Turning the Tide on Outages 1 What are the true costs of implementing or failing to implement a stronger, smarter and more robust grid

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1 Turning the Tide on Outages 1 What are the true costs of implementing or failing to implement a stronger, smarter and more robust grid Approachingamonthduringwhichthenationwillobservethe8thanniversaryoftheAugust2003Blackout (over50millionconsumersaffectedandmorethan$6billionsinlosses),the6thanniversaryofhurricane Katrina(morethan1800deathsandover$150billionineconomiclosses),andtheAugust1,2007collapseof thei"35wbridgeinminneapolis(killing13anddisruptingtrafficandthelocaleconomyforayear),inaddition tothehundredsofblack"outs,watermainbreaksanddailytrafficgridlocks,havestimulatedgrowingpublic awarenessofthenecessityforacceleratedprogramsofreplacement,rehabilitationandnewinvestmentinthe U.S.infrastructure. Focusingontheelectricpowersector,thepoweroutagesandpowerqualitydisturbancescosttheU.S. economyover$80billionannually,andupto$188billionperyear.transmissionanddistributionlossesinthe U.S.wereabout5%in1970,andgrewto9.5%in2001,duetoheavierutilizationandmorefrequent congestion.regardingtheformer,startingin1995,theamortization/depreciationrateexceededutility constructionexpenditures.sincethatcrossoverpointin1995,utilityconstructionexpenditureshavelagged behindassetdepreciation.thishasresultedinamodeofoperationofthesystemthatisanalogousto harvestingmorerapidlythanplantingreplacementseeds.asaresultofthesediminished shockabsorbers, theelectricgridisbecomingincreasinglystressed,andwhetherthecarryingcapacityorsafetymarginwillexist tosupportanticipateddemandisinquestion. ToassessimpactsusingactualelectricpoweroutagedatafortheU.S.,whicharegenerallyavailablefrom severalsources,includingfromtheu.s.doe senergyinformationadministration(eia)andthefromthenorth AmericanElectricReliabilityCorporation(NERC).Ingeneral,theEIAdatabasecontainsmoreevents,andthe NERCdatabasegivesmoreinformationabouttheevents.Bothdatabasesareextremelyvaluablesourcesof informationandinsight.inbothdatabases,areportofasingleeventmaybemissingcertaindataelements suchastheamountofloaddroppedorthenumberofcustomersaffected.inthenercdatabase,theamount ofloaddroppedisgivenforthemajorityofthereportedevents,whereasthenumberofcustomersaffectedis givenforlessthanhalfthereportedevents. Analysesofthesedatacollectedrevealedthatintheperiodfrom1991to2000,therewere76outagesof100 MWormoreinthesecondhalfofthedecade,comparedto66suchoccurrencesinthefirsthalf(Figure1). Furthermore,therewere41%moreoutagesaffecting50,000ormoreconsumersinthesecondhalfofthe 1990sthaninthefirsthalf(58outagesin versus41outagesin ).Inaddition,between 1996and2000,outagesaffected15%moreconsumersthantheydidbetween1991and1995(theaveragesize pereventwas409,854customersaffectedinthesecondhalfofthedecadeversus355,204inthefirsthalfof thedecade).similarresultsweredeterminedforamultitudeofadditionalstatisticssuchasthekilowatt magnitudeoftheoutage,averageloadlost,etc.thesetrendshavepersistedinthisdecade.nercdatashow thatduring2001"2005wehad140occurrencesofover100mwdropped,and92occurrencesofover50,000 ormoreconsumersaffected. 1 MassoudAminisleadingextensiveR&DeffortsinsmartgridsandinfrastructuresecurityandisaleadingexpertontheU.S.electricity grid.beforebecomingthehoneywell/h.w.sweattchairintechnologicalleadership,aprofessorofelectricalandcomputer Engineering,andaUniversityDistinguishedProfessorattheUniversityofMinnesota,hedirectedallInfrastructureSecurity,Grid Operations/Planning,andEnergyMarketsattheElectricPowerResearchInstitute(EPRI)after9/11.Priortothatheledmathematics andinformationsciencesatepri,workedonself"repairingenergyinfrastructures,coinedtheterm"smartgrid"in1998,consideredas the"fatherofsmartgrid,"andledthedevelopmentofover24technologiestransferredtoindustry. Draft07"18"2011 1

