Economist’s Babbage Column on Network Reliability

Lynne Kiesling

The usually-reliable Babbage columnist at the Economist has written a misguided commentary on last week’s power outage in San Diego and its broader implications (and, unfortunately, Glenn has picked it up on Instapundit, which will magnify the effects of its misguidedness). He starts by summarizing what’s known about the fault that led to a voltage reversal that culminated in the outage, but then goes awry with his interpretations of the event:

Managing supply and demand, once the prerogative of the utilities’ planners, has become a process shaped largely by an energy company’s appetite for risk. Meanwhile, independent system operators who schedule the dispatches of electricity have become, effectively, asset managers—using market-clearing prices to equilibrate between bids by suppliers and those from retailers.

By and large, such changes have made energy markets more efficient. For consumers, the competition created by deregulation has kept a lid on electricity prices. But it has had downsides, too. One of the biggest is the way it has removed what little spare capacity the grid once had. In the power industry’s new competitive environment, transmission companies operate their lines at near full capacity, leaving little room for those threatening fluctuations in voltage caused by accidental outages.

This assertion is simply false, as a couple of commenters on the column point out. The statutory reserve margin requirements have not changed. But no system, natural or engineered, is 100% reliable.

Babbage’s interpretations are misguided in two particular, and related, ways. First, he refers repeatedly to “deregulation” in the electricity industry in a misleading manner. Deregulation is a misnomer, especially with reference to California and Arizona, the states involved in this event. Regulatory restructuring in electricity was not deregulatory in general, but focused primarily on liberalizing wholesale electricity transactions. In this particular instance, California has an Independent System Operator-operated wholesale power market, with substantial restrictions and regulations, and Arizona suspended its restructuring and does not participate in organized wholesale power markets. Thus his connection of the San Diego blackout to perverse incentives arising from “deregulation” is more than misguided; it is misinformed.

He also asserts that while smart grid technologies might seem like they would enhance coordination and information in ways that would improve grid reliability, the opposite may be true because of increased cyber-security risks due to the communications overlay. Smart grid capabilities, like all other communications networks, create potential security risks, but system operators and all utility grid owners and all parties involved in scoping smart grid investments, creating cost-reducing and efficiency-enhancing customer-focused interoperability, and implementing smart grid technologies are very aware of those risks, working to mitigate those risks, and are focused on creating a resilient networked system of systems.

Babbage mentions that smart grid technologies will

… add a communications layer to the local electricity-distribution network—so consumers can see at a glance how much electricity they are using at any time of the day, and how much it is costing them. Alerts sent by the utility at peak periods will allow customers to cut back their consumption and save money—or have it cut back for them to reap extra rewards. The real aim, of course, is to save the utility from having to invest in additional capacity.

The aim is to maintain the reliability of the network while making it more efficient, which reduces costs of the regulated function for captive ratepayers … but he totally misses that if we have competitive retail markets that enable consumers to automate their responses to dynamic pricing, their individual, distributed decisions are more likely to make the grid more resilient, leading to better reliability.

A very disappointing and poorly-thought-through article.

9 thoughts on “Economist’s Babbage Column on Network Reliability

  1. Federal regulators have also been tempting the “hand of God” by loosing up standards on the grid.
    For decades, there has been a requirement to keep the accuracy of the 60Hz power remarkably accurate, but to accommodate new energy sources (read wind), they have been loosening up this standard on a trial basis. No utility out there is stupid enough to diverge from the old, more accurate, standard but eventually somebody will and it will reek havoc and let slip the blackouts of regulator stupidity.

  2. Lynne,

    I read the first part of it and thought it would be something useful for non-Smart Grid people to read in order to understand the links between reliability and Smart Grid, but, as you noted, the post is almost entirely wrong.

  3. I like graphs, but don’t have time to search for the one which shows electrical usage
    and total capacity over the last 50 years; My understanding is that it shows a steady
    convergence due to efforts to minimize cost ( and maximize unreliability ); Not only
    were ‘excess’ plants closed down, but also fuel reserves were sold off for revenue.

  4. Interesting that we still dont know the details of how something as routine as routine maintenance could bring down a regional grid with known vulnerabilities. One wonders why theres not more speculation about what is an obvious critical vulnerability that any terrorist or hacker dry run would seek to exploit, for information about secondary effects, and the authorities responses. We’ll have to wait on the utility companies and regulators for the first part, but as to the second-

    The good news is citizens largely dealt with it in typical laid-back SoCal fashion- traffic was grid-locked but moving eventually, and once the unprepared stood in line for ice and water, they learned their lesson.

    Others more stocked up and/or used to hauling stuff to the beach or camping took advantage of the situation to hold ‘blackout parties” – in my suburban neighborhood I counted 4 block parties where the bbqs came out in the cul-de-sacs, kids frolicked and wondered at the stars suddenly so much more visible, with street lights out, while parents sat around with a beer or a glass of wine, catching up and cooking up the meat that would go bad if the fridge was still off in the morning…in other homes parents and kids played monopoly or cards by candlelight, and now remark, “how the simple things are the best”.

    And San Diego cops, firemen, and preparedness pros, having weathered two large wildfires and practiced extensive earthquake drills, came thru with colors flying – the word got out fast enough to shut down school for the next day, with no drama, and the lights were back on by midnight.

  5. Ask yourself why the large Mesa Verde station is sited in Arizona to begin with. Environmentalists blocked development of nuclear power in California to the point where it was forced out of state. The grid might be more resilient if there were more and smaller stations scattered around California. Instead we have fewer, larger sites with fewer, more critical paths between them.

  6. Neo,

    I believe you are confused. There is nothing driving any derivation from the 60Hz standard, in fact recent standards activity have centered around tightening frequency response, not moving away. You may be referring to the recent NERC press release where they discuss not adjusting the 60Hz signal for timekeeping purposes. This adjustment actually is a bigger move away from 60Hz than anything usually found on the grid in normal circumstances, and is only done to keep devices that rely on 60 cycles equaling one second in correct time. What NERC discovered was the this time correction was causing more reliability issues as some relays would respond to the change. Since GPS time is the new standard, they want to study the effect of NOT driving the frequency away from 60 in the future to correct for the miniscule slips that happen all the time as demand changes.

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