Two Cato analysts suggest a return to the past-vertical integration, but now with no state regulators.
The defeat of the energy bill in...
disposed of and the machines cleaned.
Two examples easily illustrate this concept. Plate thickness at a steel-rolling mill is controlled by microprocessors. A brief power interruption can cause rollers to misalign, making it necessary to reheat and reprocess the product. Computer failure at a paper mill can create clutter that requires two work shifts to clean up. It is apparent from these examples that a power interruption may result in an enormous amount of wasted product, employee time, and company resources.
Computers in the banking industry also require an uninterruptible power supply. Even a momentary blackout can be disastrous and require days to get computers back on line, potentially losing millions in sales and angering customers. The First National Bank of Omaha calculated that a one-hour outage would cost $6 million.
Because of the need for a continuous flow of electricity, 3-nines electric reliability is no longer acceptable to some customers. Incredible as it may seem, today some customers are demanding 6-nines or even 9-nines (99.9999999 percent) electric reliability. Demand is forcing development of new strategies for these customers. These strategies will resolve the difference between the reliability of delivered power and the reliability needed by the customer.
One of the new strategies is distributed generation. Distributed generation is the use of small, modular electric generation units close to the point of consumption. The units can be located within an industrial area, inside a building or within a community. Distributed generation technologies are installed for the benefit of a specific customer or an electric system; therefore their use can be stand-alone or they can be integrated with the grid. These technologies are emerging as a result of three independent trends-utility industry restructuring, increasing system capacity needs and technology advancements-that are concurrently laying the groundwork for their widespread use. Distributed generation is drawing interest because of the potential to increase system capacity cost-effectively, while meeting the industry's restructuring objective of market-driven, customer-oriented solutions.
A wide variety of power generation technologies can be classified as distributed generation. These technologies vary by size, application, and efficiency. Reciprocating engines and gas turbines have been commercially successful for decades. Fuel cells and microturbines are newer, evolving distributed generation technologies. Fuel cells can deliver 6-nines reliability, which translates to approximately thirty seconds of outage a year, and may be sufficient for technology centers and the data processing needs of the banking industry. In 1997, the First National Bank of Omaha switched from the grid to fuel cells after experiencing a costly computer crash at its data processing center. The difference between 6-nines and the 9-nines electric reliability required for an unprotected microprocessor also can be supplied by distributed generation investments on the customer side, or some form of storage capacity that can provide a few seconds of ride-through capability.
Distributed generation technologies also provide policymakers, regulators, and the market with flexible options to address system capacity challenges. Long-term demand is now expected to increase at an accelerated rate 2 and there are numerous examples where planned generating capacity is not keeping pace.
There also is a need for