January 27, 2009 | Memo

Endangered Electricity System

In August 2003, a tree fell into a power line on Ohio’s electricity grid, causing more electricity to be rerouted across other high-voltage power lines to compensate. All was seemingly well. Within hours, however, three other major lines had failed, also due to falling trees. The cascading failures overloaded the entire Northeastern electricity grid and brought it crashing down. Over 50 million people were without power, 11 died, and the economic toll was calculated at some 6 billion dollars in that short period of time.

Was this an isolated incident, an unpredictable event that is unlikely to recur?  In fact, the U.S. Department of Energy had warned of just such a calamity the year before, in a report titled the “National Transmission Grid Study”:

There is growing evidence that the U.S. transmission system is in urgent need of modernization. The system has become congested because growth in electricity demand and investment in new generation facilities have not been matched by investment in new transmission facilities. Transmission problems have been compounded by the incomplete transition to fair and efficient competitive wholesale electricity markets. Because the existing transmission system was not designed to meet present demand, daily transmission constraints or `bottlenecks’ increase electricity costs to consumers and increase the risk of blackouts.

Unfortunately, these warnings have not been taken to heart by electricity grid policy makers. Our national electricity grid is dependent on unstable fuel sources and could leave the country vulnerable to supply interruptions. The recent collapse of the global marketplace has accelerated this trend. To effectively combat this escalating challenge, we should not attempt to revive the national grid of old, but rather rethink electricity generation in the form of microgrids that can continue providing electricity even through times of uncertainty.


As with all complex infrastructure systems, electricity transmission networks rely on a certain amount of excess capacity to absorb unforeseen shocks (such as trees falling into power lines). In the early 1990s, this buffer hovered at 30-40 percent of overall capacity. However, according to the NextGen Energy Council (NEC) report “Lights Out In 2009?,” this percentage has experienced a “precipitous decline,” plummeting to 17 percent. The minimum reliability threshold (i.e. excess capacity) required to ensure the constant availability of electricity, is around 12-15 percent of total capacity. Should the level of excess capacity dip below this threshold, grid operators would lose the ability to prevent disruptions.

Electricity disruptions can take two forms. The commonly known “blackout” is the total shutdown of electricity delivery on a grid. Conversely, a “brownout” is a reduction in the amount of power being transmitted to users. Brownouts are occasionally engineered by grid operators to prevent a blackout, the logic being some electricity to everyone is better than none. The NEC’s report estimates that these two phenomena combined already cost between $22 and $135 billion per-year. Most of the costs “are borne by the commercial and industrial sectors, and not the residential sector.” This is, in large part, due to the nature of brownouts. During a brownout, the grid can sustain basic needs (light bulbs for example) but can cause significant wear and tear to complex machinery, which require large amounts of power to operate at peak efficiency. To prevent these kind of disruptions, which sap the nation’s economy, it is critical that we build additional marginal capacity into our electricity system.


The NEC estimates that the country requires an additional 120 GW by 2016 just to maintain its minimum reliability threshold. Unfortunately, the recent collapse of the housing and stock markets has forced lenders to drastically slash the amount lent, all of which does not bode well for additional capacity growth.

One of the primary areas where this growth was expected, renewable energy, is now in deep trouble. Alternative energy experienced a major influx of talent and money as energy gained more focus as oil prices soared to new heights; perhaps a misguided effort given that only 2% of the nation’s electricity is derived from oil. Nevertheless, the economic collapse that brought down the price of oil has also caused that alternative energy bubble to burst. New energy systems are expensive to build because of the large capital costs associated with infrastructure development. In the past, each component has traditionally been bought on credit and paid off as the fledging firms come to profit. Due to an ongoing flight to quality, lenders are not lending, instead choosing to hoard this cash. This credit crunch has rendered alternative energy providers unable to build capacity or operate.

T. Boone Pickens’ highly publicized attempt to build a 4,000 megawatt wind electricity farm in Texas is perhaps the most well-known alternative energy source collapse. The Pickens plan hinged on replacing natural gas fueled electricity plants with wind power, then using that natural gas to fuel vehicles in place of oil. However, decreased oil prices have caused what was supposed to be the largest wind farm in the world to be put on hold until the next oil price spike. In fact, Ventyx, an energy consulting firm based in Atlanta, reports that 66 of the 262 wind projects announced this year have already been canceled or postponed.

Solar energy systems have fared no better. While solar energy holds the most promise in the long run, because the sun’s rays are free and distributed everywhere, the high costs associated with photovoltaic cells in the short-run limit its market penetration. With enough research and development, short-run costs can be brought down to a sustainable level. However, the credit crunch has threatened that process. For example, California-based OptiSolar Inc, slated to build a 550 megawatt solar power plant in Sacramento, has cut its work force in half.  Additionally, the complex system of national, state, and local rebates already in place to lower short-run costs for solar energy development is falling apart as government budgets are slashed across the country. The future of solar power systems is very volatile. Jeff Wolfe, CEO of groSolar, a solar system installer, puts it best: “It’s two steps forward, one step back. It’s frustrating.


According to the Energy Information Administration, the nation’s coal-fired power plants supplied just under half of the nation’s electricity in 2007. Almost 40% of the nation’s coal production that year came from the low-sulfur mines in Wyoming according to the agency. As with most critical products and commodities today, the produced coal is transported in a just-in-time fashion to power plants. Much of this supply travels the nation’s railway system.

