Blackout Highlights Regional Energy Disputes

The American Wind Energy Association (AWEA) said that the political and regulatory dust from the recent massive blackout in the Eastern U.S. was still settling this week, and its impact remains far from clear.

(Courtesy of AWEA) Washington, D.C. – August, 27, 2003 [] Most political observers are betting that the power failure, which affected some 50 million people from New Jersey to Michigan and northward into Ontario and Quebec, will increase the chances for rapid passage of broad energy legislation currently pending in Congress. While that may indeed happen, it will take special effort by Congress, where a series of regional disputes has stalled many measures in the past. One of the most contentious in recent months has been the question of control and operation of the electricity transmission system, an issue that appears to be at the heart of the blackout. Many lawmakers from the South and West have opposed both centralized control over transmission and greater integration of the nation’s still-regional electricity markets, expressing a range of concerns from states’ rights to fears that allowing the cheaper power they produce to flow elsewhere will reduce a key competitive advantage in attracting new businesses. At the same time, the Federal Energy Regulatory Commission (FERC) has argued that a nationwide system of coordination and control is vital to the country’s future and its economic well-being. As FERC chairman Pat Wood put it recently to a reporter from The Economist magazine, “I’m from Texas, a great advocate of states’ rights! Even so, I truly believe that more federal control makes sense. After all, if there’s any commodity that deserves to be treated as interstate commerce-and therefore under federal jurisdiction-it has to be one that moves across state and even national boundaries at the speed of light.” The Pennsylvania-based public interest organization PennFuture struck a similar note. Observing that the area controlled by PJM, the Pennsylvania-New Jersey-Maryland interstate transmission system operator, was largely unaffected by the blackout, it commented, “State governments and agencies need to support larger regional organizations like PJM to operate the grid. Indeed, PJM was the wall that stopped the blackout-perhaps preventing it from cascading all the way down the eastern seaboard to Florida. Having all information under one roof and the buck stopping on one desk improves reliability. When it comes to electricity, no state can protect itself. Smart states welcome a strong federal role.” For AWEA, the choice of future direction is relatively clear, said deputy executive director Tom Gray: “We can either continue to move ahead toward a modernized, integrated national electricity market in which wind plants have fair access to transmission and can easily ship their product to market-the equivalent of ‘free trade’ in electricity, or we can try to turn back the clock to a balkanized, parochial system in which each local utility and generator has only its own individual interest in mind and no one is watching out for the public benefit. The economic costs of the latter approach will be enormous. Not only will it be much harder for a location-dependent energy source like wind to make headway in the market, but the overall costs of electricity will be significantly higher and American products will be less competitive.” Wind also benefits from the development of larger-scale, regional transmission operators, Gray said, because “the larger the pool of generation resources that is available to a system operator, the easier it is to integrate a variable energy source like wind into day-to-day operations.” AWEA policy director Jim Caldwell said the development of “smart” transmission system controls is critical to the system’s future and should be aggressively pursued. Industry experts say investment in such controls, which could respond at electronic speeds to problems on the system, has been stalled because a preoccupation with introducing competition among generators has led to a lack of focus on transmission improvements. In the words of the Economist article, “Some worry that expanding the grid’s capacity will mean laying more transmission lines. Actually, it need not. Thanks to advances in materials technologies and superconducting cables, more power can be shipped down the same rights of way if decades-old wire is simply replaced. Just as important is sophisticated new communications and monitoring hardware and software that will allow grid controllers to assess flows of power more easily.” Caldwell notes that press reports that tens of billions of dollars of investment in transmission are needed are probably correct, but even so, the cost is relatively small compared to the costs of the blackout or the cost savings from increased efficiency in the much-larger electricity generation sector. He added, “Utilities have called for new incentives in order to entice them to make this transmission investment, but the real problem is not the allowed rate of return on regulated transmission investments but rather who would own the right to use the increased network capacity the investments would create, and who should pay for the insurance they provide against rare but catastrophic regional blackouts.” From the beginning of the current debate in Congress, AWEA has supported proposed regulations and legislation that would encourage the formation of regional and ultimately national electricity markets, and it will continue to do so in cooperation with other allies as the House-Senate conference on the energy bill proceeds.
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