The power grid and energy industry is a complex and interconnected system that involves multiple stages from energy generation to consumption. Here's a breakdown of the vertical stack in this industry:
1. Resource Extraction and Processing Phase
This phase involves the exploration, extraction, and initial processing of primary energy sources such as fossil fuels and uranium. It's a capital-intensive phase that requires advanced technologies and often has significant environmental implications. The companies in this phase supply the raw materials necessary for a large portion of global energy production.
The amount of recoverable oil is determined by a number of factors: permeability of the rock, strength of natural drives (the associated gas present, pressure from adjacent water or gravity), porosity of the reservoir rock, viscosity of the oil.
When the reservoir rocks are "tight", as in shale, oil generally cannot flow through, but when they are permeable, as in sandstone, oil flows freely.
Oil Recovery
Oil and gas extraction typically occurs in three stages: primary, secondary, and tertiary (or enhanced) recovery. Each stage employs different techniques to maximize resource extraction as the reservoir's pressure decreases over time.
1. Primary Oil Recovery
Primary recovery relies on the natural pressure of the oil reservoir to push the oil to the surface or uses mechanical pumps to extract the oil. This stage typically recovers about 10-20% of the oil in the reservoir.
- Natural Drive: The natural pressure within the reservoir forces the oil to the surface when a well is drilled.
- Artificial Lift: When natural pressure is insufficient, pumps such as rod pumps (beam pumps) or electric submersible pumps (ESPs) are used to lift oil to the surface.
2. Secondary Oil Recovery
Secondary recovery methods are employed once the natural pressure has declined and primary recovery is no longer effective. This stage can recover an additional 20-40% of the reservoir's oil.
- Water Flooding: Water is injected into the reservoir to displace oil and push it towards production wells.
- Gas Injection: Natural gas, carbon dioxide, or nitrogen is injected to increase reservoir pressure and drive the oil towards production wells.
3. Enhanced Oil Recovery (EOR)
Enhanced oil recovery (also known as tertiary recovery) techniques are used to recover additional oil that is not extractable by primary or secondary methods. This stage can recover an additional 10-20% of the oil.
- Thermal Recovery: Heat is applied to reduce the viscosity of the oil, making it easier to extract. Methods include steam injection (cyclic steam stimulation, steam flooding, and steam-assisted gravity drainage).
- Chemical Injection: Chemicals such as polymers, surfactants, or alkaline solutions are injected to improve the flow of oil.
- Carbon Dioxide Flooding (EOR): Miscible gases (like CO2) are injected to mix with the oil, reducing its viscosity and improving flow.
Each of these methods requires specialized equipment and expertise, often provided by oilfield service companies.
Oil and gas extraction companies include: Saudi Aramco (Saudi Arabia), Sinopec (China), PetroChina (China), ExxonMobil (US), Shell (UK), TotalEnergies (France), BP (UK), Chevron (US), Philips66 (US), Rosneft (Russia)
Fracking and Shale Oil Extraction
Hydraulic fracturing (fracking) is a technique used to extract oil and gas from tight rock formations, particularly shale. This process has revolutionized the oil and gas industry, allowing access to previously uneconomical reserves.
1. Drilling
A hole is drilled vertically into the earth, reaching depths of up to several thousand feet. Once the vertical drilling reaches the target depth, the drill bit is turned horizontally to extend the wellbore within the rock formation that contains oil or gas. This horizontal section can extend several thousand feet.
2. Casing and Cementing
Steel pipes, called casings, are inserted into the wellbore to stabilize it and prevent the contamination of groundwater. Cement is pumped between the casing and the wellbore wall to secure the casing and prevent fluids from migrating between different rock layers.
3. Perforation
Once the casing and cementing are completed, perforation guns equipped with explosive charges are lowered into the horizontal section of the well. The charges are detonated to create small holes in the casing and cement, allowing the fracking fluid to enter the rock formation.
4. Fracture Creation
A mixture of water, sand, and chemicals (known as fracking fluid) is injected into the well at high pressure, creating fractures in the rock. The sand in the fluid acts as a proppant, holding the fractures open to allow natural gas, petroleum, and brine can flow more freely through them.
