Risk & Compliance

Bring Me Your Powerless Masses

With luck, the great American blackout could propel the country to a brighter energy future.
Economist StaffAugust 22, 2003

What is the greatest technological advance of the past 100 years? That was the question considered recently by America’s National Academy of Engineering. Some said the light bulb or the television; others the telephone, the computer or perhaps the internet. In fact, the experts picked an achievement without which those other marvels would be useless: North America’s power grid.

The academy gushed that “widespread electrification gave us power for our cities, factories, farms, and homes — and forever changed our lives…from street lights to supercomputers, electric power makes our lives safer, healthier, and more convenient.” Try telling that to the millions of people in the north-eastern United States and Canada who were plunged into darkness on August 14th, when the greatest engineering achievement of the 20th century suddenly fell apart.

In what seemed like an instant, street lights, lifts and air conditioners stopped working. As minutes grew to hours, it became clear that this was no blip. In Cleveland, Ohio, the sudden cut shut down pumping stations, leaving many without water. In Manhattan, several million people walked cheek-by-jowl for hours through dark streets and across packed bridges to get home. They were the lucky ones: others had to sleep in railway stations, on office chairs or even on the pavements. The blackout caused Ontario’s 12 million residents even more grief, for Toronto’s subway trains were out of operation for the whole weekend after the blackout.

The good news is that this massive power cut resulted in very few injuries or deaths. If it had happened in winter, or on a much hotter day in summer, it might have been worse. It also did not provoke the sort of bloody rioting and looting that was seen in New York during the blackout of 1977. On the contrary, the much-maligned residents of that city proved — as they had after the attacks of September 11th 2001 — to be calm, resourceful, patient and even selfless at times. Yet now that the electricity is back, those let down by the worst power failure in North American history are demanding answers.

This will not be easy, given the complexity of the electrical system. Getting to the bottom of things will require answers to three simple questions. What exactly happened? Why did it happen? And how can it be prevented in future? And answering these questions points to a troubling but inescapable conclusion: unlike other countries that are modernising their power industries successfully, America is muddling along with an approach to electricity reform that is deeply flawed. If future blackouts are to be avoided, it must fix these problems quickly and decisively.

Suddenly This Summer

It might sound straightforward to work out what it was that shut down such a large swathe of the North American grid. Indeed, early on, plenty of explanations were touted: lightning strikes, trees bringing down power lines, a fire shutting down a power plant, control-room operators snoozing through alarm bells, even computer-virus attacks. George Bush and other American officials rushed to make clear that this was not a terrorist incident — though some fingers did point north.

That is because few things move more seamlessly between America and Canada than electricity. Ontario is an integral part of the North American power grid (which is subdivided into two main, quasi-independent grids serving the eastern and western halves of the continent, plus a third grid for Texas). When the blackout occurred, American generating stations were supplying about 7 percent of the electricity in Ontario. In the event, this amicable arrangement gave way to bitter rancour: Canadian officials talked of problems in America, while the Americans blamed Canada.

Actually, nobody had the facts necessary to make any confident claims at all. The leading theory now is that the blackout began with the sudden failure of several transmission lines in Ohio controlled by First Energy. For reasons that are not yet clear, the company was unable to contain the damage or, it is claimed, to warn neighbouring grid operators in time for them to take precautionary action. As a result, a little local difficulty cascaded into a regional problem and ultimately a national crisis, as one part of the grid after another automatically shut down to prevent the permanent damage that might result from a huge and unexpected surge in power.

It could take investigators weeks to finish their technical report on this blackout, but it does not need so long to answer the second question, why it happened. One possible explanation is that this was a freak occurrence; if that were true, there would be no reason to blame anybody and no reason to rethink basic assumptions about grid safety and reliability. If this were merely an electrical version of a storm of the century, it would be foolish to “goldplate” assets to prevent a repeat.

Sadly, the signs are that America’s grid was ripe for a blackout. Peter Smits, head of the power-transmission division at ABB, a European engineering giant, insists that “this was not a once-in-100-years event.” He points out that various parts of America’s grid have seen smaller blackouts in recent years — something “that would not happen in Germany”. Studies by industry associations, technical experts and America’s Energy Department have all highlighted the fragile state of America’s grid. Granger Morgan of Carnegie Mellon University goes further, concluding that “this blackout took 50 million people by surprise, but for most folks that look at the grid the only surprise is that it didn’t happen before.”

The reason that the experts are not surprised is that they have seen the demands placed on America’s grid grow rapidly, but have yet to see improvements in infrastructure to meet them. Was a lack of money to blame? After the blackout, several pundits claimed that it would cost $50 billion or more to fix America’s grid. Yet although that seems quite a lot, it is not when seen over a 30-year time horizon in an industry that takes $300 billion a year in retail revenues in the United States alone. Transmission costs make up some 7 percent of the cost of delivered power, while generation makes up perhaps three-quarters. Shortage of money is not the real issue.

