U.S. power grid operators face tension between integration and independence — FERC chairman

Source: Nathanael Massey, E&E reporter • Posted: Monday, September 16, 2013

As the United States moves to modernize its aging power grid, it is being pulled in two different, and sometimes opposed, directions, the chairman of the Federal Energy Regulatory Commission said yesterday.

On the one hand, many consumers are pushing for a greater degree of autonomy from traditional power systems, opting for a more decentralized system of small operators producing and distributing energy on a local scale, said Chairman Jon Wellinghoff, speaking during a briefing co-hosted by the Environmental and Energy Study Institute (EESI) and the German Marshall Fund of the United States.

On the other hand, imbalances in supply and demand, as well as the need to balance the variable power produced by renewables, make a more integrated, interdependent system an attractive prospect, he said.

Each option has its own merits. Decentralized power systems encourage consumers to invest their own resources in power markets, for example installing home photovoltaic systems or investing in electric vehicles that can store and access power. They can also be less vulnerable to wide-ranging disruptions such as those caused by natural disasters.

Interdependent systems, meanwhile, can move large amounts of power from areas of high production to areas of high demand

The latter is particularly important for renewable energy systems like wind, where the areas of peak production don’t always have the energy appetite to consume the generated electrons. Most wind energy in the United States is concentrated in the center of the country, while the greatest energy demand lies in the Southwest.

Several ventures are currently planning large transcontinental transmission lines to bridge that gap (ClimateWire, Feb. 13).

Inevitably, the future grid will have elements of both, said Wellinghoff. And that’s probably for the best, he added.

“I think the two approaches can be complementary,” he said. “The tension [for operators] is that we’ll overinvest in one and not the other. Hopefully, markets will make those decisions … with as much of an even hand as possible.”

Europe opts for interconnection

On the other side of the Atlantic, Europe has moved toward greater interdependence for the past 20 years, said Daniel Dobbeni, president of Eurogrid International. This shift was initially prompted by cost concerns rather than the need to integrate renewables, he said.

“The first directive to move towards a fully integrated gas and electric market was voted on in the mid-1990s with the objective of decreasing energy prices,” he said. Only recently, with the establishment of ambitious renewable energy targets, has interdependency come to be seen as part a widespread solution to reduce the continent’s greenhouse gas footprint, he said.

“Instead of only increasing transmission capacity, the question now is, how can we increase transmission capacity fast enough to be where the wind is blowing?” he said. “Our wind is north, in the Baltic Sea, the North Sea. Our sun is in the south.”

While rules like FERC’s Order 1000 and groups like the Eastern Interconnection States’ Planning Council have strived to simplify the thicket of laws governing interstate transmission, many operators and private parties are still dissuaded by the complexity of the process.

Patchwork or pipeline?

The problem stems, in part, from the organic growth of the U.S. power grid. At its earliest beginnings, the grid was itself highly decentralized, with local power sources interacting directly with their nearest communities. As these regional grids grew outward and intersected, they developed a higher degree of interconnection over time, taking advantage of efficiencies of scale as they did so. Like the grid itself, the rules governing transmission between operators are directed by a patchwork of jurisdictions.

An alternate example, one that better illustrates the principle of integration and interdependence, can be seen in the growth of the U.S. natural gas industry, Wellinghoff said. For many years, natural gas in the United States came almost entirely from a single source — the Permian Basin in Texas and New Mexico. Congress granted FERC siting authority over the pipelines that radiated from this region, an authority it lacks in all but a handful of cases when siting power lines.

As a result, he said, “we’ve got a set of natural gas pipelines that are robust and complete — we can get natural gas from Louisiana to Montana for a uniform price.” In contrast, electricity rates can vary over as little as 350 miles, he said.

The greatest challenge to a centralized, integrated energy system may come from consumers themselves. “Customers want to make choices and have control, more so than they did in the past,” he said. “They’re thinking about events like Hurricane Sandy, thinking, ‘Maybe I shouldn’t be so reliant on those power lines running down my street.'”

“Consumers have the ability to interact with the grid now,” he added. “Control goes two ways.”