Can New York Keep the Lights On?

It has been more than five years since the plug was pulled on New York City. Shortly after four o'clock on the afternoon of August 14, 2003, electricity vanished in an instant. Most businesses were operating without backup generators; operations ceased, and computer systems crashed. Restaurant freezers failed, and traffic lights went dark. Excepting the honking of car horns, the hum of the city gave way to silence.

Once more, stranded New Yorkers crossed the city's major bridges by foot to get home. Flights were grounded at LaGuardia and JFK. Cell phones failed to work. A general sense that nobody "knew what was going on" enveloped a metropolitan area of roughly 20 million. New Yorkers could be forgiven for thinking they were targets of yet another terrorist attack.

The 2003 blackout affected not only New York City, but also large portions of the Northeast and Midwest, as well as Ontario, Canada. But as the nation's media and financial capital—before Wall Street's implosion and with the wounds from 9/11 still raw—it seemed to most deeply affect New York."

The lights went out again in July 2006. Tens of thousands of New Yorkers, mostly in Queens, were without power for over one week.

The causes in each case were wildly different, yet the practical effect was exactly the same: The juice that powered people's lives and livelihoods was cut off, and everything stopped. Unfortunately, there is every reason to think it will happen again.

A WARNING

The New York Independent System Operator (NYISO), the nonprofit corporation responsible for operating the state's bulk electricity grid, has issued grave warnings about New York's electricity system in recent years. According to the NYISO's last two annual Power Trends reports, the condition of the grid is adequate to meet near-term reliability requirements for the state, but only through 2011. The NYISO analysis predicted "a change for the worse" in the next several years unless significant infrastructure additions are made. NYISO insists that the state must build power plants to add electricity generating capacity. Otherwise, with too much demand chasing too little power, the lights will go out once more. A recession might slow the growth of electricity demand and give New Yorkers a little breathing room, but probably not much. Electricity demand has increased inexorably for decades, despite occasional economic downturns. The bottom line, according to NYISO, is that New York needs more power.

The group has identified particular vulnerability in the city and close—in Westchester and Rockland counties. An additional 500 megawatts (MW) of resources are needed in New York City, and fully 750 MW in the Hudson Valley, in order to meet reliability needs in 2012.

To meet statewide energy requirements by 2017, according to the NYISO, the Empire State will need the equivalent of 2,750 MW added to the bulk electricity grid, some portion of which must be located in New York City and Long Island. This includes replacement of 1,300 MW due to the planned retirement of several generating plants by 2010.

How much is 2,750 MW? Consider that the Indian Point nuclear power plant north of New York City has two operating reactors, each with an operating capacity of about 1,000 MW. These are huge power generators, capable of supplying gargantuan amounts of electricity.

There are only about 70 generators in the entire country capable of supplying 1,000 MW of power. What the NYISO is saying is that New York needs about three more, and pronto.

Avoiding disaster is in the hands of New York state and city officials who should make sure new power plants get sited and built. But other aspects of mitigating the danger of blackouts are largely out of their hands. The 2003 blackout didn't start in New York, though its waves swept over the state like a tidal surge. It had to do with the peculiar fragmented nature of the nation's electricity grid.

THE TRIUMPH OF THE GRID

In 2003, the National Academy of Engineering, a division of the National Academy of Sciences, ranked electrification as the single greatest engineering achievement of the 20th century. By "electrification," it meant the development of the system of generation, transmission, and distribution of electric power to virtually every corner of the United States. In effect, the National Academy cited the grid as the supreme achievement of the century.

It speaks to the importance of our electricity system that the nation's premier group of engineers considers its development more significant than the automobile (ranked second), the telephone (ninth), or computers and the internet (eighth and thirteenth, respectively).

Yet the average American is oblivious to the centrality of electricity to daily life. We expect the lights to turn on when we flip the switch, with virtually no thought to the coal mined from deep underground, or its shipment by rail or barge to a distant power plant.