Another plausible explanation might be that the necessary technologies are not available. Yet a glance at the more reliable grid in Europe suggests this is not true. So does the fact that much of America’s grid uses technology designed in the 1950s and 1960s. In fact, explains ABB’s Mr Smits, there are plenty of modern technologies that would greatly improve the reliability of America’s grid. He points to the example of high voltage direct-current cables, an innovative means of delivering electricity over long distances. China is using this technology to deliver the power generated at its Three Gorges dam to Shanghai; Brazil uses it to get Amazon power to São Paulo.

Yet consider the travails that ABB has met in America with this technology. The firm completed a project laying high-voltage cable from Connecticut to energy-starved Long Island, New York, a year ago. But objections from greens and bureaucratic delays stopped it from becoming operational. When the lights went out on August 14th, Spencer Abraham, Mr Bush’s energy secretary, ordered that the cable be activated immediately. “Without it,” says Mr Smits, “I can say with confidence that Long Island would not have received power on August 15th.” That sorry tale suggests that the real explanation for America’s power woes lies in mucky politics.

Demonising Deregulation

The way the country has deregulated power has left investors and utilities confused, with little incentive to invest in upgrading transmission. Paul Joskow, an economist at the Massachusetts Institute of Technology, says that “the wrangling between pro- and anti-competition forces, jurisdictional disputes between federal and state policymakers, and plenty of ignorance have led our electric-power system to become stuck somewhere between the old system of regulated monopoly and a new system that relies more on competitive power markets. If we remain stuck here, there will be much more trouble with electricity down the road.”

That grim analysis suggests that the third question — how to prevent future blackouts? — is pressing. And to judge by the sound and fury coming from Washington, Ottawa and New York, politicians and utility bosses are taking it seriously. The North American Electricity Reliability Council, the group responsible for grid reliability, has a big investigation under way. Canada and the United States are co-operating on a joint one. And congressional staffers are tinkering with proposals in the big energy bill that both the House and Senate will take up after the August recess.

In the end, fixing the grid’s problems will require Congress to fix America’s energy laws in several ways. The most important is to enhance the role of the Federal Energy Regulatory Commission (FERC). America’s federal system gives a lot of authority over the transmission and distribution system to states. Mr Joskow insists that the federal government “needs to be given primary regulatory and policy jurisdiction over the high-voltage transmission facilities owned by private, public and cooperative utilities”, just as it has jurisdiction over interstate natural-gas pipelines. He also wants to see the crazy patchwork of local transmission operators consolidated into a few regional organisations.

Although the FERC deserves some blame for snoozing as power marketers such as Enron manipulated the wholesale market for power, it has come roaring back to life under the leadership of Pat Wood. Mr Wood was appointed to the FERC by Mr Bush, whom he got to know when he was the top energy regulator in Texas. He has proposed changes to bolster the FERC and advance deregulation. He has put forward a promising if imperfect plan to clarify aspects of deregulation, and another to force the many grid companies to unite into a few, manageable regional giants. He is right to call for more federal control over power. But the administration is, for the moment, afraid to anger powerful and generous regional utility monopolies.

Asked about objections from states’- rights advocates, he defends his plans thus: “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.”

That notion also points to the final area of hope for fixing the grid: technology. Once the disincentive to invest is removed, the industry seems sure to see a rash of innovation of the sort seen in telecoms after the break-up of AT&T. In particular, advances seem likely in two areas: upgrading the grid to expand capacity, and bypassing it with micropower plants that generate power close to consumers.

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.

Roger Anderson of Columbia University, whose warnings of this summer’s impending power crisis went unheeded, hopes to build, with colleagues from Houston’s Rice University, the “smart electric grid of the future” in Texas. He is not alone. T.J. Glauthier of E2I, a group affiliated with the Electric Power Research Institute (the research arm of the American power industry), wonders if the blackout could have been averted had First Energy had at its disposal powerful tools to analyse the grid’s problems in real time. His group is working with Lucent and GE to develop the “open architecture for a self-healing, intelligent grid” equipped with microprocessors and sophisticated software for communications and control.

E2I and EPRI are also working with United Technologies to develop “plug and play” software that could make it as easy to connect a micropower plant to the grid as it is to connect a printer to a computer. That would do much to boost the fortunes of small, super-clean generators such as fuel cells and microturbines. Researchers at Carnegie Mellon have run elaborate simulations and tests, and have concluded that a system with more distributed generation would be more robust than today’s grid.

If that sounds far-fetched, consider one last question: where was the safest place in New York during the worst blackout in American history? It may have been the middle of Central Park. That is because the police station in the park uses fuel cells. With the rest of the city in darkness, super-clean “micropower” plants carried on unaffected: New York’s finest had all the power and light they needed. If only 1,000 such flowers were allowed to bloom, the world might shed a grid conceived long ago in favour of an energy internet worthy of the 21st century.