Earlier I pointed out that a) regulatory problems have prevented investment in the smart grid and b) subsidies to wind power in some states have driven prices to negative levels (yes, people are being paid to consume power). These two problems are closely related.
The states control whether transmission lines get built but states with a lot of wind energy don’t have an incentive to build transmission lines to move the power out. In effect, states with a lot of wind energy are preventing exports which lowers their own internal price of electricity but raises everyone else’s price and reduces the use of wind power.
A new article in Technology Review makes the point.
One effect of these regulatory moves was that companies had less incentive to invest in the grid than in new power plants, and no one had a clear responsibility for expanding the transmission infrastructure. At the same time, the more open market meant that producers began trying to sell power to regions farther away, placing new burdens on existing connections between networks. The result has been a national transmission shortage….
[Many states have a lot of wind potential]…But the existing transmission system doesn’t have the capacity to get that much electricity to the parts of the country that need it. In many of the states in the [wind] region, there’s no particular urgency to move things along, since each has all the power it needs. So most of the applications for grid connections are simply waiting in line, some stymied by the lack of infrastructure and others by bureaucratic and regulatory delays.
Hat tip to Andrew Samwick who writes:
The federal government is the entity that can resolve that failure, by taking the lead and making those expansions itself. It can recoup its costs by levying a fee on subsequent power consumed through the grid. I hope the fact that we need this investment isn’t a reason for it to be excluded from plans for fiscal stimulus.
I hope the fact that we need this investment isn’t a reason for it to be excluded from plans for fiscal stimulus.
Best sentence I’ve read so far today. But with our “leadership” in DC, we need prayers in addition to hope.
Forgive my ignorance – I’m not familiar with the details of the US power industry – but why can’t the market solve this problem itself? Are the power companies not private? Or are there regulations that prevent power companies negotiating with private owners of land to transfer power from one place to another?
Within Texas there are pretty strong incentives to build transmission to get low cost power (in the West part of the state, with lots of wind power generation) to markets (but only those within the state itself). The state government has pursued a relatively pro-active approach to getting the necessary transmission built, but the transmission owners still face the usual siting problems. So even with the state pursuing a half-way reasonable infrastructure policy in this case, it will take a few years to get the necessary transmission built.
Elsewhere, interstate commerce in electric power remains mostly hostage to the cooperation of state interests. (And, of course, even the Texas state government is not particularly interested in ways to get low-cost power out of the state-regulated ERCOT market and into the federally-regulated rest-of-the-country, they just want to build the infrastructure needed to support intrastate commerce.)
Babar: to tell you the truth, there’s little agreement as to exactly what constitutes a “smart grid,” other than that it is supposed to use improved computer management to make more efficient use of grid resources. I personally think that the term is not particularly meaningful as it is usually employed, since visions of what a “smart grid” vary considerably from person to person.
As for a link, I think that this summary of possible EU grid modernization plans is probably as good a place to start as any.
Very well written and thoughtout post. I feel that the overall economy is going to get worse before it gets better. The Fed
has thrown just about everything it has at the economy to stabilize it. I believe that you will see the real estate market
start to recover before the rest of the economy can recover. In the Tampa real estate market I have started to see some
recent activity on some of our properties. There are even a couple of properties getting multiple offers. Prices are still
dropping a little bit but hopefully we are nearing the end. I choose to look at the glass as have full although I am
realistic that we do have some pain ahead of us.
Forgive my ignorance – I’m not familiar with the details of the US power industry – but why can’t the market solve this problem itself? Are the power companies not private? Or are there regulations that prevent power companies negotiating with private owners of land to transfer power from one place to another?
Thanks for sharing your knowledge and expertise on this field. I believe this will be very useful for people who are new on this field. I really appreciate your good work. =)
Why has this story not yet become mainstream? The media is gossiping and the politicians are debating in generalities.
Instead of wasting money on short term stimulus and bailouts government should invest in the smart grid which would create a market solution to our energy and financial problems.
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