Shale oil extraction companies include: Pioneer Natural Resources (US), EOG Resources (US), Chesapeake Energy (US), Continental Resources (US), Devon Energy (US), Diamondback Energy (US), Occidental Petroleum (US)
Coal Mining
Coal mining is the process of extracting coal from the ground for energy production. It remains a significant source of energy worldwide, despite growing environmental concerns. The coal industry faces increasing pressure to reduce its environmental footprint and compete with cleaner energy sources. There are two primary methods of coal extraction:
Surface Mining
This method is used when the coal seam is located relatively close to the surface, making it economically viable. The process begins with clearing vegetation and topsoil, followed by drilling and blasting to break up the rock. The coal is extracted using a variety of techniques, including strip mining, open-pit mining, and mountaintop removal.
Surface mining is highly efficient and allows for the recovery of large quantities of coal, but it has significant environmental impacts, including habitat destruction, landscape alteration, and water pollution from runoff.
Underground Mining
Underground mining, also known as deep mining, is used to extract coal deposits that are too deep beneath the surface for surface mining to be economically viable. This method involves constructing vertical shafts or inclined tunnels to reach the coal seams. Once access is established, miners use various techniques such as room-and-pillar or longwall mining to extract the coal.
In room-and-pillar mining, rooms of coal are mined out while leaving pillars of coal to support the roof of the mine. Longwall mining, on the other hand, involves using a mechanized shearer to cut along the face of the coal seam, allowing the roof to collapse in a controlled manner as the coal is removed.
Underground mining is labor-intensive and poses significant safety risks, including cave-ins, gas explosions, and exposure to harmful dust. However, it has a smaller surface footprint compared to surface mining and can access deeper coal reserves.
Coal mining companies include: BHP (Australia), Glencore (Switzerland), Rio Tinto (Australia/UK), China Coal Energy (China) Peabody Energy (US), China Shenhua Energy (China), Anglo American (UK), Coal India (India), Sasol (South Africa), Shaanxi (China)
Uranium Mining
Uranium mining involves the extraction of uranium ore from the earth to be processed and refined for use in nuclear energy production and other applications. The extracted uranium ore undergoes milling to produce uranium oxide concentrate, commonly known as yellowcake, which is further refined for use as nuclear fue
Open-Pit Mining
Open pit mining is employed when uranium ore deposits are located relatively close to the surface. The process begins with drilling and blasting to fracture the rock, followed by the use of heavy machinery such as excavators, loaders, and haul trucks to transport the ore for further processing. Open pit mining allows for the extraction of significant amounts of uranium ore and is cost-effective for shallow deposits.
Underground Mining
Underground mining is used for uranium deposits that are too deep for open pit mining to be feasible. This method involves sinking shafts or creating adits (horizontal tunnels) to reach the ore body. Miners use techniques such as room-and-pillar or cut-and-fill to extract the uranium ore while maintaining the stability of the mine. Room-and-pillar mining leaves columns of ore to support the roof, while cut-and-fill involves excavating ore and backfilling the voids with waste rock.
Heap Leaching Mining
Heap leaching is a process used to extract uranium from lower-grade ores that might not be economically viable through conventional mining methods. The process involves piling crushed ore into large heaps and then applying a leaching solution, typically sulfuric acid or an alkaline solution, over the heap. The leaching solution percolates through the heap, dissolving the uranium from the ore. The uranium-laden solution, known as "pregnant leach solution," is then collected at the base of the heap and processed to recover the uranium.
In-situ Leach (ISL) Mining
In-situ leaching, also known as in-situ recovery (ISR), is a mining technique that involves extracting uranium directly from the ore body without physically removing the rock. In this method, a leaching solution is injected through wells drilled into the uranium deposit. The solution dissolves the uranium as it moves through the ore body and is then pumped back to the surface through recovery wells. The uranium-laden solution is processed to extract the uranium.
Uranium mining companies include: Kazatomprom (Kazakhstan), Cameco (Canada), Orano (France), CGN (China), Uranium One (Canada/Russia), BHP (Australia), Paladin Energy (Australia)
2. Energy Generation Phase
This phase involves the production of electricity from various sources, including fossil fuels (coal, natural gas, oil), nuclear energy, and renewable sources (solar, wind, hydroelectric, geothermal). Each type of generation has its own unique processes and challenges. In 2021, the world generated 28 petawatt-hours with the following breakdown: Coal (36%), Natural gas (23%), Hydro (15%), Nuclear (10%), Wind (7%), Solar (4%), Other (5%).
