2022 Energy Outlook

By Jim Harrison, UWUA Director of Renewable Energies

Numerous factors are driving utilities to focus on lowering their carbon output and examine the ways they generate and deliver power. At the same time, they’re re-examining their business models in the wake of significant competition from non-utility power producers, particularly of renewables. A 2021 report by Hitachi found 88% of all utility-scale wind and solar generation capacity in the U. S. is owned by independent power producers. This is significant for UWUA members working in power generation because the overwhelming majority work for either an investor-owned or publicly run utility.

One of the biggest drivers of change is compliance with targets aimed at cutting greenhouse gas emissions in half by 2030 and reaching carbon neutrality in 2050. This will require large scale shifts in power generation, and significantly reducing emissions in the transportation sector, buildings, and industrial processes now running on fossil fuels. The Electric Power Research Institute (EPRI) projects we will need to build more than 500 GW of new capacity in the coming decade to meet both demand growth and replace generation currently provided by fossil fuels.

The UWUA is working to understand what these changes mean for our members. The types of work we do now, and who we work for, have the potential to look much different in the not-too-distant future. Presented below are key areas to watch in 2022.

Infrastructure Investment and Jobs Act

The 2021 Infrastructure Investment and Jobs Act allocates $73 billion for grid resiliency. These funds will be distributed to investor-owned, as well as county, co-operative, and municipal utilities, through the DOE’s Energy and Power project. Key provisions include:

  • $2.5 billion over five years for public-private partnerships to replace or enhance transmission lines — funding for alleviating transmission constraints, line replacement, increasing capacity, and connecting microgrids to existing transmission.
  • A DOE grant program to support investments to protect the grid from the impact of extreme weather, wildfires, and natural disasters. Congress amended a 2007 law to allow smart grid investments that quickly rebalance the grid during disruptive events and facilitate aggregation and integration of distributed energy resources such as energy storage and other grid hardening investments to protect the distribution grid against extreme weather events. The 2021 Act adds to this by allowing state regulators to develop rate mechanisms that allow utilities to recover costs of promoting demand response practices.
  • Funding for pumped storage hydropower projects, along with wind and solar generation integration, for long-duration storage.
  • $7.5 billion for nuclear generation infrastructure to include micro reactors, small modular reactors, and a process to reduce inefficiencies for allocation of credits to build with advance certification.
  • $7.5 billion for construction of electric vehicle (EV) charging stations and additional funds for states to accelerate the use of EVs for state-owned fleets, taxis, ridesharing and school buses (watch for more on this — and hydrogen — in the April-May-June issue of The Utility Worker).
  • $7.5 billion for hydrogen specific programs and expansion of the DOE’s research, development, and commercialization of hydrogen production processes, delivery, and end-use technologies.

Department of Energy

Last June, the DOE launched its Earth Shot Initiative, aiming to bring significant federal resources together for hydrogen and fuel cell production and to direct resources for developing long-duration grid scale storage systems. The initiative includes manufacturing hydrogen from renewable energy and advanced technologies and is also geared toward creating pathways for using natural gas as a feedstock for manufacturing hydrogen for use in industrial, transportation and power generation processes. Hydrogen is the most common element on earth, but it is mostly attached to other atoms and is therefore rare by itself. The excitement over manufacturing hydrogen is that it can be used widely in several hard to decarbonize sectors of the economy.

This year, all eyes will be watching Long Ridge Energy’s recently completed 485 MW power generation center in Ohio. The plant is the first full-scale U.S. power plant built to use hydrogen as part of its fuel mix. Its initial generation will be fueled by natural gas but by April it expects to incorporate 5% hydrogen, phasing in more over time; the goal is to be completely hydrogen-fueled by 2030.

In January, the DOE unveiled its Building a Better Grid Initiative which provides funding for demonstration projects that help coordinate electrical transmission planning and construction, increase energy storage access to the grid, and build electrical distribution systems that enhance grid resiliency. In addition, this initiative enables the DOE to encourage collaboration on a cost share basis between states and publicly regulated utilities for these potential investments.

