Hurricanes Katrina and Rita may have brought out the best in
utilities. But, they also exposed some potential weaknesses, namely
the level of investment in transmission.
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Ken
Silverstein
EnergyBiz Insider
Editor-in-Chief |
It's not an issue that gets much attention until the power goes out
for an extended period. But when such things happen, the topic comes
to light. The 2003 Blackout is the clearest example of that -- an
occurrence that left 50 million in the dark in several states and in
Canada. And, now, Entergy Corp. and Mississippi Power are still
fighting to restore power within their territories. Needless-to-say,
help is on the way. Sure, utilities have their field crews working
round-the-clock. But U.S. lawmakers passed mandatory reliability
standards that might make it easier to site transmission lines.
The need for a more vast and modern grid is widely recognized. But
the chief obstacles to building them deter construction, principally
resistance by neighborhood organizations and environmental groups. At
the same time, utilities are pressed to make other investments -- ones
that require less capital and have traditionally earned better and
faster rates of return than those in transmission projects. Federal
policymakers say that the goal now is to break down the barriers and
to ensure the nation's grid is updated.
"We believe this is not an option, but a necessity, and on the
basis that it is reasonable to argue that the next 10 years will see a
substantial increase in transmission investment in North America,"
says a paper issued by the Edison Electric Institute called "Meeting
U.S. Transmission Needs."
The group says that during the past 10 years, investment in
transmission by all types of utilities averaged $3.6 billion per year.
In 2003 and 2004, the number jumped to $5 billion each year. It says
that such investment could average $7 billion a year over the next
decade, or in a best-case scenario, $10 billion a year.
One of the reasons it says for the expected rise is the growth of
regional transmission organizations, or RTOs, that are independent
operators of transmission lines that have the authority to order
upgrades and even construction in some instances. In other cases, it
says that the efforts are being led by incumbent utilities that are
not part of RTOs. Under any circumstance, the federal government will
now have more power to enforce reliability standards and to try and
license transmission lines if the states don't issue the needed
permits within a one-year time frame.
Specifically, the 2005 energy law gives the U.S. Department of
Energy the authority to identify "national interest electric
corridors" while the Federal Energy Regulatory Commission can site the
projects that fail to win state approval. Meantime, the law not only
would include the North American Electric Reliability Council in the
development of standards but allow it to enforce them as well -- all
under the authority of a so-called Electric Reliability Organization.
Such standards have been optional to this point.
Modern Transmission
While the recent hurricanes and the 2003 Blackout have enlightened
the masses as to the serious need for new investment, those in the
industry have been cautioning against complacency for some time.
Certainly, the average age of assets along with a growing demand for
power and limited capital have combined and sent warning shots across
the bow of the American people and their elected representatives. The
2003 Blackout, for instance, cost untold millions in lost economic
opportunities.
The wires business must evolve to meet the needs of a high tech
society. The delivery system was designed a century ago and the
technologies that run it are half as ancient. It's about increasing
the capacity of wires, says the Electric Power Research Institute
(EPRI). Progressive technologies exist. But transmission projects
compete with other capital intensive projects for money.
What should the grid of the future look like? EPRI says that a
modern transmission system would also lead to improved security and
efficiency. Any intrusion, for example, could be isolated while the
rest of the grid kept functioning. By promoting compatibility with
future technologies, these tools for the design of systems have the
potential to eliminate expensive upgrades later on.
It's all part of EPRI's intelligrid, which it says is doable
in those areas where transmission expansion is coming and when aging
assets need to be replaced. According to Wade Malcolm, vice president
of power delivery and markets for the Palo Alto, Calif. Group, an
investment rate of $7 billion annually in the transmission grid would
be a welcome development. At that level, however, it's more realistic
to make incremental upgrades to the grid, as opposed to wholesale
changes.
"An idealistic end point would be $100 billion investment over 10
years," Malcolm says. "But within the $7 billion annually over 10
years framework, we will still see opportunity to apply new and
emerging technologies. We want to make sure companies look at advanced
technology when they invest in their systems."
Red Tape
To be sure, transmission developers are still likely to get
entangled in red tape. On paper, the Energy Department now has the
ability to say what pathways transmission lines should follow and the
FERC can act as a backstop to ensure the infrastructure is built. The
reality, however, may prove far different.
FERC, for example, has maintained the ability to step in to get
interstate natural gas pipelines constructed. But that hasn't stopped
opposition groups from throwing up roadblocks that cause delays, and
even the total derailment of deals. In any event, FERC emphasizes that
nothing in the law obviates the necessity for developers to lay the
foundation for winning pipeline or transmission permits. That includes
working with all the stakeholders to understand and address their
concerns.
The permitting process will still be inclusive. But, to keep local
disputes from impeding national economic interests, federal officials
do have the authority to get the job done. Progress in the past has
been done on a piecemeal basis that inhibits the flow of electrons and
by extension economic growth. A more systematic approach that uses a
common architecture would advance both the capacity and capabilities
of the grid.
It's all about attracting new investment in transmission. And the
changes in federal law now give utilities more incentive to reposition
their capital -- all to build a modern 21st century electricity grid.
In the end, the events surrounding the 2003 Blackout and the recent
hurricanes could well fade to black.
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visit: http://www.energycentral.com
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