Natural Gas Power Plants
Natural gas power plants are thermal power stations that burn natural gas to generate electricity. They generate almost a quarter of the world electricity supply and are a significant source of greenhouse gas emissions. During peak hours, many smaller plants can be spun up to supplement the base load. There are two main types of natural gas power plants:
Simple Cycle Gas-Turbine
Simple cycle, also called open-cycle, gas turbines are known for their quick start-up times and operational flexibility, making them ideal for meeting peak electricity demand and providing backup power. However, they are less efficient compared to other power generation methods, as a significant portion of the energy from the fuel is lost as waste heat in the exhaust gases The process begins with air being compressed and mixed with fuel in a combustion chamber. The high-temperature, high-pressure exhaust gases produced from combustion drive a turbine connected to a generator, producing electricity.
Combined Cycle Gas-Turbine (CCGT)
CCGTs enhance the efficiency of power generation by combining a simple cycle gas turbine with a steam turbine. In this configuration, the exhaust gases from the gas turbine, which would otherwise be wasted, are used to generate steam in a heat recovery steam generator (HRSG). The steam produced drives a steam turbine, which generates additional electricity. By utilizing both gas and steam turbines, CCGTs can achieve much higher efficiency rates, often exceeding 60%, compared to simple cycle systems. This makes CCGTs more environmentally friendly and cost-effective for large-scale power generation, as they maximize the energy extracted from the fuel and reduce overall emissions.
Natural gas power plant companies include: Huaneng Group (China), Engie (France) NextEra Energy (US), Duke Energy (US), Dominion Energy (US)
Coal-Fired Power Plants
Coal-fired power plants generate electricity by burning coal to produce steam, which drives turbines connected to generators. The process begins with the pulverization of coal into a fine powder to increase its surface area and improve combustion efficiency. The powdered coal is then burned in a boiler, producing high-temperature, high-pressure steam. This steam flows into a turbine, causing its blades to spin and drive a generator, which converts the mechanical energy into electrical energy. The steam is then condensed back into water in a cooling system and recycled to the boiler.
Coal-fired power plants are known for their ability to produce large amounts of electricity and provide a stable, reliable power supply. However, they have significant environmental impacts, including the emission of pollutants such as sulfur dioxide (SO2), nitrogen oxides, and carbon dioxide (CO2), which contribute to air pollution, acid rain, and global climate change. To mitigate these effects, modern coal-fired power plants are equipped with various pollution control technologies, such as scrubbers, electrostatic precipitators, and selective catalytic reduction systems. Despite these measures, coal-fired power generation remains a major source of greenhouse gas emissions and faces increasing scrutiny and regulatory pressure in the push toward cleaner and more sustainable energy sources.
Coal power plant companies include: CHN (China), Huaneng Group (China), Datang (China), SPIC (China), NTPC (India), Vistra (US), Southern Company (US), Duke Energy (US), PacifiCorp (US), RWE (Germany)
Nuclear Power Plants
Nuclear power plants generate electricity through the process of nuclear fission, where the nucleus of a heavy atom, typically uranium-235 or plutonium-239, is split into smaller parts, releasing a significant amount of energy in the form of heat. This heat is used to produce steam from water in a reactor core. The high-pressure steam drives a turbine connected to a generator, which converts the mechanical energy into electrical energy. The reactor core is housed within a robust containment structure to ensure safety and prevent the release of radioactive materials.
Nuclear power plants are known for their ability to produce large amounts of continuous, low-carbon electricity, making them a vital component in efforts to reduce greenhouse gas emissions and combat climate change. Unlike fossil fuel plants, nuclear reactors do not emit carbon dioxide during operation. However, they do produce radioactive waste, which requires careful handling, long-term storage, and stringent regulatory oversight to ensure environmental and public safety. Additionally, nuclear power plants involve high initial construction costs, typically take 6 to 8 years to build, and face challenges related to public perception, regulatory approvals, and the management of potential risks.