There it is pulverized and burned to provide steam to spin the turbines that generate electricity, which is ramped up and transmitted hundreds or even thousands of miles along high-voltage transmission lines. Only then is it handed off at a substation, where the power is stepped down for distribution to home meters, making its way through home wires to the lights and computers and appliances.[1] Whereas we routinely marvel at many other technological achievements, we scarcely think about the electricity system until it fails us.

Our electricity generating and delivery system is a complicated marvel. It is comprised of nearly 17,000 big and little power generators nationwide, with a total generating capacity of about 1,000 gigawatts (GW). Most of these are tiny, but there are behemoths, too. There are more than 800 electric generators capable of producing more than 250 MW of power each. Half of those can generate 500 MW or more.

These plants are owned and operated by more than 3,100 electric utilities; more than 200 of these are investor-owned and provide nearly three-quarters of the nation's power. Additionally there are more than 2,100 non-utility power producers feeding electricity into a system marked by several hundred thousand miles of high voltage transmission lines, over 100,000 substations, and an additional 2.5 million miles of local distribution wires.

The Electric Power Research Institute (EPRI) put the value of North America's transmission and delivery system at $358 billion, and says that "with its millions of transformers, circuit breakers, and other components, it is the most complex machine ever invented." And perhaps the biggest as well; it is the second largest physical structure in the United States, after the nation's system of highways and roads.

This amazing system serves the needs of more than 130 million customers, representing nearly every business and household in America. Colloquially referred to as "the grid," it is as interesting for what it isn't as for what it is. It is not a system that was engineered or designed by a single governmental authority, the way the Interstate Highway System was developed top-down by the Eisenhower Administration. It was not created or designed by any of the men we recognize as giants in the field of electricity, like Edison or Tesla or Insull or Westinghouse. It is not a singular, defined, completed structure like Hoover Dam or the Golden Gate Bridge.

Strictly speaking, in fact, it is not even a single grid. It is a powerful, efficient, massively sprawling and ever-growing network of technology that has developed organically over the full course of the 20th century. It is not one system, but several. There are three distinct major independent power networks, or grids, that have evolved in the United States. One is east of the Rocky Mountains, one west, and one handles most of Texas (Hawaii and Alaska are not included). These interconnections are largely independent from each other.

Within these three grids are many smaller, regional ones that emanate from power plants built to serve nearby urban load centers. Throughout the better part of the 20th century, each power plant served its own localized grid. The focus was on distribution systems designed to move power in one direction—from power plant to end user. Over time, as power plants grew larger and more efficient, they were located further away from the load centers. Electricity generators relied upon improved high-voltage lines to transmit their electricity to increasingly distant markets.

While operators stretched out these grids, they also realized that the reliability of their systems could be enhanced by linking with nearby systems. Thus independent and localized grids stretched out and linked to each other. In time these morphed from independent and localized systems to multi-state ones that linked entire regions.

Restructuring and deregulation efforts in the 1990s encouraged the sale of power across state lines, further stretching the grid and facilitating interstate commerce. Utilities split themselves into transmission companies (whose rates were still regulated) and generation companies (whose rates no longer were). With rates strictly regulated (a prerogative jealously guarded by authorities at the state level), transmission companies lacked the incentive to invest in the maintenance and upkeep of their wires. All of these developments conspired to develop the electricity generation and transmission and distribution system we name today the grid. All conspired to plunge a huge portion of North America into darkness one quiet August day.

INHERENT VULNERABILITIES

A structure as large and spread out as the grid is vulnerable on various fronts. Its high-voltage transmission lines convey as much power as is produced by the engines of a 747, and very nearly at the speed of light. A number of circumstances can instantly send a massive, destructive surge of power up or down these lines—peak loads on a hot summer day, a major weather event, or even human error. These can send huge amounts of power surging up and down the system, much like waves sloshing in a bathtub. The system depends on its circuit-breakers, switches and transformers to route power by handling and flattening it out. These are designed to protect the system from any calamitous surges.

