Insight: Power reliability will cost Americans more

Reuters News
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Posted: Sep 13, 2011 12:13 PM
Insight: Power reliability will cost Americans more

By Scott DiSavino

NEW YORK (Reuters) - Major blackouts like the one that affected 5 million people in the U.S. Southwest and Mexico last week are rare, but occur more often in the United States than in some other developed nations because U.S. electric companies keep excess power capacity, and consumer costs, to a minimum.

U.S. utilities could shore up reliability, but experts are divided over whether customers would be willing to spend the billions needed to harden the grid to significantly reduce outage risks.

"The fact that the power went out for about 12 hours (in San Diego) does not justify doubling electric rates for the whole rest of the year," said Jay Apt, Executive Director of Carnegie Mellon's Electricity Industry Center.

Although most outages are relatively small, blackouts and brownouts, including those due to hurricanes and other storms, do cost Americans an estimated $150 billion a year in spoiled food, lost productivity and other costs, according to data from the Galvin Electricity Initiative.

"The U.S. does not have the excess generation some other nations have. We don't have two of everything and we shouldn't - you would not want to pay for it," Apt said, noting U.S. electric rates are about half of some European rates because the United States runs an efficient power system.

And still the electric grid in the United States remains one of the most dependable in the world.

"We are 99.99 percent reliable. But you still have that (0.01) percent of the time something is going to happen. Nobody is perfect," said Andrew Phillips, Director of Transmission and Substations at the Electric Power Research Institute (EPRI).

BLACKOUTS COST BILLIONS

Preliminary estimates of the cost of last week's blackout in the greater San Diego region were $97-$118 million, including spoiled food ($12-$18 million), government overtime ($10-$20 million) and lost productivity ($70 million), according to a report by the National University System Institute for Policy Research, which conducts research in the San Diego area. The study did not include costs from the blackout outside of the San Diego area.

The Sept 8-9 power outage affected Southern California, Arizona and Baja California in Mexico. Its cause was related to work in a substation in western Arizona that tripped a giant 500-kilovolt power line carrying electricity to the San Diego area.

That outage ultimately knocked out more than 4,000 megawatts of generation, including the San Onofre nuclear plant in California. One megawatt powers about 1,000 homes.

Pinnacle West Capital's Arizona Public Service power company, which owns the Arizona substation, said it was investigating the outage because "operating and protection protocols typically would have isolated the resulting outage" to the area around the substation in Arizona.

Roughly 500,000 Americans spend at least two hours each day without power. But that is only a small fraction of the 312 million U.S. power consumers and big blackouts like San Diego are extremely rare.

The majority of outages are failures at the local level where most investment needs to happen, said John Kelly, Executive Director at the Galvin Electricity Initiative. His group seeks regulatory and market reforms to encourage power companies to invest in the modernization of the grid.

SMART GRID RESCUE

To modernize the grid, Kelly said power companies would have to spend $500 billion to $1 trillion over the next 10 to 15 years on new cleaner generation, transmission and distribution systems, including smart meters, automation equipment and software at consumers' homes and businesses.

That's a lot of money, but Kelly estimated Americans could save two to three times that amount (up to $3 trillion) over the same 10 to 15 years if regulators require power companies to commit to reliability improvements to recover their investments, among other things.

Other energy experts believe Americans might be willing to pay a bit more to make the system a little more reliable.

"I think people will be surprised there is a willingness to pay somewhat more for a somewhat hardened grid and better outage response assistance," said Steve Mitnick, President of the not-for-profit energy research group Build Energy America.

Mitnick said investing billions in the smart grid and other equipment needed to harden the power system would likely only add pennies a day to the average residential electric bill.

The smart grid uses technology to respond to data from generation, transmission and consumers' homes and businesses to efficiently deliver reliable power at the lowest cost.

Several companies participate in the smart grid space, including smart meter and automation companies Itron and Echelon, and some of the world's biggest technology companies, including IBM, General Electric, ABB, Siemens, Toshiba and Cisco.

(Reporting by Scott DiSavino; Editing by Andrea Evans)