2 TheU.S.electricalgridhasbeenplaguedbyevermoreandeverworseblackoutsoverthepast15years.Inan averageyear,outagestotal92minutesperyearinthemidwestand214minutesinthenortheast.japan,by contrast,averagesonly4minutesofinterruptedserviceeachyear.theoutagedataexcludesinterruptions causedbyextraordinaryeventssuchasfiresorextremeweather. Figure1:U.S.ElectricPowerOutagesover100MWandaffectingover50,000Consumers(1991"2005) Ianalyzedtwosetsofdata,onefromtheU.S.DepartmentofEnergy'sEnergyInformationAdministration(EIA) andtheotherfromthenorthamericanelectricreliabilitycorp.(nerc).generally,theeiadatabasecontains moreevents,andthenercdatabasegivesmoreinformationabouttheevents,includingthedateandtimeof anoutage,theutilityinvolved,theregionaffected,thequantityofloaddropped,thenumberofcustomers affected,thedurationoftheoutage,andsomeinformationaboutthenatureoftheevent. Thesetwodatasetseachcontaineventsnotlistedintheotherdataset.Ingeneral,theEIAdatabasecontains moreevents,andthenercdatabasegivesmoreinformationabouttheevents.thenarrativedatainthenerc (andalsotheeia)databasesaresufficienttoidentifyfactorssuchasequipmentfailureorsevereweather(ora combinationofboth)thatmayhavecontributedtoanoutage.establishmentofprecisecauseisbeyondthe scopeofmostofthenarratives.bothdatabasesareextremelyvaluablesourcesofinformationandinsight. Inbothdatabases,areportofasingleeventmaybemissingcertaindataelementssuchastheamountofload droppedorthenumberofcustomersaffected.inthenercdatabase,theamountofloaddroppedisgivenfor themajorityofthereportedevents,whereasthenumberofcustomersaffectedisgivenforlessthanhalfthe reportedevents. IntheEIAdatabase,thenumberofcustomersaffectedisreportedmorefrequentlythantheamountofload dropped. Inbothsets,eachfive"yearperiodwasworsethantheprecedingone:AccordingtodataassembledbytheU.S. EnergyInformationAdministration(EIA)formostofthepastdecade,therewere156outagesof100 megawattsormoreduring2000"2004;suchoutagesincreasedto264during2005"2009.thenumberofu.s. poweroutagesaffecting50,000ormoreconsumersincreasedfrom149during2000"2004to349during2005" 2009,accordingtoEIA(Figure2): Draft07"18"2011 2

3 Figure2:PowerOutageshavesteadilyincreased 2 3 inthemostrecentdecade In2003EIAchangedtheirreportingformfromEIA"417RtoOE"417.Bothformswereattachedwith descriptionsofreportingrequirements(page3andpage6respectively).inall,thereportingrequirementsare verysimilar,withoe"417beingalittlemorestringent.themainchangeintherequirementaffectingthe abovefiguresisthatalloutagesgreaterthan50,000customersfor1hourormorebereportedinoe"417, whereitwasonlyrequiredfor3hoursormoreineia"417rpriorto2003.adjustingforthechangeinreporting in2003(usingallthedatafrom2000"2009andonlycountingtheoutagesthatmetthelessstringent requirementsoftheeia"417rformusedfrom2000"2002):therewere152outagesof100megawattsormore during2000"2004;suchoutagesincreasedto248during2005"2009.thenumberofu.s.poweroutages affecting50,000ormoreconsumersincreasedfrom130during2000"2004to272during2005"2009(figure3): 300 HistoricalAnalysisofU.S.Outages(2000"2009) (Adjustedfor0.9%/yearincreaseinloadto2000levels) NumberofOutages Numberofoutages affecting50,000or morecustomers Numberofoutages of100mwormore " "2009 Figure3:U.S.ElectricPowerOutagesover100MWandaffectingover50,000Consumersduring2000"2009, adjustedfor0.9%annualincreaseinloadandadjustedforchangeinreportingin2003(usingallthedatafrom 2000"2009andonlycountingtheoutagesthatmetthelessstringentrequirementsoftheEIA"417Rformused during2000"2002) 2 Source:Amin,M. U.S.ElectricalGridGetsLessReliable,"IEEESpectrum,January2011,andonlineat 3 ResearchissupportedbyagrantfromtheNSFandacontractwithSNL.ForpreparationsofFigures3,IgratefullyacknowledgeMr. AnthonyGiacomoni,myGraduateResearchAssistant,inthedepartmentofElectrical&ComputerEngineeringattheUofMTwinCities. Draft07"18"2011 3

4 Insummarythenumberofoutagesadjustedfor0.9%annualincreaseinloadandadjustedforchangein reportingin2003is: Occurrencesof100MWormore Occurrencesof50,000ormore consumers 2000" " Asanenergyprofessionalandelectricalengineer,Icannotimaginehowanyonecouldbelievethatinthe UnitedStatesweshouldlearnto cope withtheseincreasingblackouts andthatwedon thavethe technicalknow"how,thepoliticalwill,orthemoneytobringourpowergridupto21stcenturystandards. Copingasaprimarystrategyisultimatelydefeatist.Weabsolutelycanmeettheneedsofapervasivelydigital societythatreliesonmicroprocessor"baseddevicesinvehicles,homes,offices,andindustrialfacilities.anditis notjustamatterof can. Wemust iftheunitedstatesistocontinuetobeaneconomicpower.however,it willnotbeeasyorcheap. Costs/benefitsoffulldeploymentofsmartgrids 4 Inarecentnation"widesurvey,mostofconsumersintheU.S.