Author: Georgi Gullia, Industrial Manufacturing Business Development Leader
The need for innovative energy solutions has never been more pressing as the energy grid is increasingly strained by population growth and overall usage. With no signs of a slowdown, the challenge of meeting the world's growing energy needs is at the forefront of industrial and technological discussions. This issue was one of the key focuses at Cherry Bekaert's recent Modernizing Manufacturing Executive Symposium, featuring several panel discussions with top-notch, industry-renowned executives.
During this session, Cherry Bekaert Partner and Industrial Manufacturing & Consumer Goods Leader Jason Hodell invited Mitsubishi Power Americas’ President and CEO Bill Newson and Tokai Carbon GE LLC's President Scott Carlton to explore how their companies are navigating the complex landscape of modern energy demands, increasing their capacities, and doing so more sustainably in comparison to global competitors.
Key Components Driving Unprecedented Power Growth
The U.S. has experienced a remarkable surge in electricity demand in recent years, transitioning from a modest and nearly stagnant growth rate of 0.5% annually over the past two decades to an impressive 3%, with some regions even reaching 6%.
As a result of this surge, the goals for transforming power generation have shifted dramatically. Previously, the objective was to decarbonize the grid reliably and affordably by 2050. Now, companies like Mitsubishi Power and Tokai Carbon are tasked with not only achieving these decarbonization goals but also expanding the electricity supply by 6% annually and enhancing its reliability. This significant increase is driven by several key factors that are reshaping the energy landscape:
Government Policy and Funding Initiatives
A major catalyst for this growth is the support from government policies and funding initiatives put forth by the Inflation Reduction Act (IRA) of 2022, along with new Environmental Protection Agency (EPA) guidelines and Department of Energy (DOE) hydrogen hubs. These measures have been pivotal in channeling investments towards building clean energy generation and incentivizing the development of renewable energy projects.
Expansion of Renewable Energy and Strengthening of Reserve Margins
Renewable energy is experiencing unprecedented growth, with projections indicating a 10% annual increase from 2024 to 2026. This expansion is essential for meeting the rising electricity demand while reducing reliance on fossil fuels. However, the transition is not without challenges.
Planned coal retirements amounting to 96.5 gigawatts (GW) between 2024 and 2033 highlight the need for careful management of reserve margins. Unlike coal, which has averaged over 50% capacity for the last decade, renewables typically run only between 25% – 35% of the time, necessitating strategic enhancements to ensure energy reliability during peak demand periods.
To mitigate potential power shortages, utilities are proactively increasing reserve margins by over 5%. This strategic move aims to bolster energy reliability, particularly during extreme weather events like Texas's Storm Uri, which left many without power for days. By enhancing reserve margins, utilities are better equipped to handle fluctuations in renewable energy availability and ensure continuous power supply to consumers.
Extraordinary Customer Growth and Electrification
Utilities are also witnessing extraordinary customer growth, driven by the rise of data centers, the reshoring of manufacturing, and the widespread electrification of various sectors. Data centers, in particular, have emerged as significant consumers of electricity, while the post-IRA reshoring and manufacturing boom is fueling demand further. Additionally, the shift towards electrification of heating systems and other appliances, traditionally powered by natural gas or coal, is accelerating electricity consumption across the nation.
Right now, I'm meeting with customers like Microsoft, Amazon, and Meta, and we're talking to them about how — with all this great stuff that's going on — the one thing that they need to hold them up is power.
Bill Newson (Left) and Scott Carlton (Right) answer panel questions on next-gen energy solutions at Cherry Bekaert's Modernizing Manufacturing Executive Symposium.
How Mitsubishi Power Is Addressing Energy Demand
Mitsubishi Power is a power solutions brand of Mitsubishi Heavy Industries leading the transformation in power generation and energy storage, providing power solutions. Mitsubishi Heavy Industries produces a diverse set of solutions, including gas turbines, compressors, aero engines, CO2 capture plants, metals machinery, chemical plants, transportation, waste-to-energy, turbochargers, aerospace, rocket engines and defense. Their top three business units are power generation, nuclear and defense.
Mitsubishi Power aims to achieve carbon neutrality by 2040 to help its customers reach net-zero goals by 2050. They are pursuing this through a three-pillar strategy:
Building a Hydrogen Ecosystem
The company is constructing the world's largest green hydrogen production and storage facility, set to be operational in 2025. This project involves utilizing curtailed renewables and water to produce hydrogen, which is then stored in two salt caverns in Delta, Utah.
Each cavern boasts a storage capacity of 150 GWh of energy. “So that’s 300GWh in the two (salt caverns),” said Newson, “If you take today, all the batteries that are operational today in the United States, there’s only 30 GWh. So, you could fill them all up, and it would only take up 10% of the energy that we can store in these salt caverns.”
Remarkably, the salt dome in Delta has the potential to house up to 100 caverns, offering significant scalability for future energy storage needs. They are also involved in other hydrogen projects in Texas and the Pacific Northwest, supported by $7 billion in U.S. government funding.
Building a Carbon Dioxide (CO2) Ecosystem
In Decatur, Illinois, a food processing company must replace its coal plant by 2030, as demanded by the state, which currently provides its electricity and steam for food processing. Mitsubishi Power will replace that coal plant with a gas turbine and boiler.