Federal Energy Regulatory Commission

Industry watchers are expecting significant activity from FERC this year, especially in the areas of electrical transmission planning, deployment, and cost allocations. FERC has a significant role in channeling funds earmarked in the Infrastructure Bill for transmission investment.

FERC will be focused on reducing the backlog of projects approved — but still waiting to connect to the grid — as well as policies that result in more coordinated planning across states and regional transmission areas. FERC has expressed concern that previous orders that it issued have not resulted in envisioned transmission investments. Utilities will be concerned about right of first refusal for construction projects as well as cost allocations that may not benefit customers in their service territory. For UWUA members who do transmission work, a utility’s right of first refusal can mean the difference between UWUA members getting work or the work going to third party developers.

Also expect FERC to focus on policies allowing energy storage projects in the wholesale power markets and to address an update of criteria for reviewing proposed natural gas infrastructure projects, which haven’t significantly changed since 1990. Possible changes could affect how FERC decides if infrastructure is needed and how it measures a project’s climate impact.

Coal, Natural Gas, Wind, and Solar Generation and Utility-scale Battery Storage

Last year’s higher natural gas prices made coal generation more competitive, temporarily delaying some planned coal plant retirements. The U.S. Energy Information Administration (EIA) expects retirements to resume, and that 12.6 GW will go offline in 2022. If realized, this will outpace the 11 GW in average annual retirements seen in the 2015-2020 period. Natural gas is expected to replace the lion’s share of retired coal generation capacity, with wind and solar filling the rest of the void. New natural gas power plants are slated to go online this year in Connecticut, Florida, Massachusetts, Michigan, and Ohio.

Total current U.S. utility-scale electric generation capacity is approximately 1,200 million megawatts, with nuclear, hydro, and wind together providing just over a quarter. Industry analysts project that renewables will account for an additional 71 GW in 2022. This means that in just a single year, renewables will provide an additional 6% of the generation pie — an impressive growth rate.

States moving toward lower emission goals will continue to invest in renewable energy, energy storage, distributed energy resources and EV infrastructure:

  • At the end of 2021, 31 states and the District of Columbia had renewable portfolio and/or clean energy standards.
  • In the eastern U.S., utility-scale solar will be the primary generation addition this year; wind will dominate in the Midwest; and western states will place their largest investments in solar and battery storage.
  • Nearly all east coast states are in a race to be seen as the preeminent leader in offshore wind development, but no projects are scheduled to become operational in 2022. The Bureau of Ocean Energy Management (BOEM) recently held a lease auction for the New York Bight, the largest leasing area for offshore wind to date. UWUA has provided comments to BOEM on several leases requesting that labor standards to be attached to lease awards.
  • Battery storage projects will see a robust build out in 2022. Last year, 4.7 GW of utility-scale storage came online, mostly in California and Arizona. Standard & Poors projects 8 GW of battery storage will be added nationally this year.
  • A key driver of battery storage growth is the shift from fossil fuel to renewable generation. Several states with utility-scale solar are looking to add battery facilities (up to 5 MW) to connect to the distribution system. The UWUA’s Power for America Training Trust has a DOL-certified training program for work with battery storage and is available for locals in need of member training.

Natural Gas and Electrification

Natural gas fueled roughly a third of U.S. electricity generation last year — a rate the EIA expects will hold into the foreseeable future. At the same time, EIA expects home usage of natural gas to fall over time (today almost half of all homes use natural gas for heating and cooking) and commercial use to flatten or slightly decline over the next decade. Much of the continued reliance on natural gas has to do with its low relative cost; the DOE estimates that the cost of electricity nationally to be 3.6 times higher than that of natural gas.

Look for more cities and states to weigh ordinances or new building codes pushing for all electric building stock. Denver recently passed an ordinance for building electrification and renewable energy deployment for commercial and multifamily housing. New York City is phasing out gas for buildings 7 stories and under, and Philadelphia has called for a study looking at business diversification options for its municipal gas utility (see page 14). In reaction, we may see other states consider “fuel choice” or “ban-the-ban” bills that allow natural gas to remain a customer choice.

If your local needs assistance on providing input at the city or state level ensuring that natural gas continues to be part of the energy mix, contact the National union, which has assisted several locals on this issue.