(~68%)didn'tknowwhat"SmartGrid,"meant. Wemustassessandclearlyarticulate: 1)whatisthe"SmartGrid"orwhatwillitdoforconsumers? 2)whatarethecosts/benefitsandrangeofnewconsumer"centeredservicesenabledbysmartgrids? Whatisthesmartgrid spotentialtodriveeconomicgrowth? Regardingthefirstquestion...Sowhatisthesmartself"healinggrid? Herearethedefinitionsforthesmart"self"healing"grid,whichIproposedandhaveutilizedinallpertinent projectswhileatepriandbeyondsincejanuary1998: Theterm smartgrid referstotheuseofcomputer,communication,sensingandcontroltechnology whichoperatesinparallelwithanelectricpowergridforthepurposeofenhancingthereliabilityof electricpowerdelivery,minimizingthecostofelectricenergytoconsumers,improvingsecurity, quality,resilience,robustness,andfacilitatingtheinterconnectionofnewgeneratingsourcestothe grid. Asystemthatusesinformation,sensing,controlandcommunicationtechnologiestoallowittodeal withunforeseeneventsandminimizetheiradverseimpact.itisasecure"architected"sensing, communications,automation/control,andenergyoverlaidinfrastructureasanintegrated, 4 Earlierversionsofthisdraftarepublishedat: 1. GreenTechMedia,SmartGridResearch&Analysis,September29,2010:"TurningtheTideonOutages:Whatarethetrue costsofimplementing orfailingtoimplement astronger,smarterandmorerobustgrid,asksmassoudamin" 2. UniversityofMinnesotaNews,October4,2010:"Asmarterwayoflookingatpower,Uprofessoradvocatesfor"smartself" healinggrid"toboostu.s.energysecurity," 3. ConnectedPlanet,October7,2010:"TheRisingTideofOutages:Movingtowardagreener,moreresilientNorthAmerican SmartGrid" 4. October8,2010:TheRisingTideofPowerOutagesandtheNeedforaStrongerandSmarterGridathttp://tli.umn.edu/blog/ 5. TheEconomist,January10,2011:TheIdeasEconomy: 6. Amin,M. U.S.ElectricalGridGetsLessReliable,"IEEESpectrum,January2011,andonlineat Draft07"18"2011 4

5 reconfigurable,andelectronicallycontrolledsystemthatwillofferunprecedentedflexibilityand functionality,andimprovesystemavailability,security,quality,resilienceandrobustness. Theconceptofsmartgrids,pertinentR&Dprogramsaimedatdevelopingself"healinggrids,andthe associatedterminology,datebackto1990s.ofparticularinterestisalarge"scaleresearchprogram conductedjointlybytheelectricpowerresearchinstitute(epri)andtheu.s.departmentofdefense(dod) during ,titledComplexInteractiveNetworks/SystemsInitiative(CIN/SI).108professorsandover 240graduatestudentsin28U.S.universitiesparticipated,alongwith52utilitiesandgridoperators.Several leadingcontrolsresearchersledand/orparticipatedinprojectteams.thisworkprovidedthemathematical foundationsandsimulationsforthesmartself"healinggridandshowedthatthegridcanbeoperatedcloseto thelimitofstabilitygivenadequatesituationalawarenesscombinedwithbettersecurecommunicationand controls. Sincethen,therehavebeenseveralconvergentdefinitionsof"smartgrids",includingwithinthe2007Energy Bill,alongwithinformativereportsbyEPRI(1998"present),NISTandU.S.DOE(2007"2010),anddefinitionsby theieee,ferc,geandwikipedia.manydefine"smartgrid"intermsofitsfunctionalitiesandperformance objectives(e.g.,two"waycommunications,interconnectivityrenewableintegration,demandresponse, efficiency,reliability,self"healing,etc.). Therearemanydefinitions,butthereisonevisionofahighlyinstrumentedoverlaidsystemwithadvanced sensorsandcomputingwiththeuseofenablingplatformsandtechnologiesforsecuresensing, communications,automationandcontrolsaskeysto:1)engageconsumers,2)enhanceefficiency,3)ensure reliability,4)enableintegrationofrenewablesandelectrictransportation. RecentpoliciesintheU.S.,China,India,EU,andothernations,combinedwithpotentialfortechnological innovationsandbusinessopportunities,haveattractedahighlevelofinterestinsmartgrids.smartgridsare seenasafundamentallytransformative,globalimperativeforhelpingtheplanetdealwithitsenergyand environmentalchallenges.theultimategoalisforanend"to"endelectricpowersystem(fromfuelsource,to generation,transmission,distribution,andenduse)thatwill: Allowsecureandreal"time2"waypowerandinformationflows