Lessons from the August 2003 Blackout

Introduction
Reliability Problems
Blackout Solutions


The electricity blackout on August 14, 2003, highlighted the fragility of our electricity system and unleashed a torrent of proposals to upgrade it. Energy industry spokespeople have called for grid investments of $56 billion, $100 billion, and even as much as $450 billion in total electricity infrastructure investments. The White House and congressional leaders have also demanded higher rates of profit for transmission owners, federal eminent domain powers to site new transmission lines, and inclusion of electricity reliability measures in an overall energy bill loaded with tens of billion of dollars of additional incentives to the fossil fuel and nuclear industries, drilling in the Arctic National Wildlife Refuge, repealing consumer protections…and much more.

The fact that the specific cause of the blackout—and more importantly, the failure of mechanisms designed to prevent the loss of one or two transmission lines from triggering cascading outages across many states and power systems—are still unknown should give elected officials pause before using the blackout to justify huge investments in new wires, plants and conventional fuel sources. At this point, process and communication failures appear to be major contributors to the size of the blackout and priorities to fix. And there is no evidence that a lack of power plant capacity played a role.

Meanwhile, the one fix nearly everyone agrees upon—enforceable national reliability standards to replace current voluntary guidelines—is being held hostage to passing a controversial comprehensive energy bill. Mandatory reliability standards—which UCS endorsed as a participant in a Department of Energy Task Force on reliability five years ago—should be enacted now.

We also need to implement cost-effective energy efficiency and demand management measures through federal and state standards and incentives. These programs reduce stress and congestion on the transmission and distribution system, avoid the need to build new power plants and lines, reduce pollution, and pay for themselves in energy savings.

Some investments in upgraded existing transmission lines, building new lines, and implementing "smart grid" technologies will be necessary, but we need to establish fair, accountable, comprehensive regional planning processes that weigh the economic and environmental merits of all options for increasing reliability. As Amory Lovins has pointed out for decades, simply stringing together more central plants and wires can lead to a more brittle and vulnerable power system, whereas adding decentralized technologies for managing electricity demand and generating on-site power can increase the reliability and resilience of the system.

Decentralized, or distributed, resource options include targeted efficiency improvements, incentives for customers to reduce demand, and clean on-site power generation technologies such as fuel cells, micro-turbines, combined heat and power, solar, and small wind and bioenergy plants. We need to remove utility and regulatory barriers to the interconnection of clean distributed generation, and provide federal and state incentives to overcome market barriers to its adoption.

Finally, while it would not have prevented this blackout, diversifying our energy supply can also increase the reliability of our electricity system. We are becoming increasingly dependent on natural gas to generate electricity, increasing our vulnerability to supply shortages and price spikes. That is why the Federal Energy Regulatory Commission recently wrote, in supporting new rules for integrating wind energy into the grid, "Encouraging the development of intermittent generation will increase diversity in the resource base, thereby improving system reliability as a whole."

Wind, solar and other renewable energy resources can also reduce pollution and create tremendous new economic development opportunities, while enhancing the reliability and security of our energy system. A renewable electricity standard requiring utilities to increase their use of renewable electricity from a mere 2 percent today to at least 10 percent by 2020 was one of the few positive provisions in the energy bill recently passed by the Senate.

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Reliability Problems

• The nation's overreliance on large centralized power plants connected to high voltage transmission lines that bring power to consumers over long distances makes us vulnerable to the type of catastrophic failure in the system that occurred on August 14.
  
  
• Reliance on large power plants and transmission lines also makes us vulnerable to blackouts from terrorist attacks and other security threats. The United States has nearly 500,000 miles of bulk transmission lines that carry high voltage electricity to consumers. It would be nearly impossible to monitor and protect all of these lines, as well as new lines and power plants, against potential security threats.
  
  
• Improvements can certainly be made to lessen the likelihood of these events impacting such a large region in the future. Nonetheless, occasional unplanned blackouts, contained to small geographic areas, are unavoidable. Natural events, human error, and system failures cannot be completely engineered out of a system as complex and interdependent as the electric grid, where large generators in a network spanning more than half the continent must be synchronized to within one-sixtieth of a second.
  
