Iain Murray on Electricity Infrastructure Investment

Lynne Kiesling

Iain Murray has an oped in Monday’s Examiner about environmental concerns and building new electric power infrastructure:

One key problem is the sheer difficulty in building new power plants in America today. Politically powerful green lobby groups object to the building of any new plant that does not use some form of renewable energy, yet renewable energy cannot meet demand for power on its own.

They also object to nuclear power stations because of their supposed danger, even though modern nuclear plants have an impeccable safety record. And they oppose coal-fired plants because of their alleged contribution to global warming.

To back up their objections, many environmental pressure groups generally have large budgets and huge teams of lawyers. One group boasted of having 75 lawyers working on a measure in California.

Let us be clear about what that would mean. The electric power supply will be interrupted when it cannot meet demand. Lights will go out. Offices will cease to function. People will freeze or swelter. Elderly people will die. If sustained, this situation will severely damage the economy. Jobs will be lost. Health will suffer. The poor will get poorer. Flows of money from America to the developing world will shrink.

Iain’s piece builds off of this NERC report from October, their annual reliability assessment. In each annual assessment they forecast demand and the ability of the existing network to meet that demand forecast.

My biggest complaint about this NERC report, and about all of NERC’s reports and policies, is that they perpetuate the centralized supply-side bias of the industry. They are not forward-looking in their adaptation to the potential of active demand, to the potential of distributed generation, and to the potential reliability benefits of both active demand and distributed generation. By focusing on barriers to new generation and transmission investment Iain falls in this vein (but hey, it’s an 800-word opinion piece, and he does refer to the lack of flexible pricing, so I wouldn’t bust his chops about it).

On October 16 in the Wall Street Journal, Rebecca Smith reported on the NERC report:

As the system drifts closer to its physical limits, it is even more important that energy regulators and utilities promote conservation and use of the most energy-efficient equipment, said Rick Sergel, chief executive of the grid reliability organization. He added conservation programs will need to at least double their reach and effectiveness to help close the gap between supply and demand.

The report said 50,000 megawatts of generating plants are poorly utilized — either aged units taken out of service or newer plants that have been unable to line up contracts, making them nearly useless.

Where available resources are thinning, NERC may push state utility regulators to do more to promote investment. If investment isn’t sufficient, the federal government could exercise new powers, conferred in the 2005 Energy Policy Act, to site major transmission projects.

Again the NERC, centralized, supply-side exclusivity myth is perpetuated (as Smith does in almost all of her writing, which uniformly signals skepticism about the potential value of active demand and distributed generation). Here’s a thought: instead of calling on extreme government power to force investment on people who may have justifiable qualms about it, why not use digital technology and dynamic pricing to enable real live end-use customers (these are the people whom the NERC folks generically lump together as “load”) to make their own energy choices in response to pricing and product offerings that entrepreneurial retailers come up with to satisfy the risk management preferences of customers? If we did that, we would reduce or delay these so-called necessary investments in generation and transmission.

Perpetuating the centralized supply-biased myth in the electric power industry and calling for mandated investment is like treating the symptom instead of the disease. Letting information flow throughout the system, from customer to generator through the other agents in the network, treats the disease, and it does so with digital technology, which is cheaper than more iron in the ground and more wires in the air.

UPDATE: edited to reflect Robert’s comment.

4 thoughts on “Iain Murray on Electricity Infrastructure Investment

  1. Well, you’re right, of course. I think it’s beginning to work in some places, too. Obviously, it’s in the places where locational prices are highest, such as Connecticut and NYC. The mechanism will probably demonstrate itself to anyone interested in observing it, long before NERC and governments stop thinking and communicating primarily in terms of central supply. The important thing is to let the locational prices show and have the courage to let’em stick.

  2. Centralized generation is not a “myth” just obsoleted. Obsoleted does not mean broken or even undesireable nor even inefficient. We wouldn’t reproduce the current grid if we started from scratch but with the sunk costs we merely need to integrate not replace. Hydro is still centralized generation, so is nuclear.

    You are correct to point out that “rooftop” (decentralized) types of source generation are opposed by the existing players. WUnfortunately we still need centralized generation. Cities are too dense, manufacturing too resource proximate, transmission losses still too great to do otherwise.

    The one shot effort needed now is consumption. $1 taxes on incandescant lightbulbs? Even more punitive private mobility taxes?

    Then there are inducements, again one shots.” Billions in subsidies for room temperature superconduction research?

    Much as it pains me. Califorina has this one right. Subsidize rooftop generation that can feed the grid. The first half is actually cheaper than new traditional genration and the second half props up the grid particularly at times of peak stress.

  3. Fair point. I meant the exclusivity of centralized supply, to the exclusion of DG and DR. That’s a myth, and obsolete.

  4. The Democrats are unlikely to improve a grid or aid investment when private power companies will get a benefit.

    A tenet of the party is that private power companies screw the poor, overprofit always, and should be regarded as somewhat worse than drug dealers.

    So if our grid or generation capacity really has all these problems the federal solution will be greater regulation or nationalization (of course that word will not be used).

    The Democrats like the politics of solar, decentralization, and nice clean generation. They will subsidize that (excepting wind towers near the estates of important Democrats).

    Solar is about ready for prime time but like others I can’t see a true payback for apartment dwellers, large buildings, and in densely populated areas.

    Better efficiency and conservation can still help us more for a decade than can new energy sources.

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