The Future of the Grid: Why Modernizing our Nation's Aging Grid is Critical
Posted July 19, 2012
A major southern California blackout last fall cost the public more than $100 million in losses. The power outage knocked out traffic lights, causing gridlock on roads in the San Diego area. Two reactors at a nuclear power plant along the California coast went offline after losing electricity, and nearly 3.5 million gallons of sewage spilled into the ocean, closing beaches in San Diego.
According to a Federal Energy Regulatory Commission/North American Electric Reliability Corporation (FERC/NERC) report, insufficient grid coordination and a lack of coordinated planning were major causes of the incident. This is just one of the reasons why our aging grid needs to be modernized.
Last week I blogged about the congressional pushback to Energy Secretary Chu’s directive to the nation’s Power Marketing Administrations (PMAs) to better coordinate efforts with other system operators to integrate renewable energy sources into the grid, enhance reliability and efficiency, and ensure the long-term security of our electrical system.
Taking these steps should make delivered electricity cheaper for all customers of the grid, including the PMA’s “preference customers” – public municipal utilities and rural cooperatives that provide electricity to about a quarter of the nation’s consumers – by preventing the need for duplicative transmission infrastructure and reserves, and increasing operational efficiencies.
Starting this week, DOE and the Western Area Power Administration are hosting public meetings to gather on-the-ground input vital to efforts to achieve a more secure and sustainable electric sector in the western United States.
While these workshops are critical to developing consensus about how to modernize our nation’s aging grid, I expect these traditional preference customers of the Western Area Power Administration (Western) – for whom at-cost electricity is provided from federal hydropower resources – to turn out in force to oppose the changes. That’s too bad.
The ingredients are there for a rational way forward if people are willing to work together. I believe that there is plenty of room to partner with both PMAs and their preference customers to implement constructive operational and system improvements to the nation’s power grid. No one is calling for a retreat from the longstanding mission of PMAs to provide cost-based power to preference customers. Some preference customers are strong supporters of renewables, which could thus be a place to find common ground.
Let me go into more detail:
The preference customers have done the country a great service by helping pay off federal investments in the public hydro system. This low-cost power has been put to use in service of mainly rural economies to good effect. Customers of Western’s power also pay for most operating costs, though, except for Bonneville Power Administration (BPA), which is largely self-funded, the federal taxpayers annually provide between nine and 12% of the PMAs annual operating budgets. These expenses are expected to be recovered through rates as part of the “power at cost” ratemaking calculation. Understandably the preference customers want to maintain their current low electricity rates and fear that system upgrades will increase their costs for the benefit of others.
But, will having a more efficient system that is better integrated into the larger grid really increase costs? In the West, BPA and WAPA collectively control over 33,000 miles of transmission lines and 594 substations. BPA is a primary transmission provider – controlling approximately 70% of the grid – in two states. Modernizing the grid may not be possible without them.
As it turns out, the administrators of both BPA and Western have publicly disagreed with the notion that the Secretary’s proposed changes will increase costs. In fact, they did so before a House Natural Resources Subcommittee on Water and Power hearing on Capitol Hill on March 20 this year.
Stephen Wright, administrator of the Bonneville Power Administration, told the subcommittee he does not expect costs to increase and that much of what Secretary Chu called for in the memo plays into ongoing activities currently under way. "At this point, I have no reason to believe that rates will go up," Wright said.
Timothy Meeks, administrator for the Western Area Power Administration (recently retired from Western), said people who benefit from any upgrades or changes to the system would pay and that investments are needed because the transmission system is aging.
Indeed many of the changes suggested by Secretary Chu are already being implemented by PMAs, such as intra-hour scheduling and more coordinated regional operations. Western is fully engaged in regional planning efforts in the “WestConnect” subregional transmission planning group, which under FERC Order 1000 will facilitate cost allocation of transmission lines to those who demonstrably benefit.
Moreover, the changes proposed by the Secretary are either already being considered by balancing authorities (such as a western regional energy imbalance market designed to smooth renewable integration), or imposed by rule on the grid operators under FERC jurisdiction. Furthermore, improving the situational awareness between balancing authorities, would be a major reliability improvement. As cited in the FERC/NERC report on the southern California blackout, insufficient grid coordination and a lack of coordinated planning were major causes of the incident. It just so happens that Secretary Chu’s memo highlighted these very areas as in need of attention by PMAs.
“This [FERC/NERC report on the blackout] highlights the growing need for more coordination of grid operations in the West,” FERC Chairman Jon Wellinghoff said in an agency release. “Implementing the recommendations in this report will assist in enhancing the planning and system awareness measures that are necessary to operate an efficiently integrated bulk power system, and reduce costs to consumers from these types of outages that could continue if operational efficiencies are not improved.” As the rest of the grid modernizes, would it benefit PMAs’ customers to be left behind?
The real argument may boil down to who controls the PMAs, which are federal agencies and part of the Department of Energy. Some preference customers seem to believe that PMAs should only exist to provide them with at-cost electricity from federal hydro projects, and that any other mission, including accommodating renewables, is unacceptable. As an agency of the federal government, its assets are public, so they belong to all the people. They are not private nor subject to any owner's decision making. A PMA is accountable to Congress and through Congress to the people. As part of the American Reinvestment and Recovery Act, PMA authorities were expanded to include partnering to build transmission for renewable energy and they were afforded increased borrowing authority to facilitate it.
Though they will complain loudly at the workshops in the coming week, preference customers have to understand that their grid is changing all around them and they will need to change too. It doesn’t have to be costlier. It can be cheaper, and better, but it will be different.
To learn more about the WAPA hearings, to attend one or comment, go to: http://ww2.wapa.gov/sites/Western/about/Pages/Definingfuture.aspx.
For information on the workshops:
If you can't attend a meeting, you can still comment via email to JOT@wapa.gov. Please provide your name and identify your organizational affiliation in your submission. Your comments will be most useful to the WAPA team if submitted by Aug. 3; however, we will accept comments until Aug. 17.
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