  
• Electricity deregulation has contributed to reliability problems in several ways:
  
  1. The deregulation of wholesale generation and some retail markets has resulted in a marked increase in power transfers over long distances. Since the blackout, a wide range of sources, including the utility-funded Electric Power Research Institute, the Pacific Northwest National Laboratory, and executives with major utilities have cited the problem that the grid was not designed to handle these flows.
  
  2. Many utilities have cut costs and staff to prepare for deregulation, including resources for maintaining transmission and distribution lines and for energy efficiency programs.
  
  3. The uncertainty created by the debate over transmission rules, rates, and governing bodies in an era of increasing competition has resulted in reduced investment in the transmission and distribution (T&D) system in some regions. Many analysts believe that additional incentives to build transmission are not necessary. However, transmission owners are waiting to see if they will be allowed such incentives before they invest.

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Blackout Solutions

Mandatory reliability standards. Strong, mandatory reliability standards should be established. The current voluntary standards, developed by the North America Electric Reliability Council (NERC), are not enough. Congress should not hold the reliability standards provision—twice passed by both the House and Senate—hostage to passing an overall energy bill.

• According to NERC, roughly half of the 444 standards violations that occurred in 2002 could have caused a blackout. Mandatory standards with strong enforcement provisions are necessary to ensure the reliable operation of the nation's electricity system.

Energy efficiency. Increasing the efficiency of our homes and businesses is the fastest and cheapest way to ease pressure on the electricity system. This can be done by enacting tougher energy efficiency standards for appliances and buildings and increasing federal, state, and utility funding for energy efficiency.

• Federal standards to improve the efficiency of commercial air conditioners, residential furnaces, and distribution transformers could avoid the need to build 83 typical-size new power plants by 2020, and reduce transmission and distribution loads, while saving consumers $22 billion, according to the American Council for an Energy Efficient Economy. The standards for residential central air conditioners that were repealed by the Bush Administration would have saved the energy equivalent of another 48 power plants.

Consideration of diverse reliability options. Enhancing reliability must rely on a diversified approach that considers all alternatives before investing in new or upgraded transmission lines. This includes prioritizing targeted efficiency improvements, providing incentives to customers to wisely manage their loads (demand response programs), and developing clean decentralized generation when they are economically and environmentally preferable. There should be explicit opportunities for these options to compete against conventional transmission options.

Demand response programs. Demand response programs, in which customers receive financial incentives to reduce or shift their electricity use or switch on backup generators when power supplies are low or lines are congested, can be much less expensive than adding plants or wires to respond to peak demands on the electrical system. Demand response programs can also reduce vulnerability to corporate market abuses during power shortages. Without eligibility restrictions or environmental constraints, however, such programs can lead to increased use of highly polluting backup diesel generators.

Distributed generation. Distributed, or decentralized, generation sources can increase reliability for customers, avoid the need for new power plants and power lines, avoid power losses during transmission and distribution, decrease congestion on the grid, and bring many other benefits.

• The Rocky Mountain Institute counts 207 benefits to distributed generation in its recent book, Small is Profitable.

• Energy consultant Chris Robertson calculates that using clean distributed generation options for critical public health and safety facilities, like hospitals and water treatment facilities, could reduce the probability of at least one blackout in 20 years from nearly 100 percent (from relying on the grid) to about one percent.

• A 1996 UCS analysis, Renewing Our Neighborhoods, found that distributed renewable energy generation technologies in the greater Boston area can often be cost-effective if the benefits of avoided transmission and distribution expenditures are counted.

• Solar thermal and photovoltaic systems, small wind systems, and small bioenergy systems can be used as distributed generation. Solar energy is particularly well suited for reducing peak demands from air-conditioning loads on hot summer afternoons. Click here for more information.

• Some of these generation systems, such as the fuel cell in New York City's Central Park police station, helped keep lights on and systems running during the blackout.