Enableintegrationofintermittentrenewableenergysourcesandhelpdecarbonizepowersystems Enableenergyefficiency,effectivedemandmanagement,andcustomerchoice Enablethesecurecollectionandcommunicationofdetaileddataregardingenergyusagetohelp reducedemandandincreaseefficiency. In2007,theUnitedStatesCongresspassedtheEnergyIndependenceandSecurityActoutliningspecificgoals forthedevelopmentofthenation ssmartgrid.section1301ofthisactstatesthat, Itisthepolicyofthe UnitedStatestosupportthemodernizationoftheNation'selectricitytransmissionanddistributionsystemto maintainareliableandsecureelectricityinfrastructurethatcanmeetfuturedemandgrowthandtoachieve eachofthefollowing,whichtogethercharacterizeasmartgrid: 1. Increased use of digital information and controls technology to improve reliability, security, and efficiencyoftheelectricgrid. 2. Dynamicoptimizationofgridoperationsandresources,withfullcyber"security SmartGridisaconceptandarangeoffunctionalities:Itisdesignedtobeinherentlyflexible,accommodatinga varietyofenergyproductionsourcesandadaptingtoandincorporatingnewtechnologiesastheyare developed.itallowsforchargingvariableratesforenergy,baseduponsupplyanddemandatthetime.in theory,thiswillincentivizeconsumerstoshifttheirheavyusesofelectricity(suchasforheavy"dutyappliances orprocessesthatarelesstime"sensitive)totimesofthedaywhendemandislow(calledpeakshavingorload Draft07"18"2011 5

6 Draft07"18" leveling).asanexampleoftheserangeoffunctionalities,in2008,u.s.departmentofenergy(doe)defined functionsofasmartgridas: Self"healing frompowerdisturbanceevents Enablingactiveparticipationbyconsumersindemandresponse Operatingresilientlyagainstphysicalandcyberattacks Providingpowerqualityfor21stcenturyneeds Accommodatingallgenerationandstorageoptions Enablingnewproducts,services,andmarkets Optimizingassetsandoperatingefficiently. Smartgridconceptualizationanddevelopmentisoccurringinternationally.Someinformationforactivitiesin theeuandinchina,forexample,isavailableathttp:// Regardingthesecondsetofquestions...whatarethecosts/benefitsandrangeofnewconsumer"centered servicesenabledbysmartgrids?whatisthesmartgrid spotentialtodriveeconomicgrowth? Tobeginaddressingthese,thecostsoffullimplementationforanationwideSmartGridrangeovera20"year period(2010"2030): AccordingtoenergyconsultingfirmBrattleGroup,thenecessaryinvestmenttoachieveanoverhaulof theentireelectricityinfrastructureandasmartgridis$1.5trillionspreadover20years(~$75 billion/year),incl.newgeneratorsandpowerdeliverysystems. AdetailedstudybytheElectricPowerResearchInstitute(EPRI)publishedinApril2011,findsthatthat theestimatednetinvestmentneededtorealizetheenvisionedpowerdeliverysystemofthefutureis between$338and$476billion.thenewestimatestranslateintoannualinvestmentlevelsofbetween $17and$24billionoverthenext20years. Thecostscoverawidevarietyofenhancementstobringthepowerdeliverysystemtothe performancelevelsrequiredforasmartgrid.theyincludetheinfrastructuretointegratedistributed energyresourcesandachievefullcustomerconnectivitybutexcludethecostofgeneration,thecostof transmissionexpansiontoaddrenewablesandtomeetloadgrowthandacategoryofcustomercosts forsmart"grid"readyappliancesanddevices. Despitethecostsofimplementation,investinginthegridwouldpayforitself,toagreatextent.Integrationof thesmartgridwillresultin: 1)Costsofoutagesreducedbyabout$49Bperyear, 2)Increasedefficiencyandreducedemissionsby12"18%peryear(PNNLreport,January2010), 3)Agreaterthan4%reductioninenergyuseby2030;translatinginto$20.4billioninsavings, 4)Moreefficienttomoveelectricalpowerthroughthetransmissionsystemthantoshipfuelsthesame distance.fromanoverallsystem'sperspective,withgoalsofincreasedefficiency,sustainability,reliability, securityandresilience,weneedboth: Localmicrogrids(thatcanbeasself"sufficientaspossibleandislandrapidlyduringemergencies),and Interconnected,smarterandstrongerpowergridbackbonethatcanefficientlyintegrateintermittent sources,andtoprovidepowerforend"to"endelectrificationoftransportation. 5)Reductioninthecostofinfrastructureexpansionandoverhaulinresponsetoannualpeaks.Thedemand responseandsmartgridapplicationscouldreducethesecostssignificantly.

