.ignitecleanenergy.com/) are attracting attention and funding to new renewable energy technologies that offer strong business propositions as well as sound science.
Based on our own market research, we believe that new clean power solutions such as these—complementary to existing renewables, compatible with existing infrastructure and offering commercially compelling value propositions—can enable renewable sources to supply 20 percent or more of the global power mix by 2030, perhaps sooner.
The market demand is huge and growing and the opportunity is correspondingly vast and immediate. At the same time, investors increasingly seek new technologies that are both clean and profitable. We believe conditions are ripe for market-oriented renewable and clean energy solutions to proliferate.