Keeping the Lights On: Part II

by Edward W. Sheets

Thursday, August 14th was a fairly typical summer day in the Northeast. The sky was clear, temperatures were in the 90s. At 4 p.m., many people were about the wrap up their work day and head for home. Without warning, electricity was cut off to an area that covers 50 million people – from New York City to Michigan. There were no lights, no elevators, no power for commuter trains and subways, and no electricity to run televisions, radios, and other communications systems. Those of us outside the blackout area could watch millions of commuters in New York waiting in line for buses and ferries or walking out of the city to get home.

The blackout affected nine states and Canada and caused a number of deaths. Safety and emergency operations were disrupted as police, firefighters, and ambulances had to operate in total darkness. Cost estimates are still being compiled, but are likely to be in the tens of billions of dollars. Many businesses had to shut down operation; small businesses were especially hard hit because they generally cannot get insurance for such losses.

The consequences of the blackout may be more sweeping and long lasting. The blackout caused increased interest in upgrading the electricity transmission system. Making the nation's transmission system more reliable will be expensive; recent industry estimates range from $56 billion to $100 billion. Electricity consumers will pay the bill.

The Pacific Northwest has also experienced major blackouts. The most recent was on August 10, 1996, when a major outage began in Oregon and cascaded throughout the West, cutting power to 7.5 million customers, mainly in California, for periods ranging from a few minutes to nine hours.

The Northeast blackout also breathed new life into the energy bill that was stalled in Congress. That bill also includes $30 billion of tax incentives and subsidies for a variety of energy interest. Current taxpayers and future generations will pay those costs. Given the importance of reliable electricity supplies to everyone and the potential costs involved, it is important to focus on actions that will really solve the problem.

This article is the fifth in a series by Open Spaces to explore important energy issues that will affect our economy and environment. The most recent article Keeping the Lights On, discussed the challenges of planning and financing new power plants to generate electricity and programs to improve energy efficiency. This article describes the issues that need to be addressed to get the electricity to homes and business.

What Causes Blackout?

First, let's cover a few basics. When electricity is generated at a power plant it has to be transmitted to the homes and businesses that use it. When you put a unit of electricity into the transmission grid the laws of physics determine where it will go – transmission system operators cannot direct it from one point to another. These systems are very complex. The system operators must maintain the proper frequency (60 cycles per second) and exactly match supply and demand; the electricity can't be stored – even for an instant. If the operators don't maintain the appropriate balance, it can overload power lines and generators or cause damage to devices that use electricity. To add to the complexity, transmission systems need both the electricity that we use in homes and business and something called “reactive power” which helps push the electricity through the system.

For over one hundred years, utilities were vertically integrated monopolies. That means they owned and operated the power generators, transmission lines, and distributed the power to homes and businesses in a defined service area. No other utility could serve customers in that service area. In many cases, the power plants were located close to the utility service area and the power was transmitted over a simple system that was owned by the utility. Investor-owned utilities were regulated and received a profit based on how much they had invested in all of their facilities. The utility had a strong profit motive to invest in upgrades to maintain reliability. The utility was also solely responsible for the system, so managers were motivated to minimize the number of disruptions to avoid bad publicity.

Utility deregulation: The rules have changed. In many parts of the country a utility buys power from a separate company that owns and operates a power plant. That power has to be transmitted over power lines – some owned by the utility buying the power and some owned by other utilities. This change in the industry has increased the amount of electricity being transmitted over long distances. These new transactions have also added to the complexity of transmitting electricity between 140 different “control areas” from over 6,000 power plants owned by 3,000 utility and non-utility operators.

Some utility critics believe that deregulation has reduced the incentive to invest in transmission systems. A utility may make a higher profit on selling electricity in the wholesale market than the rate of return allowed on the regulated parts of their business, such as transmission. Some utilities may be concerned that if it invests in upgrading its transmissions then other competing utilities may benefit.

Physical problems: A storm or accident can cause a power plant or transmission line to fail and disrupt the balance between supply and demand. Bad weather can also knock down the local distribution lines. As utilities have increased reliance on buying power from a number of power plants it has put more stress on the system. Today, if a transmission line fails, there may not be other paths available to move the electricity.

Peak loads: Extreme cold or heat can put extra demand on the electrical system to supply the power for heating or air conditioning. As utilities try to push more and more electricity through a power line it causes the power lines to heat up. During peak periods two bad things can happen: first, as the line heats up some of the electricity is lost. This forces utilities to try to push even more electricity down the degraded power lines. In really extreme conditions, a line can heat so much that it actually stretches – failures can occur when the power line sags down into a tree or brush causing a short.

Human error: Transmission systems are supposed to be designed to isolate physical problems and contain problems to a local area. Many utilities communicate by phone and rely on mechanical switches to shut off power lines to control the size of a blackout. Clearly, these systems are not fool proof. It appears that the first signs of trouble in the Northeast started a couple of hours before the blackout with most of the problems occurring during the last few minutes. Experts are reviewing 10,000 separate actions by utility and transmission operators during this period to determine the exact cause of such a widespread failure.

In addition, transmission system operators can request the appropriate operations by the various power plants, but these requests are not always implemented properly.

Reducing the Chances of a Blackout

It is impossible to totally eliminate the possibility of a blackout. Individual business and homeowners can install their own back up systems such as batteries and small generators. These systems are expensive and will only make sense for those that need very high reliability (or for homes in areas prone to severe storms).

There are some things the electricity system can do to reduce the chances of a blackout.

