We ask merchant grid developers if anything can ever be done.
The blackout of August 2003 should have come as no surprise. The Department of Energy's May 2002 National Transmission Grid Study finds growing evidence that the U.S. transmission system is in urgent need of modernization.
Out of 186 transmission paths modeled in the East, 50 are used to their maximum capacity at some point during the year, and 21 paths are congested during more than 10 percent of the hours in the year. The study shows that the highest levels of congestion are found along the transmission corridors from Minnesota to Wisconsin, the Midwest into the Mid-Atlantic, from the Mid-Atlantic to New York, and from the Southeast into Florida.
As the finger-pointing for the blackout continues, industry veterans are proposing their own remedies for the ailing U.S. transmission system.
Throwing Dollars
Bernie Schroeder, president and COO of Trans-Elect Inc., an independent merchant transmission company, thinks prevention of future blackouts may be as simple as pouring financial resources into the grid.
He points to the Edison Electric Institute's estimate that the transmission system is under-invested by about $58 billion. But he doesn't find the grid's neglect surprising. "The transmission system is fairly benign, it doesn't have a lot of moving parts, doesn't have an operator on site," he says. "It's not like a power plant where there are 40 engineers running around watching every dial and switch, and things are happening all the time. [Transmission] would be the last place an executive of an integrated utility company would put his or her investment," Schroeder explains.
According to Kemm C. Farney, principal, Electric Power North American Energy Group at Global Insight Inc., the fundamental problem with the grid is exactly the same as that on the generation side of the business-the huge overhang of deferred maintenance and deferred capital spending in transmission-related facilities. He places the blame for the situation on regulatory uncertainty. Owners of the transmission facilities "truly don't know how long they will remain the 'owners' of the facilities in the current sense," he says. "They may be faced with transfer of ownership, they may be faced with transfer of control, but whatever happens, they face the possibility that the money they spend today may be money down a rat-hole tomorrow."
Farney does not believe huge rate increases justify fixing the grid. "It's a great system and it works. I don't believe we need to throw money at the system," he maintains. "If the current owners of these assets … knew what to expect in the future, they would take care of these assets. They would make sure the present value of those assets is as great as it can be given their custody of these assets," he argues. "Getting rid of the regulatory fog is much more important than some public program that directs resources toward the problems."
Ed Krapels, director of energy development services at Energy Security Analysis (ESAI), would spend money on the grid, but in a very targeted way. "I think the blackout wasn't really a 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 where DOE can say, 'Here is our transmission policy, and here is where the next $100 billion is going,'" Krapels says. "That is a recipe for disaster. You need federal oversight on the one hand, but you need regional plans on the other hand."
Energy Secretary Spencer Abraham has made it clear that he believes the nation needs to build transmission lines. As a result, electric rates will go up.
Krapels agrees. "We have to pay more for transmission, and the reliability part of it is going to be paid for by everybody equally-a socialized investment."
Farney says the August blackout will help raise the visibility of the long-awaited federal energy bill. "I'm kind of cynical about the political process, and I'm not sure the energy bill will have any effect on whether we have blackouts in the future that are similar to this," he says. "I really believe that what we need is something more practical, more down to earth, as simple as the ownership of these assets getting some certainty about the future of these assets."
NIMBY and Regulators
The industry currently must deal with the AC grid it now has, but recent events show even coordinated planning can run into trouble. Just look at the experience of two merchant transmission projects that aimed to fix highly congested electric paths, places where everyone agreed help was needed.
It is common industry knowledge that highly constrained southwestern Connecticut is in dire need of more transmission. But a line already built to ease that congestion has been sitting dark. That led to Secretary Abraham's issuing an unusual DOE emergency order on Aug. 15, in response to the blackout, directing the New York and New England ISOs to activate, if necessary, the 330-MW Cross Sound Cable connecting Shoreham, Long Island, and New Haven, Conn.
The direct-current buried submarine cable, owned by merchant transmission company TransEnergie U.S. and stymied by Connecticut politics as well as environmental politics, presents a microcosm of the difficulties in getting new transmission on line. The cable, which can send power in either direction, is considered by many to be part of the solution to Connecticut's expensive congestion problems. ISO New England estimates the congestion costs for 2003 in southwestern Connecticut to be between $50 million and $300 million.
