What's wrong with the electric grid? (deregulation causes blackouts)

[starroute]

A concise explanation of what went wrong last summer and why building more transmission lines would be absolutely the wrong response. We all need to educate ourselves about this before they start running high-tension lines through our backyards (and making us pay through the nose for the privilege) -- and more important, we need to educate our Congresscritters about it as well.

http://www.tipmagazine.com/tip/INPHFA/vol-9/iss-5/p8.html

In the four years between the issuance of Order 888 and its full implementation, engineers began to warn that the new rules ignored the physics of the grid. The new policies “ do not recognize the single-machine characteristics of the electric-power network,” Casazza wrote in 1998. “The new rule balkanized control over the single machine,” he explains. “It is like having every player in an orchestra use their own tunes.”

<snip>

The problems would be compounded, engineers warned, as independent power producers added new generating units at essentially random locations determined by low labor costs, lax local regulations, or tax incentives. If generators were added far from the main consuming areas, the total quantity of power flows would rapidly increase, overloading transmission lines. “ The system was never designed to handle long-distance wheeling,” notes Loren Toole, a transmission-system analyst at Los Alamos National Laboratory.

At the same time, data needed to predict and react to system stress—such as basic information on the quantity of energy flows—began disappearing, treated by utilities as competitive information and kept secret. “Starting in 1998, the utilities stopped reporting on blackout statistics as well,” says Ben Carreras of Oak Ridge National Laboratory, so system reliability could no longer be accurately assessed.

Finally, the separation into generation and transmission companies resulted in an inadequate amount of reactive power, which is current 90 deg out of phase with the voltage. Reactive power is needed to maintain voltage, and longer-distance transmission increases the need for it. However, only generating companies can produce reactive power, and with the new rules, they do not benefit from it. In fact, reactive-power production reduces the amount of deliverable power produced. So transmission companies, under the new rules, cannot require generating companies to produce enough reactive power to stabilize voltages and increase system stability.

The net result of the new rules was to more tightly couple the system physically and stress it closer to capacity, and at the same time, make control more diffuse and less coordinated—a prescription, engineers warned, for blackouts.

[blm]

1. Deregulating electricity and energy is the BFEE goal

and will allow them to dominate almost every aspect of our lives.

Thankfully, a few of our candidates know how to fight the BFEE on this.

[salin]

2. Thanks for posting this. BTW, it looks like the energy bill

might be stalled until January. Gives us a little more time to get the word out.

[Rev. Day-Bu]

3. Stupid Capitalist Assumptions

Republicans--or Capitalists of any kind--tend to make a number of stupid assumptions about Capitalism. But the worst and most dangerous is the assumption that an unregulated consumer-driven marketplace is self-policing.

They believe that if a company makes a crappy product, people will not buy it and so it will fail.

They believe that if a corporation makes a product which is dangerous, people won't buy it and it will fail.

In a nutshell, they believe that unfettered capitalism guarantees that bad products fail and good products succeed. If this were true, Capitalism would be great, but it's not.

The reality is that consumers favor products that are either (1) cheapest to buy, or (2) products which bear a familiar brand name.

Bear with me a minute....

To meet criteria #1--a products that is cheap to buy--it has to be made cheaply. And that means cutting corners. If extra safety tests will make it more expensive, then nevermind the safety tests. If making a child's blanket flame-retardant costs more (and it does) then nevermind making it flame retardant. If making a vehicle safer costs more, then skip those safety features. And there's the perennial issue of employee salaries; if you want to make a cheap product, you have to pay your employees the smallest wages you can get away with. Behind every inexpensive product is an underpaid workforce.

To meet criteria #2--products with a familiar brand name--you just use advertising and marketing to create an image for your name. This works for companies like Nike, McDonalds, and Dell. Advertising is the art of convincing people to buy inferior products which they don't need. Or, as George Orwell said, "Advertising is the rattling of a stick in a swill bucket." Name recognition and image-making (whether authentic or misleading) alwo works for people. Just look at Arnie Schwarzenegger.

Now, like I said, the capitalist assumption is that bad, dangerous, or inferior products will naturally fail. But since people will buy (and thus support) cheap products or well-advertised products, the assumption that sales are a direct function of the product's quality and safety is a totally bogus idea.

In the computer world, Microsoft is a great example of how inferior products rise to the top. Or as I like to say, "shit floats."

Regulations can guarantee quality in ways that an unrestricted marketplace can not. In a free market place, the guy who gets to the top wins. The competitive nature of capitalism doesn't suggest that the product has quality; it just says that the company is the most competitive--that is, the most wolf-like. To quote Roger Waters, "You have to be trusted/ by the people that you lie to/ so that when they turn their backs on you/ you get the chance to put the knife in."

The problem with the northeast power grid is just the most recent, high-profile example of how capitalism FAILS to police itself for product quality. If you own a power grid, is it cheaper to upgrade and modernize the grid, or is it cheaper to wait and wait and see how long you can keep the old grid working?

It reminds me of that episode of Seinfeld where Kramer wants to find out exactly how far they can drive the car until it runs out of gas.

[newyawker99]

5. Hi imac_mafia!!

Welcome to DU!! :toast:

[Martin Eden]

6. Very good points. You might want to add:

The supposed purity of free market capitalism is anything but. There is no level playing field when politicians are financed by corporations that expect and receive legislation that favors their industries.

Just look at Cheney's energy bill -- it's a giveaway to extractive and pollutive energy industries that are exactly the opposite of the public's long term interest.

And on the local level, major contracts are awarded often on the basis of political connections and greased palms, rather than on competitive bidding with the facts debated and understood in the public realm.