7 6)Thebenefit"to"costratiosarefoundtorangefrom2.8to6.0.Thus,thesmartgirddefinitionusedasthe basisforthestudycouldhavebeenevenwider,andyetbenefitsofbuildingasmartgridstillwouldexceed costsbyahealthymargin.byenhancingefficiency,forexample,thesmartgridcouldreduce2030overallco2 emissionsfromtheelectricsectorby58percent,relativeto2005emissions. 7)Increasedcyber/ITsecurity,andoverallenergysecurity,ifsecurityisbuiltinthedesignaspartofalayered defensesystemarchitecture. 8)Electricity suniquecapabilitytobeproducedfromawidevarietyoflocalenergysources,alongwithits precision,cleanliness,andefficiency,makeittheidealenergycarrierforeconomicandsocialdevelopment. Fromabroaderperspective,inasinglecentury,electricitybecamethefoundationandprimemoverofour modernsociety.notjustasacleanandconvenientformofenergy,butasthetoolmaker sdream.electricity openedthedoorsofinventiontonewtechnologiesofincredibleprecision,intelligenceandcommunication, andtonewformsofinstrumentationandinnovation. Inaddition,asnotedearlier,thecurrenthigh"voltagesystemneedstobeexpandedandstrengthened(U.S. DOENationalElectricTransmissionCongestionStudy,AEPHVtransmissionassessmentforwindintegration, andepriassessments2003"2009).thetotalcostoftheexpandedtransmissionsystemisabout$82billion. Onoptionsandpathwaysforward,Iamoftenasked"shouldwehaveahigh"voltagepowergridorgofora totallydistributedgeneration,forexamplewithmicrogrids?"weneedboth,asthe"choice"inthequestion posesafalsedichotomy.itisnotamatterof"thisorthat"butitisan"and."toelaboratebriefly,froman overallenergysystem'sperspective(withgoalsofefficiency,eco"friendly,reliability,securityandresilience)we needboth1)microgrids(thatcanbeasefficientandself"sufficientaspossible,andtoislandrapidlyduring emergencies),andweneed2)astrongerandsmarterpowergridasabackbonetoefficientlyintegrate intermittentrenewablesourcesintotheoverallsystem. Akeychallengebeforeusiswhethertheelectricityinfrastructurewhichunderpinsoureconomy,society,and quality"of"life,willevolvetobecometheprimarysupportforthe21stcentury sdigitalsociety asmartgrid withself"healingcapabilities thatpowersourinnovationandeconomyorbeleftbehindasan20thcentury industrialrelic?andfinally:whatarethecostsofnotimplementingchange? Wemustmodernizetheelectricpowerinfrastructure,andevolveitintoasmarter,stronger,moresecureand moreresilientsystem.electricityisthelynchpinandenablinginfrastructureforallknowledge"andinnovation" basedeconomies.our$14trillioneconomy allaspectsofit dependsonreliable,disturbance"freeaccessto electricity. Draft07"18"2011 7

8 Appendix:Background Whereareweandhowdidwegethere? The existing electricity infrastructure evolved to its technology composition today from the convolution of severalmajorforces,onlyoneofwhichistechnologicallybased.todayopportunitiesandchallengespersistin world"wide electric power networks, these include: Reducing transmission congestion, increasing system/cyber security, increasing overall system and end"use efficiency while maintaining reliability"" many otherchallengesengagethosewhoplanforthefutureofthepowergrid:producingpowerinasustainable manner(embracingrenewablefuelswhileaccountingfortheirscalabilitylimitations,e.g.increaseduseofland and natural resources toproduce higher renewable electricity will not be sustainable, thus not being able to loweremissionsfromexistinggenerators),deliveringelectricitytothosewhodon thaveit (notjust onthe basis of fairness but also because electricity is the most efficient form of energy, especially for things like lighting), and using electricity more wisely as a tool of economic development, and pondering the possible revival of advanced nuclear reactor construction. To prepare for a more efficient, resilient, secure and sustainable electrical system it is helpful to remember the historical context, associated pinch"points and forcingfunctions: Thetrendsofworldwideelectricalgriddeployment,costingtrillionsofdollarsandreachingbillionsofpeople, beganveryhumbly.someobviouselectricalandmagneticpropertieswereknowninantiquity.inthe17thand 18thcenturies,partiallythroughscientificexperimentsandpartiallythroughparlorgames,morewaslearned abouthowelectricchargeisconductedandstored.butonlyinthe19thcentury,withthecreationofpowerful batteries, and through insights about the relations between electric and magnetic force could electricity in wiresservicelargescaleindustries"""firstthetelegraphandthentelephones. Andonlyinthe1880sdidthefirstgridscomeintobeingforbringingelectricalenergytoavarietyofcustomers for a variety of uses, at first mostly forillumination but later for turning power machines and moving trolley cars. The most important