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March 2008 Featured Story
Electricity’s uncertain future
in the face of a ‘perfect storm’
These are the stakes: Our nation must either begin building now to meet its future electrical needs, or start slipping back into the dark.
It’s that simple.
Demand for electricity will increase by 40 percent during the next 22 years, the U.S. Department of Energy says. Yet even with an optimistic projection of a 9 percent reduction in electricity use from increased efficiency and an increase in renewable power sources, our nation will soon run out of excess generating capacity.
 Unless new power plants and transmission lines are planned and approved soon, consumers could experience brownouts and even rolling blackouts in the not-too-distant future. Imagine: Today’s children — as young adults — could reach for a light switch and not be sure if the lights will always come on when it’s flicked.
But wait … there’s more: the sticker shock. This next generation of power needed to keep the lights on will be the most expensive in history. This power supply is coming at a time when fuels to produce electricity and construction materials like steel, copper and concrete are in high demand and short supply worldwide, forcing prices to skyrocket around the globe. And, it’s coming in the face of concerns over global climate change.
Blamed partly on man-made carbon dioxide, climate change with its many dire scenarios is making us re-examine the traditional fossil fuels and technology we use to produce electricity and the ways we consume it.
Already, local, state and federal lawmakers are considering placing additional costs on fossil-fuel power plants to reduce carbon dioxide. Plans for new generating stations that use coal, the nation’s most plentiful natural resource and the source for half of the electricity Americans now use, are being scrapped. Three of the world’s leading banks just announced a new set of “Carbon Principles” driven by the risks faced by the power industry as utilities, regulators, lenders and investors deal with the uncertainties around climate change policy.
“With a shortage of electric capacity, huge increases in demand for power, and the cost of climate change,” said Glenn English, CEO of the National Rural Electric Cooperative Association, “we have the making of a perfect storm.”
And while this storm has the potential to knock out power even more profoundly than a hurricane can, English noted the nation’s consumer-owned, not-for-profit electric cooperatives “have an obligation to keep the lights on and prices affordable.” He assured consumers that co-ops will meet these challenges in environmentally responsible ways.
The storm
 NERC, the North American Electric Reliability Corporation, a non-profit organization charged with monitoring the reliability of America’s power system, warned in a report last October that demand for electricity will increase 18 percent over the next 10 years. Meanwhile, the electric industry’s capacity to generate power will increase by only 8.4 percent.
NERC also reported lags in expanding and strengthening the transmission system needed to deliver the power.
The forecasts made by NERC shed light on the urgent need to bolster our nation’s power grid. It is no longer a question of “if” but “when” we need to build — the need is real, and the time is now. Clearly, the country could face brownouts and blackouts unless additional power plants and transmission lines are brought into service.
To fully grasp that impact, consider these facts about generation, transmission, and the demand for electricity:
• Electricity can’t be stored — it must be used immediately and flow continuously. Electric energy generated at a power plant flows through high-voltage transmission lines to substations, where it is reduced to a lower voltage for safe distribution to homes and businesses. Reliability means electricity is there when and where consumers need it, without interruption.
• Not every power plant generates electricity all of the time. Across the country on any given day, it is normal for numerous plants to be shut down due to a broad range of issues, such as scheduled maintenance, fuel availability or price, or low water levels at a dam where a hydroelectric power plant operates.
• High-voltage transmission lines need regular and emergency maintenance. Vegetation management to clear rights-of-way, or weather events, such as ice storms or tornadoes, can interrupt the flow of electricity on these “power highways.”
 The NERC report also found that even if all power plants now under construction are completed on time and begin generating electricity in the amounts slated, and new construction ramps up according to plans now underway, generation capacity margins will drop below minimum reliability margin levels in certain areas of the United States and Canada as soon as the next two to three years.
 Indiana will need 3,220 megawatts of new power by 2012, Purdue University’s State Utility Forecasting Group predicts. But only about half that amount will be met by facilities already proposed or approved. By 2023, the group predicts the state will need 12,600 megawatts of additional electricity. That’s about a dozen new baseload power plants in 15 years.
“Indiana’s two power supply cooperatives are keenly aware of these projections and are making sure we’ll have the electricity to keep our consumers covered,” noted Bruce Graham, CEO of Indiana’s electric cooperative association. “Renewables like wind, alternative fuels and clean coal technologies will be a growing part of this diversified mix. And we’ll continue emphasizing energy conservation.”
All of this means that a sudden surge in weather-caused disruptions or a batch of construction delays could leave consumers facing immediate and recurring disruptions in their supply of electricity.
NRECA’s English said the NERC study shows the nation’s lawmakers and regulators must quickly come to grips with the difficult challenges of meeting future energy demand.