But Cross Sound Cable's use is being held up because the 24-mile cable does not meet the depth requirement of its permits in a few short sections, mostly due to bedrock that was not known to exist when the permitting was done. The Connecticut legislature has enacted a moratorium on its use, but the cable's recent activation in response to the blackout could change that, as it helped to stabilize the grid. Both New York senators have written letters to Abraham encouraging him to extend the emergency order to allow continued operation of the cable past Sept. 1.
A different situation arose for Trans-Elect, chosen to upgrade the notoriously constrained Path 15 in northern California. That project had come under some difficulty back in March, when a California PUC law judge found no economic need for the project and would have denied permission to Pacific Gas and Electric to play a part in the multi-party project. At that time, Trans-Elect's Schroeder had shrugged off the interference, insisting that the PUC would not prevent his company from moving forward on the project, worth more than $300 million.
Trans-Elect would be supplying most of the funding, with PG&E upgrading existing substations and low-voltage facilities and the Western Area Power Administration (WAPA) adding new construction as well as taking title to the land. "It will have no impact on us, and if they don't build it, presumably we will find somebody who will," Schroeder explained.
However, back in March the legal decision was discouraging for those pushing grid upgrades anywhere in North America. California PUC Administrative Law Judge Meg Gottlieb questioned the very idea of looking to transmission expansion as a logical first step in improving wholesale power markets, instead of simply locating new generation closer to load, or improving regulatory oversight of power producers who exert market dominance.
"What this signals to us," Gottlieb wrote, "is a failure to regulate wholesale market players effectively, rather than a failure to build transmission infrastructure."
But the California commission reversed itself and is now supportive of Path 15, because of "a new chairman of the commission, Mike Peevey," Schroeder explains.
Merchant Transmission Boost
As to whether the job of upgrading our transmission system is best left to utilities or to merchant transmission companies, Krapels says the answer depends on location. "In the places where you have locational signals-the Northeast, Texas, California-I think the independent transmission companies are going to be in a much stronger position to compete compared to places like the Southeast, where I just don't see how they can compete," he opines.
Schroeder thinks not being associated with a utility company may make it easier for Trans-Elect. But he tempers that statement. "Part of the problem that a company like Trans-Elect has is that we are new, and newness is not the bellwether of the industry or the regulatory climate." But when a crisis like the August blackout happens, Schroeder thinks it makes a pure transmission company a more provocative option. "I think it may at least get us some attention so we can get in and buy some more systems and prove ... that this is the way to go," he notes.
A test for Trans-Elect came on Aug. 14. The company had spent $290 million on some 5,400 miles of Michigan transmission lines from Consumers Power to be operated by Trans-Elect subsidiary Michigan Electric Transmission Co., which sits in the blackout location. "As it turned out, we were involved in the events, and our system came right back up," Schroeder crows. "We had no permanent damage."
The blackout could be a boost for companies like Trans-Elect. "I think if it turns out that transmission lines played a key role in this incident, then I think there will be new calls for people to invest, whether they keep it or sell it," Schroeder predicts. Still, Schroeder believes a lot of utility companies would be loath to put in the money needed to upgrade the transmission system, unless they are truly into that business. "I think others will take another look at it and say maybe these guys like Trans-Elect are the way to go-a) they take over the problem, and b) they are motivated to fix it because that is all they do," he concludes.
George Loehr: A Plea for Direct Current
The decreased lead time for new generating units (now a few years, down from 10 to 15 years a decade ago) as well as what George Loehr, a member of the executive committee of the New York State Reliability Council, calls "a change from a culture of reliability to a culture of competition," led to Loehr's innovative plan for making the grid more reliable. His plan starts with making the physical system simpler via use of high voltage direct current (DC), with smaller interconnections. For example, Loehr would take the Eastern Interconnection, which is about 600,000 MW, and break it up into 10 smaller interconnections of 60,000 MW each.
He proposes cutting the two huge North American grids into a series of smaller grids, with DC ties equaling or matching today's AC ties.
"I took published NERC data that show on the existing AC system the transmission transfer capacity between each pair of regions that has direct ties," he explains. "I said, 'Let's figure out how to provide enough DC capacity to match that existing AC capacity. Then we'll take some of those AC lines that we have opened to separate these smaller interconnections and use them for DC.' There is no reason you can't use an AC line for DC. The copper doesn't care whether it carries a direct current electron or an alternating current electron.
