Home > power, regulation > MIT’s "Technology Review" on the regulatory obstacles to a "smart grid" needed for open, competitive electricity markets

MIT’s "Technology Review" on the regulatory obstacles to a "smart grid" needed for open, competitive electricity markets

David Talbot, chief correspondent for the MIT Technology Review, has an excellent, long piece in the January/February online issue that explores some the of intra- and inter-state regulatory hurdles that frustrate both the expansion of renewable power and a truly free power market.

I’d like to excerpt some portions of the article here:

When its construction began in the late 19th century, the U.S. electrical grid was meant to bring the cheapest power to the most ­people. Over the past century, regional monopolies and government agencies have built power plants–mostly fossil-fueled–as close to popu­lation centers as possible. They’ve also built transmission and distribution networks designed to serve each region’s elec­tricity consumers. A patchwork system has developed, and what connections exist between local networks are meant mainly as backstops against power outages. Today, the United States’ grid encompasses 164,000 miles of high-voltage transmission lines–those familiar rows of steel towers that carry electricity from power plants to substations–and more than 5,000 local distribution networks. But while its size and complexity have grown immensely, the grid’s basic structure has changed little since Thomas ­Edison switched on a distribution system serving 59 customers in lower Manhattan in 1882. …

While this structure has served remarkably well to deliver cheap power to a broad population, it’s not particularly well suited to fluctuating power sources like solar and wind. First of all, the transmission lines aren’t in the right places. The gusty plains of the Midwest and the sun-baked deserts of the Southwest–areas that could theoretically provide the entire nation with wind and solar power–are at tail ends of the grid, isolated from the fat arteries that supply power to, say, Chicago or Los Angeles. Second, the grid lacks the storage capacity to handle variability–to turn a source like solar power, which generates no energy at night and little during cloudy days, into a consistent source of electricity. And finally, the grid is, for the most part, a “dumb” one-way system. Consider that when power goes out on your street, the utility probably won’t know about it unless you or one of your neighbors picks up the phone. …

The U.S. grid’s regulatory structure is just as antiquated. While the Federal Energy Regulatory Commission (FERC) can approve utilities’ requests for electricity rates and license transmission across state lines, individual states retain control over whether and where major transmission lines actually get built. In the 1990s, many states revised their regulations in an attempt to introduce competition into the energy marketplace. Utilities had to open up their transmission lines to other power producers. One effect of these regulatory moves was that companies had less incentive to invest in the grid than in new power plants, and no one had a clear responsibility for expanding the transmission infrastructure. At the same time, the more open market meant that producers began trying to sell power to regions farther away, placing new burdens on existing connections between networks. The result has been a national transmission shortage.

These problems may now be the biggest obstacle to wider use of renewable energy, which otherwise looks increasingly viable. Researchers at the National Renewable Energy Laboratory in Golden, CO, have concluded that there’s no technical or economic reason why the United States couldn’t get 20 percent of its elec­tricity from wind turbines by 2030. The researchers calculate, however, that reaching this goal would require a $60 billion investment in 12,650 miles of new transmission lines to plug wind farms into the grid and help balance their output with that of other electricity sources and with consumer demand. The inadequate grid infrastructure “is by far the number one issue with regard to expanding wind,” says Steve Specker, president of the Electric Power Research Institute (EPRI) in Palo Alto, CA, the industry’s research facility. “It’s already starting to restrict some of the potential growth of wind in some parts of the West.”