I agree that even pure capitalism without regulatory oversight is a faulty system, but our current system is turning into a plutocracy/lootocracy being perpetrated on an unwitting public mesmerized by popular entertainment and corporate media propaganda.

[Grins]

8. Yes and no...

Your points are well taken. I do not totally endorse a un-regulated marketplace. But I have some other points.

”…if a company makes a crappy product, people will not buy it and so it will fail.”

Yes, they will. And the smart money knows it. “How can you say that Oracle is better than Ingres, Lotus1-2-3 better than SuperCalc Five, McIntosh better than Amiga, or the Intel 80386 better than the National 32032? How indeed? For in fact, feature for feature, the less successful product is often arguably superior…..there is no clear reason why one venture succeeds and the next one fails….” - From “Crossing the Chasm” by Geoffrey Moore. IBM never had great products, and were never cheap. They sold “value”.

”The reality is that consumers favor products that are either (1) cheapest to buy, or (2) products which bear a familiar brand name.

I think this is too simplistic. People make all kids of buying decisions that have nothing to do with price or brand name. Delivery, training, support, parts availability, the hassle-factor, etc. are all in play here. I had a friend that sold a highly technical product and he never got into the product features or any superiority it may have had against its competitor (IBM) – he sold it on the basis of training! Training! Jeeesus!! It astounds me to this day remembering how he did it.

”… a products that is cheap to buy - it has to be made cheaply.”
Not always. You can find your niche in which the other guy is not. Moore’s book discusses the D-Day Analogy that shows alternatives.

But here’s is where I want to add to your argument: a big problem with the success of new or old businesses can be laid squarely at the feet of – WALL STREET, and the Street’s pre-occupation with quarterly numbers and ever-increasing market share. It’s just stupid.

Company managers that concentrate on growth vs. truly managing their companies and products do a great disservice to all, stockholders as well as employees. Boards do a great disservice to their stockholders by hiring company executives, then base their compensation on bonuses strictly on increasing shareholder equity, all to satisfy a Wall St. that demands that growth or perish.

The steel industry is not in trouble because of Chinese imports, or the cost of union labor that republicans rail against; it's because those great white-collar managers chose to ignore other markets because those markets had margins that were too low to satisfy Wall Street's incessant demand for quarterly growth.

Steel is alive and well in the U.S., but you have to look a bit for it. It’s in niche markets that the big companies ignored, and ignored to their peril! (Steel is not the only indstry, look what McNamara did to Ford with his obsession with numbers.)

Sony did to radio and TV what other companies did to big steel. Why did Sony succeed? They went after a market that GE, Westinghouse, RCA, etc. did not want because the margins were too low for Wall Street. Let those little Japanese pissants at Sony have it, that crapply little $3 radio using that crappy unreliable transistor. But, for a lot of buyers - it was good enough.

What happens when Sony eventually dominates the market that is on the bottom of the market margins? They have no place to go but UP, so they do. But this time Sony is stronger, has more resources, and the next market's margins are bigger to get even more resources. Sony went after the next soft underbelly that the bigger companies chose to ignore because of, again, those same low margins. Next thing you know, niche by niche, belly by belly, they own entire markets and the “bigs” are history.

The best book on this subject is a real eye-opener called, “The Innovator’s Dilemma” by Clayton M. Christensen. It's a fun read. The book explains why the best companies, with the best products, and the best marketing, the best everything – fail. You do everything right, everything perfectly done as taught in Harvard's MBA program - and you still fail. How does a company like Digital Equipment Corp. get on the cover of Fortune Magazine as the country’s most admired company one year, and a mere two years later is filing for bankruptcy?

” If making a child's blanket flame-retardant costs more (and it does) then nevermind making it flame retardant…”
Not always. Your own comments on marketing somewhat refute that. You can sell something else. Fear and guilt works; “…you wouldn’t put your child at risk with non-retardant clothing, would you? What kind of parent are you?” Cell phones: “What if your child needs to call you for help? Don’t they need a cell phone to protect them – and give you the peace of mind you need? (Lots of parents got their kids cell phones after Colombine.)

”…use advertising and marketing to create an image for your name.”
Yes! Dead on the money!

I enjoyed your comments – and I love that closing quote!

[ThomWV]

4. Backup

There are some things that you need to understand about the power grind, and the first is that there isn't just one power grid, there are actually many of them, some which serve basically a single state (Texas and Florida in the lower 48 and of course Hawaii and Alaska). No one 'owns' the grids, they are comprised of indepedent operators.

The problem with deregulation is this, there is no such thing. There is not one bit less regulation now than there was a decade ago, its just that the regulations in effec now are easier to comply with. In the old system of regulation an operator was only allowed to charge what Public Utility Commissions (under various names) found to be the reasonable cost of production plus expansion plus maintainence, plus a reasonable profit. Under 'deregulation' they can charge basicall what they choose but their costs aren't monitored. So in order to increase profits maintainence is ignored. That is the basic problem with deregulation.

Thom

[Throckmorton]

7. There are four major "Grids" in North America,

and about a dozen small ones in Alaska and Mexico.

"The problems would be compounded, engineers warned, as independent power producers added new generating units at essentially random locations determined by low labor costs, lax local regulations, or tax incentives. If generators were added far from the main consuming areas, the total quantity of power flows would rapidly increase, overloading transmission lines."

The above statement is another reason the Northeastern Region of the Eastern Grid has become so unreliable. Small IPP's are allowed to connect to it where even they chose. They also have no interest in generating reactive power, only real power, so in many areas of the Northeast transmission voltages are near, or at, their design minimums. This degraded voltage condition makes it difficult to move energy, as all of the fault protection schemes for over-current of the cables, will automatically protect the cable.

Joule's law at work, P=E*I, lower E, with a fixed I, lower P.