While the grid has become more efficient and more powerful, in order to meet the demands of the increasingly electrified and digital economy, it still relies on technology developed in the 1950s. Most of the grid's key switches, for instance, are spring-loaded, electromechanical devices, not solid-state, ultra-high-power silicon switches that could control grid power flows much faster and more reliably.

The grid's switches are controlled by regional transmission authorities and utility control centers that rely upon "supervisory control and data acquisition" (SCADA) networks for information about the state of the grid. But the software systems needed to monitor and process this information weren't fully in place in August 2003.

What kicked off the greatest blackout in human history wasn't a power overload. As summer days go, August 14, 2003, wasn't particularly hot, and consumers weren't taxing the grid by cranking their air conditioners. But power lines expand and sag when transmitting electricity, and one sagged a little too much. It was later determined that a tree in northeast Ohio interfered with a power line, causing a series of power outages near Cleveland and sending waves of power surging over the lines. This happened quickly, but not instantaneously. There was still time to send warning to other grid operators, but no warning ever came. A joint U.S.-Canadian investigation found that a computer was switched off while a technician was out to lunch. With no one to sound the alarm, and the system unable to protect or police itself, utilities across the northeast United States were not notified of the massive surge of power about to overwhelm their networks. The ancient electromechanical switches were no match against the cascades of power that plunged 50 million people into darkness.

The blackout that shut down power in Queens in 2006 was a more conventional outage. A heat wave hit the city that week, and electricity demand spiked. The city's aging electricity infrastructure could not handle the load. Feeder cables serving portions of Queens—some more than half a century old—failed, putting greater stress on others. They too failed. It took Consolidated Edison 10 days to restore power to some parts of Queens. More than 150,000 people were affected, and the extent of losses suffered by businesses is still unclear.

CAN WE STOP IT FROM HAPPENING AGAIN?

The tragedy of the 2003 blackout is that the technology and know-how exist to prevent it. In the future, the question is whether the regulatory and legal regime will provide incentives for their deployment.

Congress took some important steps in a comprehensive energy bill in 2005. It established mandatory reliability standards for utilities, and made subject to punishment the sort of human error that helped cause the 2003 blackout. But the technologies that could be used are not yet successfully deployed. As Peter Huber and Mark Mills wrote in their 2005 book The Bottomless Well:

"With advanced control software, interconnected data networks, and high-speed, high-power switches at key locations, the grid could readily be made as smart as it is powerful. Power suppliers know where to put the software and switches. What regulators entirely failed to give them, however, was any economic incentive to deploy them—the prices suppliers could charge were set too low, with no premium for maintaining a more reliable grid or penalty for failing to do so. However unwittingly, regulators contrived to channel investment capital away from the wires that needed it most."

The challenge for policymakers is encouraging the investment that will make the grid as smart as it is powerful.

Each year, the problems grow more threatening. Demand for electricity is increasing steadily. Government efforts to promote conservation and efficiency are unlikely to do anything but slow the growth of energy demand. New power plants are needed, as are more transmission wires, as part of the build-out of a backbone high-voltage national electricity grid. Also needed are upgrades to smarter equipment that use silicon switches and computing technology instead of the old electromechanical devices. The energy infrastructure that worked reasonably well in the 20th century is overmatched by the demands of the 21st century.

Building new power plants in New York is easier said than done, ever since the expiration of Article X of the Public Service Law nearly six years ago. Article X was a power plant siting law that provided a one-stop permitting process, cutting the amount of time it took proposed projects to win approval. It also consolidated the process for considering local objections to proposed plants. Once a project was approved, it couldn't be tied up in courts by localities' NIMBY objections.

The law expired at the end of 2002, and the state legislature has consistently failed to extend it. The permit process for getting a proposed power plant is now onerous and prohibitive. The numbers tell the tale: The late 1990s saw the initiation of six new large power plants with a combined generating capacity of 3,400 MW. Since Article X expired, only one large-scale power plant has been initiated—the 350-MW Caithness Long Island Energy Center, a combined natural-gas and oil-fired facility, due to go online in 2009.

Siting transmission lines in New York is hardly easier, largely because of environmental and NIMBY opposition. The Energy Association of New York notes that it has been two decades since the last major transmission line was approved and sited.