The Midwest Independent Transmission System Operator, which manages the grid in a region covering portions of 15 states from Pennsylvania to Montana, has received hundreds of applications for grid connections from would-be energy developers whose proposed wind projects would collectively generate 67,000 megawatts of power. That’s more than 14 times as much wind power as the region produces now, and much more than it could consume on its own; it would represent about 6 percent of total U.S. electricity consumption. But the existing transmission system doesn’t have the capacity to get that much electricity to the parts of the country that need it. In many of the states in the region, there’s no particular urgency to move things along, since each has all the power it needs. So most of the applications for grid connections are simply waiting in line, some stymied by the lack of infrastructure and others by bureaucratic and regulatory delays. …

Utilities, however, are reluctant to build new transmission capacity until they know that the power output of remote wind and solar farms will justify it. At the same time, renewable-energy investors are reluctant to build new wind or solar farms until they know they can get their power to market. Most often, they choose to wait for new transmission capacity before bothering to make proposals, says Suedeen Kelly, a FERC commissioner. “It is a chicken-and-egg type of thing,” she says. …

Smart-grid technologies could reduce overall electricity consumption by 6 percent and peak demand by as much as 27 percent. The peak-demand reductions alone would save between $175 billion and $332 billion over 20 years, according to the Brattle Group, a consultancy in Cambridge, MA. Not only would lower demand free up transmission capacity, but the capital investment that would otherwise be needed for new conventional power plants could be redirected to renewables. That’s because smart-grid technologies would make small installations of wind turbines and photovoltaic panels much more practical.  …

The good news is that many utilities have begun installing the requisite meters–ones that intelligently monitor power flow out of a house as well as into it. The question now is how to move beyond the blizzard of pilot projects, install smarter technologies across the grid, and begin integrating more renewable power into the new infrastructure. “The smart-grid vision is nice; we all have our color PowerPoint slides,” says Don Von Dollen, who manages intelligent-­grid research at EPRI. “I think people kind of get the vision by now. Now it’s time to get stuff done.”  …

Last summer, former vice president Al Gore began arguing that the country needed to implement an entirely carbon-free electricity system within a decade to avert the danger of global warming. As part of his vision, Gore called for a “unified national smart grid” that would move power generated from renewable sources to cities, increase the efficiency of electricity use, and allow for greater control over renewable resources. He estimated that the grid overhaul would cost $400 billion over 10 years.  …

While pilot projects like the one in Boulder are worthwhile as a way to demonstrate new technologies, they’ve been implemented in hodgepodge fashion, with different utilities deploying different technologies in different states. Transmission projects are advancing incrementally, but they’re often complicated by conflicts between the states. “What we have today is this patchwork of rules and regulations that vary by state,” says Peter Corsell, CEO of GridPoint, a startup in Arlington, VA, that makes smart-grid software and is participating in the Boulder project. “We are all entrenched in this broken system, and there is no agreement on how to fix it. It’s a vicious circle.

Some think that the answer is to give FERC more ­authority. Today, the agency can overrule states’ decisions on where to site transmission lines, but only in regions that the U.S. Department of Energy has designated as critical for the security of the elec­tricity supply. So far, only two such corridors have been designated: one in the mid-Atlantic states and another in the Southwest. Even in those regions, delays continue. Southern California Edison has proposed a major transmission line in the southwest corridor; stretching from outside Los Angeles to near Phoenix, AZ, it would be able to handle power generated by future photovoltaic and solar-thermal power plants. But Arizona rejected the idea, so the utility is preparing to take its plans to FERC.

Others think the solution is a new federal policy that would make the market for renewable power more lucrative, perhaps by regulating carbon dioxide emissions, as the cap-and-trade policy proposed by Obama would do. Under such a policy, wind energy and other carbon-free electricity sources would become much more valuable, providing an incentive for utilities to expand their capacity to handle them (see “Q&A,” p. 28). “It could all change very fast,” says Will Kaul, vice president for transmission at Great River Energy in Minnesota, who heads a joint transmission planning effort that includes 11 utilities in the Midwest.  …

[A]n explosion in the use of renewables will depend heavily on upgrading the grid. That won’t come cheap, but the payoff may be worth it. “We should think about this in the same way we think about the role of the federal highway system,” says Ernest Moniz, a physics professor at MIT who heads the school’s energy research initiative. “It is the key enabler to allow us to modernize our whole electricity production system.”

(emphasis added)

One would think that deregulation of state utilities would also be a step in the direction of freeing up markets, introducing competiion and incentivizing both new grid investments and profitting from efficiency improvements.

In any case, I hope to vist this subject in other posts.

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