“The generation and transmission needed to supply everyone with electricity will get built,” English assured. “Electric co-ops have an obligation to serve. The issue is how we manage rising costs associated not only with the fuels needed to produce electricity and construction materials, but climate change as well. Policymakers must seek out solutions that are feasible technologically and can be sustained economically — remedies that will allow electric co-ops to continue providing reliable, affordable power in an environmentally responsible fashion.”
In its report, NERC examined other significant problems that could affect reliability. These include the need to attract well-trained younger electric utility workers to replace the aging workforce of technicians and professionals, and how to deal with renewable energy concerns such as intermittency.
It’s an unfortunate fact that wind turbines placed where the wind blows best generate electricity on average at only 40 percent of their capacity. In Indiana, the average falls to around 25 percent. Generally, wind turbines generate little to nothing in the middle of hot, humid summer days when power consumption usually peaks. And solar panels collect no sunlight at night.
So what can consumers do? “Beginning now, start doing everything you can to use electricity wisely,” NERC encourages — such as turning off lights when not in use, replacing old appliances with more energy-efficient models, and managing electricity use carefully.
The cleanup and the cost
Discussions about global climate change inevitably include electric power generation. Power plants that burn fossil fuels such as coal and natural gas produce more than 2 billion tons of carbon dioxide every year. That’s 39 percent of all man-made carbon dioxide, the largest single source of the principal greenhouse gas contributing to climate change.
As the climate change debate takes aim at power generation, electric cooperatives have a responsibility to keep policy makers informed, ensuring that the right solutions are developed and implemented in ways that keep the nation’s lights on in an affordable way.
Ways to curb greenhouse gases, including carbon dioxide, include energy efficiency, nuclear power, renewable energy resources and new technologies that capture and store carbon dioxide emissions.
But what will these solutions cost? Based on calculations by Charles River Associates, a utility analysis firm, climate change proposals currently circulating in Congress, if passed, could result in a 50 to 80 percent increase in wholesale power costs by the year 2020. Translate that into retail rates, and electricity bills could climb by 25 to 40 percent.
“When it comes to climate change, Congress will legislate, the U.S. Environmental Protection Agency will regulate, and state and local governments are already moving forward,” said NRECA Vice President of Environmental Issues Kirk Johnson. “With carbon constraints in our future, it’s essential that lawmakers and elected representatives understand the financial repercussions their political actions could cost Americans.”
The New York Times and The Wall Street Journal observed last summer that the issue of cost should be put on the table.
About half a dozen bills are pending in Congress to impose limits on carbon dioxide emissions by electric utilities. Evaluation by the Congressional Budget Office on the various climate change proposals pegs the annual cost at between $50 billion to $300 billion annually by 2020, as measured in today’s dollars.
The Center on Budget and Policy Priorities — an advocate for low-income citizens — estimates the nation’s poorest families will pay $750 to $950 more a year in energy-related expenses during the first five years if carbon dioxide emissions are reduced just 15 percent below current levels. That will push many more households into poverty.
“Although many in the electric utility industry seem willing to pass on added costs of solving climate change problems, electric cooperatives understand the pain higher rates will cause for consumers,” noted English. “Some organizations also think America’s energy is too cheap, and that the way to fight global warming is to encourage conservation and energy efficiency through higher energy prices.”
“Indiana utilities may be particularly vulnerable to cost increases because of our dependence on coal-fired generation,” said Graham.
Because of the abundance of inexpensive coal in southwestern Indiana, over 94 percent of the power Hoosiers use is generated from coal. Nationwide, that number is about 50 percent.
English added that electric co-ops, which serve a higher proportion of low-income consumers than other utilities, already have a significant number of consumer-members struggling to pay electric bills. “The reality facing our industry is that even more consumers will be unable to afford electric power. Electric cooperatives are urging lawmakers to keep in mind that electric power is not a luxury. It is a necessity.”
The rainbow
 While no single solution exists to dissipate this “perfect storm,” a broad spectrum of energy efficiency and new and existing technologies has been focused into a plan promising to keep the lights on and meet environmental goals.
The ambitious plan developed by the Electric Power Research Institute, a non-profit, utility-sponsored consortium whose members include electric co-ops, would achieve a 45 percent reduction in carbon dioxide emissions over the next 22 years while meeting growing demand for electricity.
“Technology is what it’s all about,” English said. “It gives electric cooperatives the opportunity to address climate change and at the same time generate the amount of power we need to meet the needs of our members.”
This article was edited by Electric Consumer using material from NRECA.
Go to “An Environment of Change” contents page.
Written By: eceditor
Date Posted: 2/29/2008
Number of Views: 1964
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