Thursday, September 22, 2005

The intelligent grid pt. 3: Transmission capacity

More answers to the questions posed by Matt Marshall, who wrote:

“Locally, [the intelligent grid] is significant because the California Independent System Operator, which oversees most of the state's electricity system, has just approved a $300 million transmission line that brings power into S.F. from Pittsburg under the S.F. Bay. That's a whopping-big line. Sounds like the opposite of the Intelligrid, but maybe we're missing something.”

Looking at the chart of electricity prices mentioned in the last post (again, you have to scroll down on the page to see the chart), it's striking how much prices vary across the country. Why is that? Because of lack of transmission capacity. Hydro power is (once the dam is built) really cheap. Coal power is relatively cheap. Natural gas-fired power is not nearly so cheap. So areas with access to cheap power (e.g., the Pacific Northwest's hydro, or the Midwest's coal-fired plants) tend to have the lowest cost of electricity.

But if our major transmission grid worked efficiently, we would simply move power to where it's needed, from where it's cheapest to produce. And then prices would self-adjust, right? There would still be some slight variation in pricing due to losses during transmission, but they would be minor, not the 2x or more variation seen in the chart.

There are two macro problems with the current layout of the tranmission grid -- there's not enough capacity, and there's not enough connectedness.

With enough capacity, you could ship all of the cheap hydro power from the Northwest down to where it's most needed in California. Some of that does happen (and energy traders make good money off of facilitating that). But just look at the prices -- clearly, it's not done efficiently. Indeed, we don't really have one single American power grid. We have many different grids tied together at "interties" with very limited capacity. Anyone who wants to learn more about the power congestion situation should definitely check out this report from the DOE (pdf).

Besides the lack of capacity, the grid is not as well meshed as would be hoped. In an effective mesh system, when one link goes down, the load is easily apportioned out across several other links, and power still gets to where it needs to be without significant strain on the system. But no one started out building a national grid that would resemble such a perfect mesh system, so we don't have one. Instead, there are a few critical links out there that, if they go down, take a lot of the system with them. And you get what you had in LA last week, where someone cuts the wrong cable and a major city loses power.

We also need the links in the grid to be smarter and more efficient, but that's to be discussed in the next and final post of this series, where we'll describe some of the technology areas where innovative startups are addressing the needs of the intelligent grid, and finding success.

Let's go back to the question implied by Matt from above: Should we spend $300M on transmission capacity, or should we spend it encouraging more distributed renewable generation?

To which the cleantech investor says, “Yes.”

But joking aside, I’ll simply point out that solar resources and wind resources, just like hydro power resources and coal-fired generation plants, are not evenly dispersed across the country. So even if you encourage distributed, renewable energy generation, again you have the situation where power can be generated in one place a lot cheaper than it can be produced elsewhere. And it so happens that the best places for solar (e.g., deserts) and wind (e.g., offshore, and the Great Plains) aren’t really close to consumers. Indeed, some pundits say that the biggest obstacle to even more adoption of wind generation (as if it wasn’t already growing incredibly rapidly) is lack of adequate transmission capacity in locations where wind farms can be best built.

So while there’s a strong case to be made for further building out renewable distributed energy generation capacity, there’s a strong case to be made as well for building out transmission capacity and interconnectedness.


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