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Blackouts? never Again! (But...)

We ask merchant grid developers if anything can ever be done.
Fortnightly Magazine - October 1 2003

sign of an endemic and generic problem that is going to come at us again and again and again," he argues. "I think it was a one-in-10-year event, and we designed the system for that."

But Krapels cautions, "We obviously didn't want it to be this big, so that is going to take some retooling. But it won't take $100 billion to prevent another blackout." Instead, he thinks the solution lies in understanding why the blackout occurred and directing some very specific reliability investments at that problem. "Modernizing the grid, which I think is a totally different issue-is really an economic issue, not a reliability issue," he makes clear. "I think the grid is pretty darn reliable."

In agreement is George C. Loehr, vice president and board member of the American Education Institute, and member of the executive committee of the New York State Reliability Council, who calls recent comments about the antiquated grid in the United States "rather disingenuous." Loehr says, "The same people who are saying that now, five years ago were telling us all-and this an exact quote from an economist-'the grid is a vast underutilized resource.'" He adds, "We were told if we didn't know how to use this vast resource efficiently then the economists could come in and show us how to use it properly."

SMD and Political Gridlock

The subject of locational marginal pricing leads to the question of the now-stymied SMD, and how that uncertainty will affect grid development.

Krapels says the Bush camp's backing away from standard market design (SMD) "hurts, but I think we are too far down the road with SMD, and there are too many people happy with SMD to go back. But due to objections to SMD, the result is that we have a national transmission market with many different models. And each one of those models has its own unique and peculiar transmission investment challenge."

Farney says the SMD proposal, while not perfect and far from final, "is far superior to the current kind of fragmented approach to building markets," he says. "We really need more standardization, we really need more clarity. … What is on the table is very valuable."

Krapels says, "The political gridlock over transmission was kind of broken anyway. The next step in the evolution of standard market design markets like PJM was to begin to make transmission investments. … We have to find a way to get [Wall Street] money in, because otherwise we're stuck in the old utility paradigm."

Krapels looks for that incentive as coming from the regional transmission organizations (RTOs). "The RTOs are going to present FERC [the Federal Energy Regulatory Commission] with four or five different models of how you finance transmission, and I think FERC's role simply will be to say, 'Yes, that is fine if it works in your area. Go ahead and do it.'"

But there is no easy answer. "At one level you want the blackout to signal to people that transmission is a federal issue, but on the other hand it is not an issue