"In fact, when you work out the real technology of this, you find out you can use a slightly higher voltage in DC than in AC for several reasons. One is you don't have to worry about switching surges like you do in AC, and you only need two phases instead of three, because you have a positive and a negative. So, if you had a double circuit line with six conductors (six phases), you could operate three of those wires as the positive pole and the other three as the negative pole. With a single circuit line on a horizontal tower arrangement, you can use the outside phases as the positive and negative poles, and you can make the inside phase a fully insulated neutral. So if you lost the positive or negative pole you can put in automatic equipment to automatically switch that into place-to replace the faulted pole with the inside wire, which would be fully insulated.
"You convert some of these AC lines into DC, and now comes the rub: You put in converter stations at each end of the lines to carry the amount of power you want to carry, and that is where the money comes in. But the technology has been around for a long time, since before World War II."
Proven Technology
Loehr says Hydro-Quebec has two major DC interconnections with the United States-one with New York and one with New England. Loehr says Hydro-Quebec uses DC for technical reasons. "It could not interconnect with the Eastern Interconnection or with other Canadian provinces, but they were able to overcome that problem by using DC ties," he explains. "ERCOT also was a separate interconnection and found that to tie into the Eastern Interconnection to buy and sell power was much more feasible by using DC," he notes.
Loehr claims that use of DC would have avoided the August blackout. "The advantage of DC is that it is not subject to Kirkoff's laws," Loehr points out. "With an AC system, if something happens at one end of an AC system, then that is broadcast to the other side," he explains. "So if the lines trip in Ohio, we feel it in New York, but if you have DC, that is not the case."
"Let's say you have a situation on Aug. 15 where New England, New York, and Ontario are operating as a separate interconnection, with DC ties to the rest of the world," offers Loehr. The problems in Ohio would not have caused any problems in those three areas. "The only effect you could have on a neighboring system is the neighboring system would have maybe the loss of any power that had been flowing on the tie," but Loehr adds "you would plan for that anyway, even if it were an AC system."
Cost Advantages
Loehr also believes the proposed DC system would cost less to upgrade the North American grid than numbers being thrown around post-blackout. "I did estimates of the cost for DC, and they all seemed to average out to about $100,000 per mega-watt at each end of the line to converter stations," he says. He did the math and came up with estimates of between $7 billion and $8 billion. Those costs would match the capabilities of the present grid, which might need to be enhanced in some places and lessened in places. -L.A.B.
Toward Bigger Blackouts?
The 2003 blackout was larger than the 1965 blackout geographically, and George Loehr believes any future blackouts will be even bigger.
He makes that conclusion based on the existence of many more high-voltage transmission lines today. The resulting effect is that impedances between one point in the system and another point decline. Loehr explains that if you take Point A and Point B with one transmission line through it, and now have impedance X, and then build another identical line, impedance is now X divided by two. Then build two more, it is X divided by four. That leaves one-quarter the amount of impedance between those two points than existed with just one line. Basically, the grid is infinitely more complicated, and when more transmission is built, impedance is lowered across the system. If something happens somewhere in the interconnection, it is going to be felt more strongly by places far distant than was the case 20 or 40 years ago.
Loehr did a study on the impedance between New York city and Albany as it existed 20 years ago and then figured out the impedance between New York and Chicago now. He found that Chicago was closer impedance-wise to New York currently than Albany had been 20 years earlier. "That was kind of astounding," he says. "So today Detroit is closer to New York than probably Albany was in 1965," he figures. "That is a partial explanation for why the extent of this blackout was larger," he says. "If we build more AC, we will make the Eastern Interconnection smaller still in terms of electrical effects."
Loehr points out that in 1965, power went out in Boston, New York, and Toronto. Only Boston was not affected in the 2003 blackout. "But I found out the bulk power system in upstate New York never went down on Aug. 14, and there was at least one tie the whole time between New York and New England," he says. "New York ties to Ontario never went out either, but Ontario was not connected to anything else. They were separated from Michigan, and New York had separated from PJM." He adds, "The reason Boston did not go down is that the automatic under-frequency load shedding in upstate New York-I don't know yet if there was any significant load shedding in New England-dropped enough load once the three or four islands caused by the instability had been formed to balance load and generation." So there were people in upstate New York who never lost their lights.
Loehr believes the next major blackout very well could include many more cities. "Sooner or later we are going to have another event like this, and if you make the AC system electrically tighter, it will be more likely to include more cities than this one did. One way to prevent that is to break up the interconnections and tie them together with DC." -L.A.B.
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