Nuclear power plant companies include: EDF (France), Constellation Energy (US), NextEra Energy (US), CNNC (China), Exelon (US), Rosatom (Russia), CGN (China), Korea Hydro & Nuclear Power (South Korea)
Renewable Energy Generation
Renewable energy generation involves harnessing energy from natural and sustainable sources to produce electricity. These sources are abundant and replenish naturally, making them a critical component in efforts to reduce carbon emissions and combat climate change.
Governments worldwide are increasingly investing in renewable energy initiatives to transition from fossil fuels to cleaner energy.
The Biden Administration's Investing in America agenda highlights the following targets:
- Reducing greenhouse gas emissions 50-52% below 2005 levels in 2030.
- Reaching 100% carbon-free electricity by 2035.
- Achieving net-zero emissions by 2050.
The EU's Green Deal also strives to transform Europe into the first climate-neutral continent, with a target of 0 net emissions by 2050, and at least 55% less net emissions by 2030, compared to 1990 levels
These initiatives support the development and deployment of renewable technologies, grid modernization, and research into more efficient and cost-effective solutions, driving the growth of renewable energy generation on a global scale.
Solar Power
Solar power converts sunlight directly into electricity using photovoltaic (PV) cells or indirectly using concentrated solar power (CSP) systems. PV cells, commonly found in solar panels, generate electricity when exposed to sunlight, making them suitable for various applications from residential rooftops to large solar farms. CSP systems use mirrors or lenses to concentrate sunlight onto a small area to produce heat, which then generates electricity through a steam turbine. Solar power is one of the fastest-growing renewable energy sources due to declining costs and advancements in technology.
Solar power companies include: LONGi Solar (China), JinkoSolar (China), Trina Solar (China), First Solar (US), JA Solar (China), Canadian Solar (Canada)
Wind Power
Wind power harnesses the kinetic energy of wind to generate electricity using wind turbines. These turbines are typically installed in wind farms, either onshore or offshore, where wind speeds are optimal for energy production. The rotation of the turbine blades drives a generator, producing electricity. Wind power is one of the most mature and cost-competitive renewable energy sources, with significant capacity additions occurring worldwide.
Wind power companies include: Vestas (Denmark), Goldwind (China), Enercon (Germany), Siemens Gamesa (Spain), GE (US), Envision (China)
Hydroelectric Power
Hydroelectric power generates electricity by harnessing the energy of flowing or falling water. This is typically achieved through dams on large rivers, where the water flow drives turbines connected to generators. Hydroelectric power is one of the oldest and most established forms of renewable energy, providing a reliable and consistent power supply.
Hydroelectric power companies include: China Three Gorges Corporation (China), EDF (France), SPIC (China), Eletrobras (Brazil), Hydro-Québec (Canada), RusHydro (Russia), Statkraft (Norway)
Geothermal Power
Geothermal power utilizes the Earth's internal heat to generate electricity. This involves drilling wells into geothermal reservoirs to access hot water and steam, which then drive turbines connected to generators. Geothermal power is a reliable and consistent energy source, capable of providing base-load power with minimal environmental impact.
Geothermal power companies include: Ormat (US), Calpine (US), Enel Green Power (Italy), Calpine (US), Energy Development Corporation (Philippines), Mitsubishi Power (Japan)
3. Transmission and Distribution Phase
The Transmission and Distribution Phase is a critical link in the power grid, responsible for delivering electricity from generation sites to end consumers. This phase requires sophisticated engineering to minimize power losses, ensure system stability, and maintain a reliable electricity supply. It also involves complex management systems to balance supply and demand in real-time, integrate renewable energy sources, and respond to outages or disruptions.
Transmission
The transmission phase of the power grid involves the high-voltage transfer of electricity from power generation sites, such as power plants and renewable energy installations, to substations located near demand centers. This phase utilizes a network of high-voltage transmission lines, towers, and transformers designed to minimize energy losses over long distances and ensure efficient power delivery. Sophisticated engineering techniques and technologies are employed to maintain system stability, manage power flow, and prevent bottlenecks. Additionally, transmission systems are equipped with advanced monitoring and control mechanisms to balance supply and demand in real-time, integrate various energy sources, and quickly respond to outages or disruptions, ensuring a reliable and continuous electricity supply to the distribution network.
