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.