of these early grids, the first established big city grid in North America, was the networkbuiltbythomasedisoninlowermanhattan.fromitspowerstationonpearlstreet,practicallyinthe shadow of the Brooklyn Bridge, Edison s company supplied hundreds and then thousands of customers. Shortlythereafter,Edison spatenteddevices,andthoseofhiscompetitors"""devicessuchasbulbs,generators, switchingdevices,generators,andmotors"""wereinuseinnewgridsintownsallovertheindustrializedworld. FromahistoricalperspectivetheelectricpowersystemintheU.S.evolvedinthefirsthalfofthe20thcentury withoutaclearawarenessandanalysisofthesystem"wideimplicationsofitsevolution.in1940,10%ofthe energyconsumptioninamericawasusedtoproduceelectricity.by1970,thishadrisento25%,andby2002it had risen to 40%. (Worldwide, current electricity production is near 15,000 billion Kilowatt"hours per year, withtheunitedstates,canada,andmexicoresponsibleforabout30%ofthisconsumption.)thisgridnow underlies every aspect of our economy and society, and it has been hailed by the National Academy of Engineeringasthe20 th century sengineeringinnovationmostbeneficialtoourcivilization.theroleofelectric power has grown steadily in both scope and importance during this time and electricity is increasingly recognized as a key to societal progress throughout the world, driving economic prosperity, security and improvingthequalityoflife.stillitisnoteworthythatatthetimeofthiswritingthereareabout1.4billion peopleintheworldwithnoaccesstoelectricity,andanother1.2billion peoplehaveinadequateaccessto electricity(meaningthattheyexperienceoutagesof4hoursorlongerperday). Once loosely interconnectednetworksoflargelylocalsystems,electricpowergridsincreasinglyhostlarge" scale, long"distance wheeling (movement of wholesale power) from one region or company to another. Likewise, the connection of distributed resources, primarily small generators at the moment, is growing rapidly. The extent of interconnectedness, like the number of sources, controls, and loads, has grown with time.intermsofthesheernumberofnodes,aswellasthevarietyofsources,controls,andloads,electric Draft07"18"2011 8

9 powergridsareamongthemostcomplexnetworksmade. Inthecomingdecades,electricity sshareoftotalenergyisexpectedtocontinuetogrow,asmoreefficientand intelligent processes are introduced into this network. Electric power is expected to be the fastest"growing source of end"use energy supply throughout the world. To meet global power projections, it is estimated by the U.S. DOE/EIA that over $1 trillion will have to be spent during the next 10 years. The electric power industryhasundergoneasubstantialdegreeofprivatizationinanumberofcountriesoverthepastfewyears. PowergenerationgrowthisexpectedtobeparticularlystrongintherapidlygrowingeconomiesofAsia,with Chinaleadingtheway. The electric power grid s emerging issues include creating distributed management through using distributed intelligence and sensing; integration of renewable resources; use of active"control high"voltage devices; developing new business strategies for a deregulated energy market; and ensuring system stability, reliability, robustness,andefficiencyinacompetitivemarketplaceandcarbon"constrainedworld. Inaddition,theelectricitygridfaces(atleast)threeloomingchallenges:itsorganization,itstechnicalabilityto meet 25 year and 50 year electricity needs, and its ability to increase its efficiency without diminishing its reliabilityandsecurity. Asanexampleofhistoricalbifurcationpoints,the1965Northeastblackoutnotonlybroughtthelightsdown,it alsomarkedaturningridhistory.thepreviouseconomyofscale,accordingtowhichlargergeneratorswere alwaysmoreefficientthansmallmachines,nolongerseemedtobetheonlyrisk"managedoption.inaddition, inthe1970stwopoliticalcrises"""themideastwarof1973andtheiranianrevolutionin1979""ledtoacrisis infuelpricesandarelatedjumpinelectricrates.forthefirsttimeindecades,demandforelectricitystopped growing.moreover,theprospectsofpowerfromnuclearreactors,oncesopromising,werenowunderpublic resistanceandtheresultantpolicythreats.accidentsatbrown sferry,alabamain1974andthreemileisland, Pennsylvaniain1979,andrapidlyescalatingconstructioncostscausedadrasticturnaroundinordersfornew facilities.somenuclearplantsalreadyunderconstructionwereabandoned. In the search for a new course of action, conservation (using less energy) and efficiency measures (to use availableenergymorewisely)wereputintoplace.electricalapplianceswerere"engineeredtouselesspower. Forexample,whileontheaveragetoday srefrigeratorsareabout20%largerthanthosemade30yearsago, they use less than half the electricity of older models. Furthermore, the