Changing of the grid

By Bill Kovarik

(Originally published in Appalachian Voice)

If the inventors of the telephone, the adding machine and the light bulb could see their legacies today, the first two — Alexander Graham Bell and Herman Hollerith — would be bewildered by the complexity of satellite phones and computers.

Thomas Edison, on the other hand, would scarcely notice a difference. The electrical generating and transmission systems that lit up his incandescent bulbs a century ago have barely changed.

This transmission system, called the grid, is a patchwork of legacy technologies focused on large power generators. It was designed for reliability, but not the kind of flexibility that allows the optimal use of smaller, cleaner and more decentralized sources of power.

Finally, we have a changing of the grid.

“We are headed to an era of energy production where you have smaller scale energy producers scattered across territory,” said Scott Sutton, spokesman for Progress Energy of North Carolina. “The grid has to be smart enough to know who is producing when and who is demanding where.”

In late October, Progress was one of several dozen utilities that were awarded a total of $3.4 billion in federal grants for “smart grid” initiatives announced by President Barack Obama. Progress will spend $100 million on smart metering systems in North Carolina. In the process, Progress and other utilities will begin an overhaul that everyone says is long overdue.


Overcoming the monopoly legacy

The structure of electrical generating systems has been an issue for as long as there has been a power grid. In the 1890s, the first electrical systems were going in, some cities had a dozen power plants in competition. Chicago had 20, and when one of Thomas Edison’s companies absorbed them all by 1907, it was renamed Commonwealth Edison.

Monopolies didn’t sit well with Americans at the time. And yet electric utilities were considered “natural monopolies” where competition seemed impossible because they were too capital-intensive to have effective competition. Progressive reformers like Teddy Roosevelt and others wanted an electrical system without the abuses that are all too typical of monopolies, wrote Richard F. Hirsh of Virginia Tech in a Smithsonian Institution web article.

There were two answers:

• One was to create a municipal or “public” utility to compete with the big investor owned utilities. Today, some small towns (such as Radford, Virginia) have their own city utilities that generate part of their power needs and buy the rest in bulk from a big investor owned utility.

• The other answer was to regulate both public and investor owned utilities through state and federal agencies.

A few decades later, two other kinds of utilities were created to bring electricity to rural America. These were the federal power agencies, such as the Tennessee Valley Authority, and also rural electrical co-operatives, which were created under the New Deal to reach less profitable areas.

By the 1940s, each of the four types of utilities operated as monopolies in their territories, and no other power generators were allowed to compete. (See Sidebar: Who Generates Electricity in the US?)

Breaking the monopolies

A fifth kind of electric producer emerged in the 1970s — the non-utility generator.

After the oil crisis of 1973, as people looked for ways to save energy, one place where waste seemed most obvious involved industries that generated steam for their processes. Capturing the steam at the industrial plant to spin an electric generator was encouraged by government policy as “cogeneration” under a 1978 public utilities law called the Public Utilities Regulatory Policy Act – PURPA.

In the beginning, PURPA made few inroads for competition within the electric utility industry. The law only required utilities to pay the cost they avoided for fuel, which usually worked out to about one or two cents per kilowatt hour.

So, for example, when a renewable energy cooperative in Floyd, Virginia set up a 15 kilowatt wind turbine in 1985, Appalachian Power Co. offered to buy at only 1.5 cents per kilowatt hour by, even though APCO sold electricity at 8 cents per kilowatt hour.

By using the electricity internally, the co-op got a payback of 10 years on the wind turbine. But if the windmill simply sent electricity back out into the grid, the payback period would have been 57 years, said Luke Staengl, then president of Floyd Agricultural Energy Coop.

Wind power fared better in states like California, where electric sales to utilities brought in 7.5 cents per kilowatt hour under the same federal regulations in the early 1980s. And although California wind farms had many problems with reliability, wildlife and economic issues, the state served as a crucible for the world’s wind energy industry in the 1980s and 90s.

Deregulation and Renewable Portfolios

California also served as a proving ground for the idea of deregulating utilities in the late 1990s and early 2000s. By separating power generating companies from transmission and service companies, competition would be increased, with the promise of better service and lower costs. The same deregulation of monopoly had achieved vastly improved telecommunications and computing.

What exactly went wrong with the California grid during the fall of 2000 and winter of 2001 is still a matter of some dispute, but huge price increases and repeated blackouts surprised consumers who had expected lower prices from deregulation. Because out-of-state energy companies were controlling large blocks of power, the state may have relied on federal regulators who were not inclined to intervene. State regulators finally stepped in after a number of energy companies were caught in fraudulent schemes, and some, like Enron, went bankrupt.

Meanwhile, a new idea called a “renewable portfolio standard” took shape at the state and federal level. In the spring of 2002, a 5 to 10 percent renewable energy portfolio was proposed, but the idea stalled under opposition from the utility industry. The Obama administration continues to push for a Renewable Energy Standard in the fall of 2009.

State RPS standards in the Appalachian region include that of North Carolina (12.5% by 2021); West Virginia (25% by 2025); and a voluntary standard for Virginia (12% by 2022).

