Energy Transmission, Distribution Systems Need Major Overhaul

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Antiquated technology, a lack of coordinated government policy and a pattern of industry-wide under-spending on electric transmission and distribution infrastructure may have played a role in the blackout that left about 50 million people in the U.S. in the dark Thursday, experts said. However, they were quick to note that it is difficult to speculate on the cause before the investigation is completed.

"Something happened, most likely in northern New York or southern Canada, and the system was not able to react fast enough to shed load to allow the system to continue to function," Michael Mount, vice president with R.J. Rudden Associates, a consulting firm specializing in energy matters, told internetnews.com. "If they lost load because a major location was tripped off, then they have to start removing generation rapidly to compensate. Either a loss of generation or a loss of load could have precipitated the cascade."

Mount, co-author of the report "Distribution Reliability and Power Quality -- The Next Industry Time Bomb," published by Rudden in June 2002, explained that the U.S. has one of the most sophisticated and complicated power grids in the world, with numerous fail-safes designed to prevent the sort of cascade that caused power outages from Canada to the northeastern United States and out to Michigan. But because of the very nature of the energy delivery, those fail-safes, which would sever a portion of the grid hit by a large-scale outage, have to kick in nearly instantaneously. If a major location, like Niagara, were tripped off (switched off and removed from the system), the fail-safes might not be able to react swiftly enough to compensate, Mount said.

"The power system is very unique in that you do not for the most part store energy," he said. "When you flip a switch to a light, it's instantaneous request and delivery of power. It's an interconnected grid. When something happens to a portion of a region, the rest of the system needs to compensate. The rest of the system must react. If a large power station like Niagara were taken off the system, all the power plants connected to the grid need to instantaneously react to the power need which is now not being supplied by Niagara."

The problem can occur in two ways. An outage can occur when a power plant trips and cuts power generation. However, if a transmission line is severed or tripped, the system is forced to trip power plants in order to match the generation to the load.

"Either a loss of generation or a loss of load could have precipitated the cascade," Mount said.

The problem is compounded by the age of most of the energy transmission and delivery technology in the United States.

"From 1988 to 1998, the demand for electricity increased by 30 percent, but the capacity of the nation's transmission system expanded by only half that rate," Mount said, citing a report issued by the Edison Electric Institute. "High voltage transmission lines have become nearly impossible to build, and a utility that seeks to invest in new transmission exposes itself to the regulatory risks of not achieving full cost recovery should project approval not be obtained."

Mount said many of the nation's transmissions lines, which have a life expectancy of 30 to 50 years if properly maintained, have met or exceeded their useful life. And transmission and distribution systems have not seen much investment in years.

Leonard Hyman, author of "The Next Big Crunch: T&D Capital Expenditures," a report published by Rudden in March 2003, said electric utilities and transmission owners should be spending about $63 billion for distribution improvements, and about $25 billion for transmission improvements, over the next five years, with spending averaging out at about $13.6 billion and $5.3 billion a year, respectively. But in 2001, utilities spent only about $8.5 billion on distribution and $3.7 billion on transmission.

Mount said transmission lines can take 10 years to permit, plan and construct, so new investments must enter the planning and construction phases now, in order to be in-place and running by 2013.

The blame for the lack of investment in the energy infrastructure does not lie entirely with the utilities, according to Richard J. Rudden, CEO of R.J. Rudden Associates.

"It would be unfair to place all or even most of the blame for this fall off in investment solely on the shoulders of the utilities," Rudden said. "The congress, Federal and state governments, the Federal Energy Regulatory Commission, and state regulatory bodies have not yet provided the power industry with a clear, coordinated set of guidelines to govern the development and operation of the nation's transmission grid. Without clear legislative and policy direction, and an assurance that capital expenditures can be recovered through rates in a timely fashion, utilities and the financial community will be reluctant or financially unable to make the investment required to maintain reliability levels. The cascading events of August 14th are not simply a regional anomaly, but underscore a potentially broader industry problem, and the need for national consensus."

Mount and his colleagues said regulatory policy inadvertently encouraged the pattern of under-investment when price caps were placed on the rates utilities could charge customers during the phase-in stages of deregulation. Deregulation activities have also diverted utilities' attention away from investing on system improvement and replacement, they said. Now the bill is coming due.

"Financially, the sector is under tremendous pressure to pay off debt, however, outside investors are eager to bring new money to the table if the political and regulatory risks can be alleviated. This would mean that approval processes would need to be streamlined, and filings for rate increases will be necessary to cover the costs of new capital needed for the higher level of spending required to maintain reliability," Stephen A. Stolze, managing director at Rudden, said.

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