UPDATE: The Challenge Ahead: POWER-GEN International kicks off with explosive keynote session

During the Tuesday morning keynote session of POWER-GEN International 2012, four executives encouraged attendees to prepare for impending challenges the power industry is sure to face in the future. Speakers were Gordon Gillette, president and CEO of Tampa Electric and Peoples Gas; Jon Wellinghoff, Chairman, Federal Energy Regulatory Commission; E. James Ferland, President and CEO, Babcock & Wilcox; and Paul Browning, President and CEO, Thermal Products, GE Power and Water.

One of the most popular topics among all four speakers was the worldwide shift toward natural gas power generation. “The long-term prospects for natural gas have never looked more favorable,” Browning said. Natural gas production has boomed in the U.S. over the last decade, allowing existing natural gas plants to ramp up their output. “Capacity factors have increased from 45 percent to 80 percent in recent years.”

Gillette, whose company currently uses natural gas to generate about 40 percent of its 4,700 MW portfolio, said Tampa Electric’s generation mix will move even more towards natural gas over the next decade.

However, the long-term growth of natural gas generation may not be as dramatic as some would expect. Ferland said Babcock & Wilcox foresees worldwide natural gas generation increasing from 23 percent in 2010 to 26 percent in 2035. Natural gas will likely be most prevalent in the U.S., where unconventional shale gas resources have been a “game changer” over the last decade, Browning said.

Natural gas has stepped in at just the right time in the U.S., as widespread retirements of coal-fired power plants are already occurring.

“The amount of coal being used for electric generation is dropping in the U.S.,” Ferland said.

Consequently, Gillette said he expects that natural gas combined-cycle will be a much bigger trend in new builds than integrated gasification combined cycle (IGCC) for years to come. He also said there will likely be no new conventional coal plants in the U.S., and that older, unscrubbed plants will be retired.

While coal retirements and retrofits introduce a new set of challenges, the move toward natural gas in the U.S. has been met with several positive results. For example, in 2005, the U.S. was the world’s largest emitter of greenhouse gases, Browning said. Since 2005, the U.S. has reduced its greenhouse gas emissions more than any other country. “This is largely attributed to the shift from coal to gas generation,” Browning said.

While the U.S. coal-fired power sector is encountering a number of challenges, companies seeking coal generation business could find hope elsewhere in the near future.

“If you want to build new coal units, you’d better have a presence in Asia,” Ferland said.

Likewise, opportunities for new nuclear power will likely exist mostly outside the U.S. Although some nuclear projects are currently being licensed in the U.S., such as Southern Company’s Plant Vogtle, Ferland said nuclear build-outs in the U.S. will increase only slightly, from 106 gigawatts in 2010 to 109 gigawatts in 2035. “The majority of the U.S. (nuclear) build-out is already occurring,” Ferland said.

Because coal and nuclear require large investments, new projects are mainly feasible only at utilities with a large amount of money to invest. Ferland pointed out that a large U.S. utility is valued at about $25 billion, a large European utility at about $45 billion, and a large Asian utility at about $100 billion. Consequently, “a very limited number of utilities in the U.S.” can make the decision to build new coal or nuclear, Ferland said.

One potential “game-changer” in the nuclear realm could be small modular reactors (SMRs), Ferland said. Although SMRs won’t likely be ready for deployment for another five to ten years, Babcock & Wilcox and other companies are entrenched in developing these reactors. SMRs are expected to allow for faster licensing and increased versatility. “Smaller megawatt output means a smaller investment upfront.”

Renewable energy is expected to represent a growing piece of the worldwide generation pie. According to Ferland, renewable energy will increase globally from 11 percent in 2010 to 24 percent in 2035. Browning said that through the use of new technologies, renewables and gas will be integrated increasingly in the future to provide “more affordable, cleaner power.”

The speakers also seemed hopeful about a bright future for solar photovoltaics (PV). “If PV gets into the $.05/kWH range, that’s a real game-changer,” Browning said.

Solar PV could play an important role in the future of distributed generation, as more home owners and businesses explore rooftop installations, Wellinghoff said. The utility industry must in turn decide how it will respond to these and other attempts at distributed generation. In addition, utilities must adapt to rapidly shifting consumer needs. Gone are the days when consumers spent an ever-increasing amount on electric bills. Items like desktop computers are vanishing from homes and causing electric bills to be lower. Also, smart grid developments that allow customers to track electric usage are becoming commonplace.

“We will literally have control at our fingertips with respect to deployment of the smart grid,” Wellinghoff said.

While all of these developments can seem like disruptions to the growth of the worldwide power sector, the industry must learn to welcome the changes. “We as an industry have to figure out how we can embrace these trends, not fight them,” Wellinghoff said. “If we don’t, they’re going to run over us.”