Net metering. National interconnection standards and net metering (allowing surplus generation to turn the electric meter backward) are needed to remove barriers to the development of distributed technologies. Congress should increase research and development spending and adopt financial incentives for distributed energy systems to help overcome market barriers to their introduction. Regulators need to assess and remove other utility, market, and regulatory barriers to distributed generation, and to account for the benefits of distributed generation in system planning.

• 36 states currently have net metering provisions. See the net metering factsheet for more information.

Micro-grids. Distributed generation can be linked in local micro-grids to enhance reliability at the community level. A micro-grid under development by Northern Power Systems in Waitsfield, Vermont (in the Mad River Valley ski area), will initially use propane-fueled engines and microturbines, a photovoltaic array, and a small wind turbine, along with storage devices. It will provide power to 12 homes and five commercial and industrial facilities. It will also examine and potentially incorporate fuel cells, Stirling engines, and flywheels into the system. Learn more about the micro grid.

Fuel diversity. Renewable energy sources also increase system reliability because they diversify our resource base and do not use fuels that are vulnerable to periodic shortages or other supply interruptions. While some people think of solar and wind power as unreliable because they are intermittent generators, the Federal Energy Regulatory Commission (FERC) recently recognized the reliability benefit of wind in adopting new rules to facilitate integrating wind energy into the grid: "Encouraging the development of intermittent generation will increase diversity in the resource base, thereby improving system reliability as a whole."

Renewable energy incentives and standards. The most important ways to increase the use of renewable energy are through extending federal production tax credits and expanding their eligibility to all renewable resources, and through enactment of federal and state renewable electricity standards, also known as renewable portfolio standards. In July 2003, the Senate passed a renewable electricity standard requiring major electricity companies to obtain 10 percent of their electricity from renewable energy sources by 2020.

• Thirteen states currently have renewable electricity standards. See the renewable electricity standards factsheet for more information.
  
  
• A 2002 study by the Energy Information Administration (EIA) found that a 10 percent standard, similar to the one recently passed by the Senate, would save consumers $13.2 billion on their electricity and natural gas bills between 2002 and 2020. Learn more about the EIA report for more information.
  
  

• A 2002 analysis by UCS found even greater benefits from enacting either 10 percent or 20 percent renewable energy standards. See the full report, Renewing Where We Live, for more information.

• Competition from renewable generators would also reduce natural gas use in power plants, thereby reducing gas prices for consumers who use natural gas to heat homes and run businesses. Thus, renewable energy can also provide an important long-term solution to the current natural gas crisis. Learn more about renewable energy and natural gas.

Upgrading existing transmission. Many technologies exist to significantly increase the capacity and efficiency of our existing transmission system, and new technologies have even greater potential. Priority should be placed on upgrading the existing system before building any new lines.

New transmission. Some new transmission will be needed to increase reliability and for other purposes. Some transmission upgrades and new lines will be needed to support wind power development, particularly in rural areas of the country. For example, the Minnesota Public Utilities Commission recently issued an order approving four new high voltage lines to support the development of 825 MW of wind power in southwestern Minnesota by 2006. Several consumer and environmental groups supported the development of these lines because they are being built primarily to support clean electricity from wind power.

RTOs. Regional transmission organizations (RTOs) can potentially have a positive, constructive role in enhancing reliability by facilitating regional planning, reliability assessment, and operational communication and by establishing market rules that treat renewable energy sources fairly. Effective RTOs should be open to all, governed independent of utility interests, work closely with multi-state agencies, and be accountable. Planning for system expansion or upgrades must be open, fair, and allow all options to compete. Rules should provide fair access to the transmission system and remove unfair scheduling penalties for variable-output resources such as wind power.

No across-the-board transmission incentives. Many analysts are not convinced that it is appropriate or legal for FERC to provide additional incentives to monopoly service providers, who already have an obligation to invest in transmission systems and receive a FERC tariff with a built-in profit margin. FERC's proposed across-the-board bonus approach will significantly increase costs to consumers, but may not produce system improvements in the most timely and cost-effective manner.

Analyze deregulation. Proponents of increased deregulation should provide thorough, open analysis of costs and benefits that accounts for the cost of upgrading the grid to achieve savings from purported increased efficiencies.