Some believe that small-scale, distributed generation will usher in a new era of magically inexpensive power: Industrial users will run their own cogeneration units. Many residential customers will use some sort of portable (em perhaps exotic (em power equipment in their homes. Existing, utility-owned, large-scale generating stations will be cast off on the path to ultimate efficiency.
Meanwhile, New England is running out of power this summer. At this writing three nuclear plants have come off line for various reasons, while a fourth could follow by press time. The situation already threatens widespread brownouts.
Let's revisit the question of dynamic system efficiency over extended periods of time, with particular emphasis on the essential role of the transmission grid and associated computer, control, and communications (3C) systems.
Research at MIT
Industry deregulation, while introducing welcome competition and perhaps lower prices, also harbors some less palatable side effects. First, a power-distribution system with multiple suppliers and customers is much harder to control than a system in which a single utility decides whether to take its own units on and off line. Second, competition among suppliers tightens profit margins because new, smaller, gas-fired units can produce electricity more cheaply than nuclear power plants and older coal plants.
Researchers at MIT have been studying the complex control aspects of a deregulated power system. Such a system is quite different from the traditional control systems developed under regulation. Complicated operating strategies are necessary to provide the reliability that customers demand. I and others at MIT are examining the performance of the existing New England power system under peak summer load scenarios. We have developed some techniques that may help power grid managers identify the best short-term strategies for shedding loads and selectively choosing brownout areas to minimize the extent of compromised service to consumers, as well as the best long-term options to improve future system performance.
MIT researchers are also examining the value of providing operating reserves for reliable service on hot days or when a large generating unit has to come off line. Those studies may help the industry decide whether to recover some of its stranded costs by appropriate peak-power pricing that will encourage them to keep backup power plants in running condition, or whether there are better alternatives to achieve reliability.
If brownouts occur during hot spells this summer, we need to think about the compromises we make when we want cheaper electricity but forget to pay for the reliable service we also want. The MIT studies will play a role in deciding how to keep the advantages of competition, but also how to charge consumers in an equitable way for the reliable service they count on to keep their computers running and to avoid burning out their air-conditioner motors.
How much capacity is adequate for reliability?
Several arbitrary assessments of excess generation capacity in this country are often cited to point out possible inefficiencies in providing generation capacity. However, I do not find these analyses applicable to the eastern United States since they do not consider the locational and temporal dependencies associated with generation. Inexpensive generation from the Midwest is of little use to New Englanders. Similarly, inexpensive hydropower from Canada makes little difference. No additional power bought from Canada will make it to Connecticut because of weak transmission capability and the restrictions imposed by requirements to deliver power reliably across the New England grid to Pennsylvania.
A closer look at the availability of inexpensive generation in the eastern United States reveals that significant efficiency gains are possible only when trading power over large distances. The average cost of power in the Northeast is generally much higher than in the Midwest. Many estimates of stranded generation costs factor in these cost differences. The error of these estimates lies in a failure to recognize that power differs from many other commodities in that it has to be available at the right place and at the right time to be useful.
The most important insight derived from recent debate over deregulation is a recognition that coordinated management of available resources is more efficient than distributed decisionmaking. That tips the scales in favor of a "PoolCo" rather than strictly bilateral structures. It comes as no surprise to find that coordinated optimization is more efficient than the results of multiple suboptimizations. Qualitatively, this is how the current power grid operates.
Other problems that impose a much more detrimental effect on system performance have not received equal attention, however. Instead, it is blithely supposed that market forces will sort these out. Monumental changes are taking place as a result.
In an industry in which externalities associated with the primary supply/demand process may impose substantial effects on the efficiency of the interconnected system, the process of achieving dynamic efficiency cannot be left solely to the market. To start with, typical estimates of stranded costs most frequently assume that any generator is useful at any arbitrary location and at any time of use. This notion is a basic fallacy if we seek to make safe, clean, and uninterrupted electricity always available (em and inexpensive too. Reliability, after all, imposes significant costs.
The Economics of Reliability
The accepted industry definition of "uninterrupted" is that in a region like the entire eastern United States, no single equipment outage (e.g., the shutdown of a major transmission line or generating station) will have any effect on customers. Based on an MIT analysis of a similar scenario for a hot New England summer in 1988, the load peaks in New England this summer will necessitate interrupting the supply of electricity to some customers. The situation appears worse now than in 1988 because three nuclear units are off line. These unavailable units are not necessarily "stranded"; they may pay off in a very useful way for situations like this, at least until the area acquires enough new generation to replace them. For now, we must consider how to salvage the situation. We must determine the economics of reliability.
Two qualitatively different solutions are possible: 1) import power, or 2) reduce consumption. The first choice makes more sense. Unfortunately, however, New England cannot import any more power 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 total megawatts, quickly leading to further sequential disconnection of equipment for
protection. Such a scenario could provoke a full-blown blackout in the New England region. And, except in the case of a single-event contingency, it is not clear who bears responsibility for keeping power delivery uninterrupted.
What is clear, however, is that distributed decisionmaking by various profit-driven market players does not recognize the technical complexity of this scenario. Consequently, it cannot coordinate the systemwide corrective actions necessary to retain integrity of the interconnection under unexpected contingencies.
Beyond the level of coordination needed for real-time system operation, there exists a need for systematic, long-term nurturing of the transmission grid and various high technologies. Though generally viewed as external to the primary supply/demand market (em and, thus, as an unwelcome expense (em these technologies play a critical role in achieving dynamic efficiency (i.e., reducing customers' energy bills).
A strong future for the power industry requires dynamic efficiency and high-quality, reliable power under open access. The ongoing debate on deregulation must begin to assess long-term efficiency, and to evaluate potential grid enhancements and the efficient use of resources. In the competitive market, we want not only efficient, but also reliable, electric supply.
Tomorrow's generation may come from small-scale distributed generation built where needed. But the properties of such systems must be compared to more traditional systems in terms of robust reliability as well as of dynamic efficiency. t
Marija Ilic' is a senior research scientist in the Department of Electrical Engineering and Computer Science at the Massachusetts Institute of Technology. Her research focuses on control and network theory applications to the dynamics, control, and economics of large-scale power systems. She has also taught and researched such subjects at Cornell University and the University of Illinois at Champaign-Urbana.
The author thanks the U.S. Department of Energy for financial support of projects on the role of technology in a deregulated industry. She also acknowledges the unselfish input provided by Elizabeth Drake, associate director of the MIT Energy Laboratory, and Leonard Hyman, managing director of Fulcrum International, Ltd., plus assistance from two former graduate students, Jeffrey Chapman of Failure Analysis, Inc. and Assef Zobian of Putnam, Hayes and Bartlett, Inc.
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