Transmission System Operators are entities responsible for operating, maintaining, and developing the high-voltage transmission network. Their primary responsibilities include:
1. Ensuring the reliable and efficient transmission of electricity
2. Maintaining system stability and power quality
3. Planning and implementing grid expansions and upgrades
4. Facilitating fair and non-discriminatory access to the transmission system for electricity generators and suppliers
In many countries, TSOs are regulated monopolies due to the natural monopoly characteristics of transmission infrastructure.
Entities involved in transmission often take on TSO roles. These include: National Grid (UK), State Grid Corporation of China (China), Fortis (Canada), Power Grid Corporation of India (India), Terna (Italy)
In the United States, the management of the transmission system is often handled by Regional Transmission Organizations (RTOs) or Independent System Operators (ISOs). These are independent, non-profit organizations that were established to ensure non-discriminatory access to transmission and promote efficiency in electricity markets.
As of 2023, there are ten ISO/RTOs operating in North America:
- Alberta Electric System Operator (AESO) – ISO
- California Independent System Operator (CAISO) – ISO
- Electric Reliability Council of Texas (ERCOT) – ISO
- Midcontinent Independent System Operator, Inc. (MISO) – RTO
- ISO New England (ISO-NE) – RTO
- New York Independent System Operator (NYISO) – RTO
- Ontario Independent Electricity System Operator (IESO) – ISO
- PJM Interconnection (PJM) – RTO
- Southwest Power Pool (SPP) – RTO
- Western Power Pool (SPP) - RTO
Distribution
The distribution phase of the power grid takes over where the transmission phase ends, involving the delivery of electricity from substations to individual consumers, including residential, commercial, and industrial users. This phase operates at lower voltages, with the electricity being stepped down using transformers to levels suitable for end-use. The distribution network consists of a complex system of power lines, poles, transformers, and meters spread across urban and rural areas.
Ensuring reliability and efficiency, the distribution phase requires careful management to handle the varying demands of consumers, quickly address faults or outages, and integrate distributed generation sources such as rooftop solar panels. Advanced distribution management systems (DMS) and smart grid technologies enhance the capability to monitor, control, and optimize the flow of electricity, improving overall grid performance and customer service.
The distribution phase is primarily operated by several types of entities:
1. Local Distribution Companies (LDCs) or Distribution System Operators (DSOs): These are utilities responsible for operating and maintaining the local distribution network.
2. Vertically Integrated Utilities: In some regions, a single company may handle generation, transmission, and distribution.
3. Municipal Utilities: These are city-owned entities that manage the local distribution network.
4. Electric Cooperatives: These are non-profit, member-owned utilities that serve rural areas.
Companies involved in distribution include: EDF (France), Duke Energy (US), PG&E (US), TEPCO (Japan), State Grid Corporation of China (China), Enel (Italy), E.ON (Germany), Iberdrola (Spain)
4. Energy Retail and Consumption Phase
The Energy Retail and Consumption Phase represents the final stage in the power grid and energy industry vertical stack. This phase is dominated by utility companies and involves the sale of electricity to end-users and the management of energy consumption.
Grid Management
Grid management systems use advanced software and communication technologies to monitor, control, and optimize the distribution of electricity. These systems enable utilities to detect and respond to outages more quickly, integrate distributed energy resources (such as rooftop solar panels and electric vehicles), and balance supply and demand more effectively. As the grid becomes increasingly complex with the integration of renewable energy sources and the growth of prosumers (consumers who also produce energy), smart grid technologies are becoming essential for maintaining grid stability, improving energy efficiency, and enabling new services and business models in the energy sector.
Energy Retail
Energy retailers play a crucial role in the power industry by acting as intermediaries between electricity generators and consumers. These companies purchase electricity in bulk from generators or wholesale markets and sell it to end-users, including residential, commercial, and industrial customers. Energy retailers are responsible for customer acquisition and retention, billing, and customer service.
Major utility companies include: EDF (France), E.ON (Germany), Engie (France), Iberdrola SA (Spain), TEPCO (Japan), KEPCO (Korea), Centrica (UK), Nextera Energy (US), Exelon (US), Duke Energy (US)
Further Readings
- Electricity Generation, Capacity, and Sales in the US https://www.eia.gov/energyexplained/electricity/electricity-in-the-us-generation-capacity-and-sales.php
- European Green Deal https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal_en
- US Inflation Reduction Act and Bipartisan Infrastructure Law https://www.energy.gov/media/303206