The Center for Infection Disease Research and Policy conducted a study in September 2005 on the impact a three-week disruption of railway lines would have on the supply of coal for electricity generation. The report, titled “Pandemic Influenza, Electricity, and the Coal Supply: Addressing Crucial Preparedness Gaps in the United States,” states that “many power plants were down to less than 10 days of coal in their stockpile, with some reporting only 2 days of coal on hand.” While it costs more, stockpiling necessary fuel sources for electricity generation is critical to maintaining electricity transmission in the face of disruption – whether caused by natural disaster or terrorism.

The recent surge in electricity derived from natural gas should be seen in the same light. From 1994-2007, the amount of natural gas used to generate electricity has jumped by 71.4%, while the amount of electricity generated through that means has increased by some 94.1%. In 1994, natural gas provided 14 percent of electricity. In 2007, that number had climbed to 21 percent. During that the same time period, natural gas prices jumped from on average $1.85, to $8.50, some 359.3%. In a large part, this is due to the advent of shale wells. James Howard Kunstler, author of The Long Emergency, expresses his distrust: “They are expensive to drill and run, and they all tend to deplete very quickly — around one year. I’m not convinced we have the capital or the resources even to come up with the steel necessary to drill for it.” 

Daveed Gartenstein-Ross, the Foundation for Defense of Democracies’ Vice President of Research, has explained the threat to our oil systems in some detail. As the ongoing situation with Russia’s Gazprom, the largest natural gas extractor in the world, reveals, the global natural gas supply chain is also rife with instability. As a result of a pricing dispute with Ukraine, natural gas exports to Europe have diminished significantly. Bulgaria has been forced to shut down smelters, manufacturing plants, and breweries. We would do well to avoid the same fate.


An often overlooked component of the country’s energy crisis is the quality of the electricity transmitted on the power grid. In order for machines to run at peak efficiency and not suffer more than normal levels of wear and tear, electricity transmission has to maintain a steady voltage. If that voltage is interrupted, or “sags,” machines deteriorate at a greater pace than normal. According to Distributed Energy, a journal discussing energy reliability and efficiency, “95% of these short reductions in voltage occur for under 10 seconds.” In the past, this

was only made apparent to the public when light bulbs flickered.

However, with today’s highly sophisticated technology (most notably computer data centers that make up the internet), such minor electricity quality decline can devastate our core electronic infrastructure, causing millions of dollars of lost productivity. For example, Contingency Planning Research Company estimates that for every hour of electricity downtime, credit card companies lose $2.2-$3.1 million in authorizations. In addition to lost revenue, other costs associated with lower power quality include: maintenance costs, lost opportunity, decreased competitiveness, equipment repair, and replacement equipment. In total, the Electric Power Research Institute estimated that this costs the economy upwards of $119 billion annually, an unsustainable cost in this economy.


Rather than attempting to resuscitate the national electricity grid, the nation may be better served by fostering and funding the development of a distributed energy grid, made up of a network of self sustaining subsystems or “microgrids.” A microgrid is essentially a component of the national grid that can, in the face of interruption or disruption, provide 100% of electricity generation, management, and distribution services for its users. This design approach allows consumers to bypass unstable electricity supply chains, and makes microgrids more likely to gain start up capital during this time of economic upheaval. Sandia National Laboratories explains why:

It is safe — it’s not introducing any new dangers. It’s secure because it uses a diverse mix of fuels — solar, wind, and oil. It’s reliable because it uses a variety of types of generators. There is a redundancy of generation and storage. It’s sustainable because it is using renewable energies. And, it is cost-effective because it uses energy sources that are readily available and appropriate for the site.

Additionally, by generation electricity independent from the national grid, power quality can be improved. The national grid is comprised of hundreds of different generators attempting to route their produced electricity to the highest bidder. Unfortunately, this can mean increased transmission distances, which contribute to power quality decline. Alex McEachern, an expert on voltage sag immunity, argues that we should treat “power quality as a compatibility problem.” In contrast to the national grid, microgrids are independent systems able to use a single set of design specifications over short distances. In this regard, microgrids can insulate themselves from voltage sags. By being able to disconnect and sustain itself as needed, microgrids can also prevent brownouts, and blackouts much like the one the Northeast portions of the country experienced in 2005.

One notable example of where microgrids could be very useful is in the military, which has learned the security implications of an extended electricity supply chain the hard way. In Iraq and Afghanistan, most forward deployed assets are reliant upon clusters of diesel generators each requiring 9 gallons of fuel per day, per user. This dependence, coupled with the extended petroleum based supply chains, has compounded the military’s demand for oil. David Sandalow writes in Freedom From Oil that “more than half the fuel used in combat operations is consumed by support troops, not on the front lines.” However, because of the disruption of traditional oil networks in these two countries, there is a greater reliance on convoys of military-escorted fueling trucks. This posed a target rich environment for insurgents and terrorists. Robert Bryce describes the cycle of destruction in a 2005 article in the Atlantic: “It’s a vicious cycle: attacks on convoys produce a need for more armor, which produces a need for more fuel, which produces larger convoys, which produce more targets for attack.” To remedy this clear vulnerability, Marine Corps Maj. Gen. Richard Zilmer sent the Pentagon a “Priority one” request for “a self-sustainable energy solution” including “solar panels and wind turbines.” The Pentagon has not yet developed this solution, but should the right microgrid be adopted, it could save lives and money in the field.


With the correct microgrid focused design philosophy, the Obama administration could help spark an electricity revolution. Localized production and management, with federal funds applied as necessary, would yield the most return for each dollar of federal money. Adopting this approach would insulate the country from its reliance on uncertain, rapidly depleting hydrocarbon supply chains. Furthermore, it would help secure our nation’s energy security.