This new setup will supply clean electrons and steam while capturing CO2 emissions for storage in a nearby underground facility with proven CO2 storage capabilities. A leading technology company will purchase part of the output from the gas turbines (clean electrons), and the food processing company will receive government subsidies from the Section 45Q tax credit for CO2 sequestration.
Decarbonizing Existing Infrastructure
Working with Georgia Power, the company has already tested existing M501G gas turbines with a 20% blend, successfully reducing CO2 emissions by 7% and proving that minor facility modifications can further lower emissions. Next year, they plan to increase that blend to 50%. Georgia Power has experienced a 6% growth in demand, with 80% of this increase driven by the expansion of data centers and advancements in generative artificial intelligence (GenAI).
How Tokai Carbon Is Addressing Energy Demand
Tokai Carbon, a Japanese manufacturer of carbon and graphite products, is uniquely positioned in the market as both a major consumer of electricity and a supplier to industries with significant energy demands. The company offers a wide range of products that support various sectors, providing solutions to numerous global challenges related to environmental sustainability and electricity capacity, including:
- Graphite Electrodes for the Iron and Steel Market
- Friction Materials for the Automotive Parts Market
- Fine Carbon for the Semiconductor Market (e.g., silicon for microchips, computer chips)
- Anode Materials for the Battery Materials Market (e.g., lithium-ion batteries)
- Smelting and Lining for the Aluminum Market
- Carbon Black for the Tire Market
- Industrial Furnaces and Related Products for the Electric Components Market
Graphite Electrodes
In the U.S., Tokai Carbon’s primary focus is on producing graphite electrodes used to transform recycled scrap steel into new steel products. The U.S. steel industry, recognized as the world’s largest recycling organization, recycles approximately 80 – 100 million tons of steel annually. This contrasts with regions like China and parts of Europe, where a majority of steel ends up in landfills. Scott Carlton noted that about 70% – 75% of U.S. steel is made from recycled scrap, the highest percentage in the Western world.
The recycling process relies heavily on electric arc furnaces (EAFs), which use graphite electrodes to generate the extreme heat needed to melt scrap steel. These electrodes act as electrical conductors, with their synthetic graphite composition providing high electrical conductivity and heat resistance. Inside the furnace, temperatures reach up to 3,000°F, powered by an electric arc traveling at 93,000 miles per second, essentially creating lightning bolts of electricity between the electrodes and delivering up to 115 million watts of power — enough to power a mid-sized city for several days.
For us to make this electrode, we are heating that up to about 3,000 degrees C, which is about two-thirds the temperature of the sun’s surface. So, we need electricity.
For every ton of steel produced, two to three pounds of graphite electrodes are consumed. The U.S. steel industry alone uses around 120,000 metric tons of graphite electrodes each year. The unique properties of synthetic graphite, which strengthens as it heats, are crucial for these processes.
However, the increasing demand for graphite, particularly in the battery industry, poses challenges. While Tokai Carbon supplies about 30,000 tons of graphite electrodes per year to the U.S. steel market, the automotive industry's demand for graphite for battery anodes is rising sharply. With 98% of graphite currently sourced from China, there are concerns about supply chain security and environmental standards.
Addressing these challenges requires collaboration with utility companies to manage energy demands effectively. Tokai Carbon has special contracts with utilities to ensure a stable grid profile, drawing close to 60 megawatts to produce 30,000 – 40,000 tons of electrodes. However, production is often restricted during peak demand periods, necessitating night or weekend operations when the grid is near capacity. The company is committed to working closely with utilities to align future developments and energy needs, recognizing that a combined effort is essential for sustainable progress.
Looking Ahead at the Power Grid in 2050
Several key factors will shape power grid modernization development as we approach 2050:
- Rising Demand and Infrastructure Needs: Electricity demand is expected to grow significantly, driven by data centers, manufacturing and electrification of various sectors. The grid will need to adapt to these increasing needs.
- Role of Natural Gas and Renewables: Natural gas is still seen as a reliable bridge fuel to support the transition to cleaner energy sources. While renewables like solar and wind are crucial, their intermittent nature means they can't always meet demand. Long-term storage solutions, such as hydrogen, will be essential for balancing supply. Moreover, the U.S. benefits from natural gas, unlike several other regions. This could provide a competitive advantage in terms of cleaner and cheaper energy production compared to countries relying heavily on coal.
- Advancements in Nuclear Power: There's potential for nuclear energy to play a significant role, with interest in extending the life of current reactors and developing small modular reactors. These could provide a stable and clean source of baseload power if regulatory and cost challenges are addressed.
- Technological Innovations and Policy: Continued innovation in energy technologies and supportive government policies will be crucial for building a sustainable and efficient power grid.
Overall, a combination of natural gas, renewables, nuclear power and technological advances will be vital to meet future energy demands while ensuring reliability and sustainability.
How Cherry Bekaert Is Helping Manufacturers Power the World
Cherry Bekaert is committed to empowering manufacturers around the globe to lead the future of energy production. As a growth advisor and consultant, we offer a comprehensive suite of services tailored to the unique needs of industrial manufacturing sectors.
Our areas of focus within this space span various risk accounting, digital advisory and tax services, with a strong emphasis on energy tax credit incentives to help clients capture savings and enhance their bottom line. Moreover, our guidance on sustainability initiatives, energy efficiency and renewable energy integration supports companies in meeting their carbon accounting and reporting requirements. With Cherry Bekaert by their side, manufacturers are well-equipped to power the world responsibly and sustainably.