Public Utility Regulatory Policy Act (PURPA) of 1978 stipulated that the main utilities were required to buy the power produced by certain independentcompanieswhichco"generatedelectricityandheatwithgreatefficiency,providingthecostofthe electricitywaslessthanthecostitwouldtaketheutilitiestomakeitfortheirownuse. Whathadbeenintendedasanefforttopromoteenergyefficiency,turnedout,inthecourseofthe1980sand 1990s, to be a major instigator of change in the power industry as a whole. First, the independent power producersincreasedinsizeandinnumber.thentheywontherighttosellpowernotonlytotheneighboring utilitybutalsotootherutilitiesfurtheraway,oftenovertransmissionlinesownedbystillothercompanies. WiththeencouragementoftheFederalEnergyRegulatoryCommission(FERC),utilitiesbegantosellofftheir owngenerators.graduallythegridbusiness,whichforsolonghadoperatedunderconsiderablegovernment guidelines since so many utilities were effective monopolies, became a confusing mixture of regulated and unregulatedcompanies. Openingupthepowerindustrytoindependentoperators,abusinessreformationunderwayforsomeyearsin places like Chile, Australia, and Britain (where the power denationalization process was referred to as liberalization ),provedtobeabumpyroadintheus.forexample,in2001inthestateofcaliforniatheeffort toremovegovernmentregulationsfromthesaleofelectricity,evenattheretaillevel,hadtoberescindedin Draft07"18"2011 9

10 the face of huge fluctuations in electric rates, rolling blackouts, and amid allegations of price"fixing among powersuppliers.laterthatyear,enron,acompanythathadgrownimmensethroughitspioneeringventures in energy trading and providing energy services in the new freed"up wholesale power market, declared bankruptcy. RestructuringoftheUS powergridcontinues.severalstateshaveputderegulationintoeffectinavarietyof ways. New technology has helped to bring down costs and to address the need for reducing emission of greenhouse gasesduring theprocessofgeneratingelectricity.examplesincludehigh"efficiencygasturbines, integrated microgrids ofsmallgenerators(sometimesin theformofsolarcellsorfuel cells),andagreater useofwindturbines. Muchoftheinterestinrestructuringhascenteredaroundthegenerationpartofthepowerbusinessandless on expanding the transmission grid itself. About twenty"five years ago, the generation capacity margin, the ability to meet peak demand, was between 25 to 30 percent"" it has now reduced to less than half and is currentlyatabout10"15%.these shockabsorbers havebeenshrinking;e.g.,duringthe1990sactualdemand intheu.s.increasedsome35%,whiletransmissioncapacityhasincreasedonly18%.inthecurrentdecade,the demandisexpectedtogrowabout20%,withnewtransmissioncapacitylaggingbehindatunder4%growth. In the past, extra generation capacity served to reduce the risk of generation shortages in case equipment failedandhadtobetakenoutofproduction,orincasetherewasanunusuallyhighdemandforpower,such asonveryhotorcolddays.asaresultcapacitymargins,bothforgenerationandtransmission,areshrinking. Otherchangesaddtothepressureonthenationalpowerinfrastructureaswell.Increasinginter"regionalbulk power transactions strain grid capacity. New environmental considerations, energy conservation efforts, and costcompetitionrequiregreaterefficiencythroughoutthegrid. Asaresultofthese diminishedshockabsorbers, thenetworkisbecomingincreasinglystressed,andwhether thecarryingcapacityorsafetymarginwillexisttosupportanticipateddemandisinquestion.themostvisible parts of a larger and growing US energy crisis that is the result of years of inadequate investments in the infrastructure.thereasonforthisneglectiscausedpartlybyuncertaintiesoverwhatgovernmentregulators willdonextandwhatinvestorswilldonext. Growth,environmentalissues,andotherfactorscontributetothedifficultchallengeofensuringinfrastructure adequacyandsecurity.notonlyareinfrastructuresbecoming morecomplexlyinterwovenandmoredifficult to comprehend and control, there is less investment available to support their development. Investment is down in many industries. For the power industry, direct infrastructure investment has declined in an environmentofregulatoryuncertaintyduetoderegulation,andinfrastructurer&dfundinghasdeclinedinan environmentofincreasedcompetitionbecauseofrestructuring.electricityinvestmentwasnotlargetobegin with.presentlythepowerindustryspendsasmallerproportionofannualsalesonr&dthandothedogfoods, leather,insurance,ormanyotherindustries lessthan0.3percent,orabout$600millionperyear. Most industry observers recognize this shortage of transmission capability, and indeed many of the large blackouts in recent years can be traced