Decarbonization for the Commercial and Industrial Sector
Today’s changing energy landscape is driving organizations to reexamine how they approach, use and manage electricity. With renewables playing a rising role in the power mix, we’re seeing sweeping changes in how electricity is produced, introducing new opportunities for stakeholders to embrace low- or zero-carbon energy systems.
Decarbonization will be a major effort, requiring significant investment in renewable power generation, electrification, decentralization and digitization. But new advances in technology and increasing cost parity are driving stakeholders, particularly those in energy-intensive sectors, to take a critical eye to their energy needs.
An Energy-Hungry Sector Seeks Options
It’s no secret that the commercial and industrial sector spends a large chunk of its operating budget on energy. According to Black & Veatch’s 2019 Strategic Directions: Commercial & Industrial Report survey, which polled 200 qualified stakeholders, respondents spend the bulk of their money on facility lighting, process heating, cooling and refrigeration, “other process demands,” HVAC, “other facility demands,” drive power, electro-chemical processes and conventional boiler use.
The survey found that there is heightened interest throughout the sector in addressing energy challenges, and stakeholders are increasingly thinking long-term as they make moves to invest in power independence and flexibility. To this point, survey data shows that approximately two-thirds of businesses in the commercial and industrial space have environmental sustainability goals and associated performance metrics, while one-quarter say they’re developing such roadmaps.
These sustainability objectives correlate directly to the respondents’ energy usage, with many respondents tying emissions reductions to sustainability goals and cost savings. Several drivers are coming together that will allow the commercial and industrial sector to achieve ambitious decarbonization initiatives: Changing regulations and policies, advances in clean energy technology, the decreasing cost of renewable energy and battery storage, and the use of Internet of Things (IoT) technology to manage energy use.
A Blended Energy Mix
Decarbonization for the commercial and industrial sector comes down to finding long-term replacement energy solution. Today, stakeholders have more options than ever before when it comes to building a blended energy mix that is affordable, sustainable and resilient.
Renewables are becoming more viable as they become more cost-competitive with power from the local utility. According to Black & Veatch’s survey, a combined 54 percent of respondents said they are considering onsite renewable energy technologies such as solar arrays (30 percent), battery storage (30 percent), combined heat and power (26 percent) and wind (24 percent), and to a lesser extent, geothermal, hydro and bioenergy. Renewable energy not only aligns with corporate sustainability goals, but also offers upgrades on cost, quality and reliability.
The Climate Group and CDP (formerly the Carbon Disclosure Project) have compiled an “RE100” list populated by more than 120 multinational companies, many of whom are in the commercial and industrial space, including General Motors, Kellogg’s, Johnson & Johnson, Hewlett-Packard and Iron Mountain. These companies have announced plans to move to 100-percent renewable power generation. Many are generating their own energy through rooftop solar, while others are buying renewable-based power from offsite, grid-connected generators.
Survey data shows this is a common desire, with many in the commercial and industrial sector looking to secure their energy futures through renewables. One-third of respondents said they’ve considered distributed energy resources (DER) or microgrids for resiliency and revenue generation, both for their facilities and as a benefit to the community. Nearly four of every 10 respondents say that while they haven’t considered DERs, there’s interest in exploring them.
Gas and Hydrogen Offer Opportunity
Although the natural gas market has been wildly unpredictable, sowing doubt as to the future of gas generation, we can’t ignore that natural gas still provided the bulk of this nation’s electricity in 2019. When viewed through the lens of decarbonization, natural gas still offers opportunity to generate flexible, dispatchable power with decreasing – and eventually zero – carbon emissions.
Many power utilities are planning to replace their coal power stations, which are notorious CO 2 emitters, with renewable generation. While this will certainly achieve zero emissions goals, the downside is that renewables are inherently intermittent, and we will still need flexible, dispatchable generation to maintain grid reliability and resiliency.
Today’s advanced gas turbine generator plants fill that need, able to turn down to very low loads but also to ramp at 10 to 15 percent of their full load capacity per minute. Plus, properly designed natural gas-fired plants will begin exceeding 65-percent efficiency within the next decade, lowering emissions without any changes in fuel. And with gas prices projected to remain at historical lows for the next few decades, natural gas will remain cost- effective. Gas is even more compelling when one considers how well it complements solar and wind generation, offering a more balanced portfolio of electrical generation that reduces carbon emissions and maintains a reliable power supply.
Another option is to change to a low-carbon fuel such as hydrogen. Interest in hydrogen is deepening as alternative fuels offer new solutions for a carbon-free future. Produced via electrolysis, hydrogen is a zero-emissions clean fuel that emits only water. When this process is powered by renewable energy, the result is known as “green” hydrogen and is 100-percent carbon-free.
The latest advanced gas turbines can use 30- to 50-percent hydrogen fuel content, and we expect to see substantial progress towards firing 100-percent hydrogen fuel within the next 10 years. The latest advanced class gas turbines, and many older models, will be retrofitted with newer hardware to realize these higher hydrogen contents. Many smaller gas turbines have significant hydrogen firing capabilities today, and we expect to see the major manufacturers design upgraded technologies that can be retrofitted into these machines.
This effort is already underway. Intermountain Power Agency recently announced that it is replacing its Intermountain Power Project coal-fueled facility with a natural gas-fueled combined cycle power plant that is commercially guaranteed capable of blending 30-percent green hydrogen at start-up in 2025, with plans to increase to 100-percent hydrogen by 2045.
Considering its cost, flexibility and emissions profile, natural gas generation has a place in our fuel mix for years to come. It can also become even cleaner through the integration of hydrogen, which offers high performance capabilities while emitting only water.
Widespread adoption of low carbon fuels such as hydrogen will take time, but considering the potential for positive returns, natural gas and hydrogen offer solutions that can help stakeholders decarbonize their operations.
The Future of Decarbonization
Black & Veatch believes deeply in the value – and viability – of renewable energy, natural gas and alternative fuels such as hydrogen in decarbonizing the world’s economies. Technology continues to evolve as we continue to pursue low- and zero-carbon solutions. Today’s high-efficiency natural gas plants are already delivering substantial reductions in emissions compared to gas plants that were built 20 years ago.
The commercial and industrial sector will continue to embrace the increasingly favorable economics of alternative energy options. But research and planning remain critical to success. Stakeholders will need to evaluate and assess these emerging technologies and develop detailed plans that outline how they can operate profitably in tomorrow’s carbon-free world.