In addition to increasing the likelihood of blackout, inadequate transmission capacity leads to congestion charges that drive up the price of power. The U.S. Department of Energy (DOE) estimates that congestion charges in 2008 will cost customers on the eastern grid $8 billion, or about $40 per person. But those costs are not evenly spread out. DOE figures that New York City area residents paid $90 per person in congestion charges in 2005.

Of course, those numbers are piddling compared to the full-blown economic losses from a serious blackout. ICF Consulting estimated that the 2003 blackout accounted for between $7 billion and $10 billion worth of damage.

A key component to whether New York and the Northeast U.S. can avoid another blackout is whether policymakers will help foster development of a far more robust transmission network than currently serves us. That largely means construction of a high-voltage transmission backbone overlaid on the existing system, reinforcing electricity delivery and minimizing the chance of breakdowns. A national high-voltage electricity backbone will enhance efficiency, lower retail electricity prices, and facilitate the use of renewable energy sources.

CHANGE IS POSSIBLE

As with siting power plants, that's no simple feat. Two critical issues must be resolved. First, how can high voltage, multistate lines get sited, especially given the parochial concerns of local regulators with the power to approve or reject proposals? Second, who should pay for them?

The first crucial step requires us to rethink the way we view transmission. Though originally local, electricity transmission has become increasingly regional and encompasses many states. We need to consider this sort of transmission—the moving of electrons across state lines—as interstate commerce, giving regulatory authority to the federal government. Siting multistate transmission lines with regional or national benefits should be the purview of the Federal Energy Regulatory Commission, not local or state regulatory authorities (though they should certainly keep jurisdiction over wires wholly within their areas). Utilities and investors need to know that they can get rights of way end-to-end. Otherwise, they won't sink money into needed projects.

A precedent for this sort of regulatory system exists. One obvious example is the interstate highway system, administered by the federal government and funded by federal gasoline taxes. Another is natural gas pipelines. At a recent Manhattan Institute forum on the need for a national electricity grid, Philip Moeller of the Federal Energy Regulatory Commission said, "If you take a look at what FERC's authority is in terms of siting interstate natural gas pipelines, they get built. And if you look at what happens with trying to site interstate transmission lines, you know, not a whole lot of them have been built in the last 20 years. Now, there are a number of reasons for that, but siting is probably, by far, the top one."

A federal regulatory presence is also necessary to allocate the costs of large-scale transmission projects. Transmission rates are customarily determined at the state level by public service commissions and similar entities. But who should pay for lines that cross numerous states? Ultimately, of course, it's ratepayers. Figuring out which ratepayers to bill and how to bill them is a political challenge far more complicated than the engineering challenge of laying wires and shipping power over long distances.

That's why FERC is probably best suited to step in, determining the rules by which transmission projects of national interest can get sited and the mechanisms by which investors can recover their costs. Until Congress moves to shore up the federal government's oversight of long-distance transmission wires, various regions of the country will be susceptible to avoidable blackouts and power outages.

The New York economy has taken a lot of hits over the last decade. And in addition to the 9/11 attacks and the 2003 and 2006 blackouts, it is facing a financial crisis.

But it still needs electricity. Will it face other blackouts? The odds suggest that it will, unless policymakers in Washington and Albany take appropriate steps.

Electricity is very often described as the lifeblood of an economy. A better, slightly different analogy is life support; pull the plug, and if you wait long enough, your patient dies.

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Notes

1. Coal provides half of America's electricity, while natural gas and nuclear power provide about 20 percent each. Large hydropower provides about another 7 percent, while renewables like wind and solar provide less than one half of one percent of the power American's use. Oil accounts for a similarly negligible percentage of America's electricity generation. In the case of New York City, the numbers are a little different. The law requires that 80 percent of the city's power be generated within the city. Residents therefore rely much less on coal than on power from in-city power plants that burn natural gas and oil. Much of the rest of NYC's power comes from nuclear power (like Indian Point) and hydropower.