to transmission problems, either because of faults in the lines themselvesorinthecoordinationofpowerflowoverincreasinglycongestedlines.however,intheneedto stay competitive, manyenergycompanies,andtheregionalgridoperatorsthatworkwiththem,are flying thegridwithlessandlessmarginforerror.thismeanskeepingcostsdown,notinvestingsufficientlyinnew equipment,andnotbuildingnewtransmissionhighwaystofreeupbottlenecks. AStressedInfrastructure ThemajoroutageonAugust14,2003intheEasternUSandtheearlierCaliforniapowercrisisin2000"2001are only the most visible parts of a larger and growing US energy crisis from inadequate investments in the infrastructureleadingtoafundamentalimbalancebetweengrowingdemandandanalmoststagnantsupply. Theimbalancehadbeenbrewingformanyyearsandisprevalentthroughoutthenation(EPRI,2001). Draft07"18"

11 From a broader view, the North American electricity infrastructure is vulnerable to increasing stresses from severalsources.onestressiscausedbyanimbalancebetweengrowthindemandforpowerandenhancement ofthepowerdeliverysystemtosupportthisgrowth.from1988to1998,theus selectricitydemandroseby nearly 30 percent, but the capacity of its transmission network grew by only 15 percent. This disparity increasedfrom1999to2009:demandgrewbyabout20percent,whileplannedtransmissionsystemsgrowby onlyunder3.8percent.alongwiththatimbalance,today spowersystemhasseveralsourcesofstress: Demand is outpacing infrastructure expansion and maintenance investments. Generation and transmission capacity margins are shrinking and unable to meet peak conditions, particularly when multiplefailuresoccurwhileelectricitydemandcontinuestogrow. The transition to deregulation is creating new demands that are not being met. The electricity infrastructure is not being expanded or enhanced to meet the demands of wholesale competition in theindustry;soconnectivitybetweenconsumersandmarketsisatagridlock. The present power delivery infrastructure cannot adequately handle those new demands of high"end digitalcustomersand21 st centuryeconomy.itcannotsupportlevelsofsecurity,quality,reliability,and availabilityneededforeconomicprosperity. The infrastructure has not kept up with new technology. Many distribution systems have not been updatedwithcurrenttechnologyincludingit. Proliferation ofdistributedenergyresources(der). DERincludesavarietyof energysources""micro turbines,fuelcells,photovoltaics,andenergystoragedevices""withcapacitiesfromapproximately1 kwto10mw.dercanplayanimportantroleinstrengtheningenergyinfrastructure.currently,der accounts for about 7 percent of total capacity in the United States, mostly in the form of backup generation,yetverylittleisconnectedtothepowerdeliverysystem.by2020,dercouldaccountfor asmuchas25percentoftotalu.s.capacity,withmostderdevicesconnectedtothepowerdelivery system. Returnoninvestment(ROI)uncertaintiesarediscouraginginvestmentsintheinfrastructureupgrades. Investing new technology in the infrastructure can meet these aforementioned demands. More specifically,accordingtoajune2003reportbythenationalsciencefoundation,r&dspendinginthe U.S.asapercentofnetsaleswasabout10percentinthecomputerandelectronicproductsindustry and 12 percent for the communication equipment industry in Conversely, R&D investment by electric utilities was less than 0.5 percent during the same period. R&D investment in most other industriesisalsosignificantlygreaterthanthatintheelectricpowerindustry(nsf2003). Concern about the national infrastructure s security (Amin 2003; EPRI 2001). A successful terrorist attempt to disrupt electricity supplies could have devastating effects on national security, the economy, and human life. Yet power systems have widely dispersed assets that can never be absolutelydefendedagainstadeterminedattack. Competitionandderegulationhavecreatedmultipleenergyproducersthatsharethesameenergydistribution network, one that now lacks the carrying capacity or safety margin to support anticipated demand. Investments in maintenance and research and development continue to decline in the North American electricalgrid.yet,investmentincoresystemsandrelateditcomponentsarerequiredtoinsurethelevelof reliabilityandsecuritythatusersofthesystemhavecometoexpect. Fromanationalsecurityviewpoint,intheaftermathofthetragiceventsofSeptember11 th andrecentnatural disasters and major power outages, there are increased national and international concerns about the security,resilienceandrobustnessofcriticalinfrastructuresinresponsetoevolvingspectraofthreats.secure andreliableoperationofthesenetworksisfundamentaltonationalandinternationaleconomy,securityand qualityoflife. Draft07"18"