Introducing the Smart Grid

The term “smart grid” became current around 2003, after a massive northeastern blackout led to power outages for 55 million people, underscoring the “brittle power” argument and the need for more flexibility. The main cause of the failure was the inability of the grid system to contain a small failure in Ohio.

As Amory Lovins of the Rocky Mountain Institute warned in “Brittle Power” – a post 911 report to the Pentagon – the national grid had become highly vulnerable to accidents and sabotage. There was the potential, he warned, for an incident that “would gravely endanger national security, and would leave lasting economic and political scars.” A more distributed, smarter grid would be the best answer, he said.

With security concerns on the one hand, and RPS and Green power purchasing programs on the other, wind power was growing at a rate of 25 percent per year. The most serious obstacle was the lack of grid ties in the Midwest.

Currently, about 200,000 MW worth of wind projects, more than enough to meet 20 percent of US electricity needs, are unable to proceed due to a lack of grid capacity, according to the “Green Power Superhighways” report by the American Wind Energy Association and the Solar Energy Industries Association.

This is the capacity equivalent of 236 average-sized nuclear reactors that can’t be built.

The country needs both a smarter and bigger energy grid, according to Dan W. Reicher, director of climate and energy policy for Google. “A smarter grid will let us see our energy use, measure it, price it and manage it in a way that lets us cut waste and get the most out of every watt,” Reicher said. “And a bigger grid will allow us to tap our nation’s vast clean energy resources – wind in the Midwest, solar in the Southwest, geothermal in the West and gulf coast, biomass in the Southeast – and deliver them where needed.”

Electric power industry think tanks agree: “If we keep everything as it is today, there is a limit on the percentage of renewable resources we can put on the grid,” said Don Von Dollen of the Electric Power Research Institute.

Big questions about grid expansion

Congressional hearings this summer and fall have brought out many questions surrounding the smart grid, such as:

• Whether to take siting decisions out of the hand of state regulators;
• whether standards for renewable energy content will be set, so that smart grids will not lead to more coal production when they should be designed to decrease it;
• and which companies will pay for grid expansion.

A House bill would make the Federal Energy Regulatory Commission the final authority in breaking state level deadlocks over crucial transmission line decisions. While some, like Reicher, say its needed as a “backstop,” others urge a skeptical look.

To have forced the introduction of new power lines only to have them expand the use of coal is one nightmare scenario. “There’s enormous financial incentive for the oldest and dirtiest coal plants to access markets through transmission,” said Chris Miller, President of the Piedmont Environmental Council of Virginia. “Unless we have a change in transmission rules, all this work on the national grid will mostly result in just more coal-fired power.”

Who will pay for the smart grid?

Wind and solar power producers do not want to pay the full cost of new grid connections or for expanding the grid, and in fact, European wind energy companies are given connections to the grid at no cost.

In hearings this summer, US Federal Energy Regulatory Commission chairman John Wellinghoff acknowledged: “If the resource developer or the host utility is compelled to bear all of the cost of these transmission facilities, they may not be developed.” But, he said, it’s up to Congress, and not the FERC, to decide how to spread costs.

Until recently in the US, wind companies paid half and transmission companies paid half. However, this October, federal courts upheld a decision by a Midwestern transmission authority to charge 90 percent of the cost of grid ties to proposed wind energy facilities, and the FERC sided with the transmission authority.

“This decision is baffling,” said American Wind Energy Association vice president Rob Gramlich, adding that federal regulators and the states “will need to exercise some leadership.”

Not everyone loves big systems

Building superhighways for electricity is not a good idea, according to the Institute for Local Self Reliance. “A transmission superhighway is a one-way street for centralized power stations; it is not a smart grid. Nor is it smart policy,” the ILSR said, reacting to the Obama administration’s “smart grid” initiative.

“Renewable energy by its very nature is available everywhere and in most cases it is economical to use it where it falls”, says John Farrell, co-author of the Energy Self-Reliant States report and senior researcher at the Institute for Local Self-Reliance. “A smart grid will encourage that dynamic. A new national high voltage grid may well undermine it.”

One of the first developers of the internet, Bob Metcalfe, said something similar recently and was quoted by L.D. Gussin at

“The killer lesson energy can take from the Internet’s history is: go distributed. As software and hardware remake the energy infrastructure, the smart grid or Enernet will become distributed—more peer-to-peer, multi-vendor, standards-based. I see an Enernet that is distributed, layered, symmetric, and asynchronous—with networked intelligence extending to trillions of leaves of the smart grid, with energy harvested and stored off, on, and in the grid.”

A similar issue is being debated in Europe. The Desertec Project, backed by some of Europe’s largest corporations, could involve $555 billion dollars worth of solar electrical generation in the deserts of North Africa sent to Europe.

Although Desertec could be a good idea for North African countries, “Sahara power for northern Europe is a mirage,” said Hermann Scheer, a German parliament member and also chair of the European Association for Renewable Energy. “Given their solar and wind power potentials, these countries would even be able to completely move to renewable energy for their electricity supply within less than 20 years. The beneficial effect to their economies would be much stronger (than just) exporting power to Europe.”


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