FERC's attempt to standardize markets have some state regulators up in arms.
The fight over standard market design (SMD) looms large as regulators face...
from Canada than it already does (em approximately 1,300 megawatts (Mw) out of a total expected consumption of 21,000 Mw. Why? The limit on imports comes from the reliability standard. Extra power in Canada does not qualify as operating reserve for New England. If the transmission line from Canada fails, the reliability standard is violated (em not in New England, but in Pennsylvania. However, the cost of reliability is shared by all.
Utilities cooperated widely under the old regulated industry in the interest of providing reliable service. Under competition, reliability margins are shrinking, as evidenced by extremely nonuniform operating reserves across system interconnections. Unless clear rules are imposed on reliability requirements under competition, some parts of the systems will carry an unfair burden. Regulation at the state level will not prove adequate; reliability rules must be well defined for everyone. In short, reliable, uninterrupted service to New England this summer ought to be a federal responsibility, at least in terms of imports/exports across states.
Of course, we could just do away with the concept of reliability. The market price would then rise in an inevitable shortage until high prices cause customers to turn off service. However, I would wager that the system might well collapse first.
Operating reserves must be distributed somewhat uniformly throughout the system (em not
concentrated in electrically distant areas. For example, extra power in Canada could only qualify as operating reserve for New England if the existing transmission grid is enhanced (without necessarily building new lines) and operated with more flexibility through use of high technology. Imports of as little as 3,000 Mw would resolve New England's problem this summer.
Gadgets, Software, and Hardware
A flexible transmission grid could play an enormous role under competition, given the right incentives. For example, it is potentially less expensive to enhance the New England grid than to rely on expensive local generation from nuclear plants. We do know, based on exploratory research, that many "3C" gadgets (software and hardware) could give the grid far greater economic efficiency. We should explore the possibilities of enhancing the grid and eliminating transfer limitations. The role of such technologies is grossly underestimated. With the right incentives in place to assign a value to reliability, utilities would find some interesting opportunities for investment.
A word of caution, however: Unexpected dynamic phenomena might prove an obstacle to achieving maximum grid performance. Overcoming the locational and temporal constraints imposed by freely transferring power poses genuine technological challenges. The evolution of the grid cannot be left to market forces or individual efforts.
Perils lie in subsystem-level thinking. Take the case of air conditioning load. Air conditioners are big consumers of reactive power. A utility might attempt to compensate for reactive power consumption by adding capacitors at the distribution level, intending to boost available capacity by reducing the need for reactive power generation. However, low needs for reactive power can lead to underexcitation of the existing power plants, prompting relays to respond by disconnecting the plants for their own protection. Such an event would immediately cause a greater deficiency in