Mandatory reliability standards: Currently, the standards for operating power plants and transmission systems are developed by the utility industry, but complying with the standards is voluntary. There is a lot of discussion in Congress about making standards mandatory on utilities and others that operate transmission systems. Given the importance of electricity to providing basic necessities, mandatory standards make sense. The more important issue is: what should the standards be?

In theory, most people would like 100 percent reliability. Unfortunately, the costs go up dramatically to achieve the last increments of improvements. Society probably would not want to pay the cost of a system that would never fail. In fact, a system that has one failure in twenty years is probably not all that much more valuable than a system with one failure in ten years, even though the cost of the former may be astronomically higher. Energy experts will need to engage the public in setting the proper balance.

National reliability standards will raise local issues. In some cases, the national standards may be less rigorous than the state planning and operating plans that would be replaced.

Expand the transmission system: There are a number of upgrades that will provide significant benefits and should be pursued as quickly as possible to improve reliability; however, even the most worthy projects are likely to run into controversy. New power lines raise safety, environmental, and aesthetic concerns from a variety of active citizens groups – no one wants to have a high-voltage transmission line in their back yard. These lines are also very expensive. A number of experts argue that there are less expensive alternatives to many new transmission lines. Addressing these alternatives may make it easier to get approval for the expansions that make the most sense.

Improved technology: The Electric Power Research Institute (the research arm of the utility industry) and others are working on a “self healing grid,” with more automatic responses to potential failures to eliminate what happened in the recent Northeast blackout. Computerized systems can respond more quickly than mechanical controls and human operators when lines begin to fail.

Distributed generation: New technologies like fuel cells and small-scale electricity generators can be built close to where the power is needed. This reduces the need to expand the transmission system. This technology is relatively new; demonstration and pilot projects would help build interest in this promising approach.

Reduce peak demand: Utilities have to provide the exact amount of electricity that their customers need. They also have to build transmission and distribution lines to meet this peak – even though it may only last for a few hours per year. In many utilities the demand hits its maximum amount in the morning as people prepare to go to work and in the late afternoon and early evening. These daily peaks increase during extremely cold or hot periods as buildings increase the heating or air conditioning. Transmission systems must be designed to meet the highest peak demand of the year. That means that a significant percentage of the transmission capacity is not being used most of the time.

The costs of meeting the peak demand are astronomical. Utilities must invest in power generators, transmission and distribution lines to serve the highest peak load of the year. But this peak usage occurs very infrequently and for short periods of time. In a typical utility system, more than 25 percent of all capital investment is used to serve loads that occur less than five percent of the time.

To meet peak demand, utilities must operate their most expensive power plants. These plants often cost 8 to 10 cents per kilowatt-hour. The transmission costs for meeting peak demands are also very high. A typical utility must spend 15 to 25 dollars per year to transmit a kilowatt from a generator to a customer, regardless of how many hours the kilowatt is transmitted. If the line is used 75 percent of the year, the average costs are less than a penny per kilowatt-hour. Unfortunately, utilities must invest in transmission to meet the higher hour of the year – those costs are typically 15 to 25 dollars per kilowatt-hour! Finally, the costs of the distribution system – the lines that run through your neighborhood to bring power to your home – also have to be built to handle the peak demand. The peak costs of these systems can be $100 per kilowatt-hour. Therefore, serving the highest peak hours in an electric system can cost $125 per kilowatt-hour, yet the average customer pays less than ten cents per kilowatt-hour, regardless of the time of day.

Some utility systems are being asked to take a hard look at alternatives to meeting peak demand. Several utilities offer time of day rates. A customer pays a higher rate during peak periods, but much lower rates in the evenings and on weekends. A consumer can save money by running the dish washer and doing the laundry during the off-peak periods and reduces the overall peak demand on the utility.

Other ideas include investing in energy efficiency measures like insulation and efficient heating and cooling systems that reduce electricity use all the time, and especially during peak hours. Some utilities have programs that pay consumers not to turn on the top coil of their water heater during peak periods. Other programs shift energy use away from peak hours. For example, a commercial building can begin heating or cooling in the early morning hours and shift the large amount of energy needed to start up these systems away from peak hours.

These efficiency and load management strategies typically cost 2 to 4 cents per kilowatt hour – a fraction of the cost of serving the peak.

Pioneering New Approaches

The Bonneville Power Administration is a federal agency in the Northwest that operates most of the regional transmission system. It also sells electricity from the federal dams on the Columbia and Snake Rivers. Congress recently authorized $700 million to finance new transmission projects in the BPA system.

About a year ago, BPA convened a group of experts to review some of the planned transmission upgrades to see if other alternatives would be less expensive. So far they have evaluated several proposals to upgrade transmission lines to see if some combination of locally built generation, energy efficiency, and programs to reduce peak demand would be less expensive than building the line.

The initial studies show some potential to reduce the overall cost of providing electricity service. These initial efforts also demonstrate some of the challenges of reducing peak loads instead of building new transmission. In some cases, the costs of adding the transmission are paid by a different organization than the costs associated with the energy efficiency and peak load management. It may be difficult to transfer the cost savings from deferring the transmission to finance the alternatives. In other cases, there may be a shortage of data on how much peak loads can be reduced and how much additional energy efficiency work can be done.

Even with these complexities, it is essential to explore all of the options to providing the electricity service that people need. Blackouts are a graphic demonstration of the importance of electricity to health, safety, and the economy. Siting and building new transmission lines will be expensive and controversial. Experiments in the Northwest to reduce peak demand and provide local generation may reduce the costs and improve the reliability of electricity service in some cases. Pursuing these alternatives may also reduce some of the controversy over building power lines where these alternatives do not make sense.