DC power makes a comeback in this vision of neighborhood grids and fuel cells on wheels.
Fortnightly Magazine - October 15 2000


Engineers Have Their Day


DC power makes a comeback in this vision of neighborhood grids and fuel cells on wheels.

"The stone age didn't end because we ran out of stone. And the oil age won't end because we ran out of oil." And columnists will never run out of quotes—as long as Amory Lovins is around, railing against the conventional wisdom. These days, he's talking about a new energy industry based not on oil, but on hydrogen.

"Oil will become not worth extracting," he predicts. "Good mainly for holding up the ground."

Lovins made his mark during the late 1970s and early 1980s, with his "negawatts" campaign. He would intervene in utility rate cases, urging regulators to consider conservation as an alternative to new power plants. He called it DSM—demand-side management. To the utility executives, it was "damned stupid marketing." Why ask ratepayers to stop buying electricity?

A rising stock market and falling oil prices put the negawatt crusade out of fashion during most of the past decade, but now the pendulum has swung again. Crude is up. Natural gas is up. Lovins has returned, as eager as ever to remake the world. "A great industry," says Lovins, talking about electric utilities, "but a bad business." So I made a point to catch his latest stump speech—"The Surprises are Coming: Hypercars, Hydrogen and Distributed Utilities"—at the annual conference of the U.S. Association for Energy Economics, held last month in Philadelphia.

"THE AVERAGE AMERICAN CAR IS PARKED ABOUT 96 PERCENT OF THE TIME." Amory Lovins joins that statistic with predictions of falling costs for hydrogen-powered fuel cells to bolster his new concept—the Hypercar—a 20-kilowatt power station on wheels, the ultimate in mobile distributed generation.

The Hypercar is an electric vehicle charged by a hydrogen-fired fuel cell. Early on, utilities saw electric cars as a scheme to build overnight load, when they would supply AC power for battery charging. By contrast, the Hypercar becomes a full player in distributed generation.

"You pay an annual lease fee," says Lovins, "for the privilege of driving your power plant." (That's for the 4 percent of the time you use your car.) "For much of the rest of the time," he explains, "rather than plugging your parked car into the electric grid to recharge it—as battery cars require—you plug it in as a generating asset. While you sit at your desk, your power plant-on-wheels is sending 20-plus kilowatts of premium-quality electricity back to the grid."

At the same USAEE meeting, a few hours later at the awards dinner, I heard more praise for fuel cells from Kurt Yeager, the president and CEO of the Electric Power Research Institute. In his after dinner talk, "Technology Innovation in the 21st Century," Yeager suggested that EPRI is clued in to the wonders of distributed generation.

Yeager sees fuel cells launching a revolution in the way utilities operate the local distribution network. In fact, Yeager sees an advantage from the fact that fuel cells produce direct current (DC), instead of the alternating current (AC) that marks the operating standard for the local grid and the long-distance transmission lines.

"We see the residential household converting its appliances and electric consumption to DC power" to better accommodate fuel cells, says Yeager. In fact, Yeager envisions entire neighborhoods converted to DC, with a substation transformer separating the local DC grid from the long-distance power transmission lines, the only part of the grid using AC power. That change, says Yeager, would solve the power quality issue, since DC power flow would not suffer from the same problems with frequency modulation and so on.

Another engineer with "out there" ideas is Mark Lively, who appears in this issue, also writing on distributed generation. He shows up regularly at workshops at the Federal Energy Regulatory Commission to push his pet idea—that the way to make sense of electricity markets and encourage distributed generation is to set prices not according to bids and offers, but by reference to the physical operation of the electric transmission grid, as carried out by—you guessed it—the engineers.

I had lunch with Mark in late August, when he gladly took a couple of hours off to teach me his theory. As Lively explains it, the control area operators (using computers for the most part) are balancing supply and load on the electric grid every three or four seconds, striving to keep ACE (area control error) as close as possible to zero. According to Lively, it is here, in the control center, where price is revealed—and not in those so-called "spot markets" run by the power exchanges and the independent system operators. Instead, Lively defines a true spot market as where you trade only that volume of commodity that is available in current inventory. Any other market, he argues, is really a futures market.

Of course, to buy into Lively's theory, you have to concede the notion of an inventory of electricity. That inventory turns over, just like inventories in sugar beets or bushels of wheat, but over a much shorter interval.

Lively offered this example. Suppose, he told me, that you are trading bushels of wheat on the Chicago Board of Trade, and a summer drought strikes. What happens? Traders will anticipate a smaller harvest, I answered, and will bid up the price of wheat several months out on the futures market.

"Right," said Lively, "but now consider electricity. You have a hot summer day and the power price at the PX starts to climb in the early afternoon. But not the day-ahead price, which depends on tomorrow's temperature."

"Of course," I answered, "electricity and wheat are not the same."

"Wrong," said Lively. "Electricity and wheat are no different," he explained, "except for the difference in the length of time required to turn over the inventory."

He continued: "There is a real inventory of electricity, stored momentarily in spinning turbines, in the form of kinetic energy. And it is this inventory that engineers work with as they balance the grid, from moment to moment, in the control area. This balancing process is the real spot market for electricity. It is possible to calculate a price for this 'imbalance energy,' which is the inventory of electricity called upon by control area operators to balance the grid at three-second intervals.

"Three seconds," said Lively, "is how quickly the inventory of electricity turns over. So by the time of next fall's wheat harvest (one full inventory cycle in wheat), the electricity inventory has turned over thousands or millions of times. That's why a hot day today doesn't impact tomorrow's power price—just as a dry summer doesn't boost next century's wheat price, after the wheat inventory has turned over a hundred times. Next century is a futures market. And everyone knows how volatile futures markets are, and how they move on a whim.

"That is why electricity prices are so fouled up."

I thought I understood, but even Amory Lovins will concede the limits of engineering. "In theory," he says, "theory and practice are the same. But in practice, they're not."

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