Economics, Energy and the Environment

Will the U.S. face an India-style blackout?

Photo Credit: fun3MD (Flickr) (CC BY 2.0)

Photo Credit: fun3MD (Flickr) (CC BY 2.0)

India’s epic power blackout has brought some attention to the state of America’s energy stability, and various pundits and analysts are asking whether or not the U.S. is either headed for, or vaguely prepared for a catastrophic power outage of the sort that afflicted India last week.

The answer seems to be, yes, we are at increasing risk of wide-scale power-outages, and no, we’re not really ready to do much to avoid it. As Aaron Jagdfeld writes in Forbes:

Power quality is the measure of reliable power in our homes and businesses, and it has been declining steadily since 1990. During this time, demand for power has increased by 25%, but the infrastructure needed to transmit power to homes has increased by a mere 7%. We have become a digital society, but are burdened with an analog power grid—one that is inefficient and susceptible to weather, surging demand, and even terrorist attack.

And that declining power quality comes with costs:

Each outage comes at a cost; the average cost of a one-second outage among industrial and digital firms is about $1,477. That means the U.S. economy loses between $104 billion and $164 billion each year to power outages.

Jagdfeld accurately places the blame where it belongs: On regulators who create disincentives for private sector investment in grid maintenance and upgrading:

American utility companies are as constrained as the government when it comes to meaningful investment in grid improvement. The 3,200 utility companies that touch the power grid are regulated by an equal number of agencies, many of which exist solely to minimize cost to consumers. This is undeniably good for consumers in most cases, but it has left us with a broken power grid that no one is responsible for (or capable of) fixing.

I’ve long observed that politicians love new infrastructure, particularly if it has their name on it. They love going to ribbon cutting ceremonies, or boarding the first train at a transit station they authorized, but they don’t much like spending money on maintaining what they build, they don’t operate infrastructure as a business, and they’re downright averse to charging the public enough to allow for suitable maintenance. Add obstructionist environmentalists into the mix, and you have a recipe for grid degradation and an elevated risk of major blackouts.

One thought on “Will the U.S. face an India-style blackout?

  1. No doubt there is always a need for infrastructure upgrade. Where I live I’ve heard a lot recently about “reliability” issues and the need for transmission. And we’re even looking at $6 BILLION 8 segment wind-driven transmission project. All of this, to be ratebased into all of PacifiCorp’s customers rates. The first segment has already been built, it supposed to cost $78 million, it ended up costing $801 million. So what’s wrong this picture you might ask?

    In 2004, before PacifiCorp was bought by Warren Buffett’s MidAmerican Energy Holding Company, their Integrated Resource Plan showed only 1 line of transmission was needed. PacifiCorp (dba Rocky Mountain Power) – transmission

    Page 33 of the document

    http://www.puc.idaho.gov/internet/cases/elec/PAC/PACE0502/200511042004%20UPDATE.PDF

    Then in 2006 MidAmerican Energy purchased PacifiCorp, and in that purchase agreement PacifiCorp agreed to take on 1400 MW of wind.

    PacifiCorp’s 2007 Integrated Resource Plan all of sudden showed 3 lines of transmission needed at $362 million.

    http://www.puc.idaho.gov/internet/cases/elec/PAC/PACE0711/200705302007%20IRP.PDF

    Page 5

    “The company also developed transmission resources to support meeting loads with new generation options, to integrate wind, to enhance transfer capability and maintain reliability across PacifiCorp s system, and to boost Import/export capability with respect to external markets.”

    Page 20-21 of document

    “Either of these projects presents opportunities to enhance PacifiCorp’s ability to accept the output from wind generators and balance the system cost effectively in a regional environment.”

    Fast forward to 2011 and over 2000 MW of wind on their system. PacifiCorp’s Integrated Resource Plan is requesting a $6 BILLION Energy Gateway transmission system.

    http://www.puc.idaho.gov/internet/cases/elec/PAC/PACE1110/20110401INTEGRATED%20RESOURCE%20PLAN,%20VOL%20I.PDF

    Page 82

    “The modeling analysis indicates that the full Energy Gateway strategy is cost effective assuming incremental wind additions are in line with the Company’s current wind acquisition plans. However, without the mandate for additional renewable resources and regulatory support for associated transmission investments, further evaluation of proposed incremental transmission originating in Wyoming (most economic location for wind) would be required to determine need for Company load service. One thing is clear; the Energy Gateway strategy provides the necessary capacity for the Company to be aligned with a green resource future.”

    Page 129:

    “It should be noted that primary drivers of wind resource selection [green resource future] are the requirements of renewable portfolio standards and the availability of production tax credits”

    The ‘ole Warren Buffett (MidAmerican) and PacifiCorp, they know how to work it — Buffett has the capital to invest and the PUCs guarantee him a rate of return on his capital invested. I’m sure that all the customers in the states of PacifiCorp’s service area can expect the remaining 7 segments of Energy Gateway to be “gold-plated” like the first one was — yes, we can expect to pay a lot more than estimated $6 billion for this wind-driven transmission project.

    And let’s not forget, that this doesn’t even include all those federal & state tax breaks/subsidies — and mandates — Buffett/MidAmerican/PacifiCorp is receiving from his wind projects in and of themselves. As said in this 3/2012 Oregon article: “Buffett described MidAmerican as one of Berkshire’s “fabulous five” operating companies because of record profits — profits he expects to continue this year.”

    http://www.oregonlive.com/business/index.ssf/2012/03/pacificorp_files_for_3_rate_re.html

    And if you would like more evidence that wind is driving our transmission needs and reliability issues, look here:

    https://www.energyintegrityproject.org/uploads/RichRayhill9222010.pdf

    This is a Ridgeline Energy (parent company is French company,Veolia) presentation given on 9/20/2010 to the Idaho Wind Working Group. This presentation nicely links up the need for transmission to wind energy — something that is NOT being publicly done.

    And please take notice of Rayhill’s words:

    “SHOW ME THE MONEY!” page 16

    “Watch the money roll In” page 26

    Again, to reiterate, I believe we did/do have old and aging infrastructure which needs to be updated. But to what extent and what’s behind this enormous push? And is wind, a low value energy source, the best source to be clogging up such expensive transmission? All questions that need to be answered. Let’s call a spade a spade.

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