In 1992 electricity began to be viewed less as an essential service and more as a commodity when deregulation was enacted with the passage of the Energy Policy Act. Previously, public and investor owned utilities controlled power generation, transmission and distribution within a set region. The Energy Policy Act, however, allowed for the trading of electricity over wide geographic areas, known as long distance â€œwheelingâ€, to the highest bidder. The promise of deregulation was that competition in a free market would keep electric rates low.
After four years of litigation, in 2000, FERC Order 888 went into effect mandating the wheeling of electric power over long distances. The â€˜single machineâ€™ grid, however, was never designed to manage this type of â€˜tradingâ€™. Electricity trading jumped immediately upon enactment of Order 888 and so did dangerous levels of transmission line congestion. Transmission loading relief procedures (TLRs) increased by 6 times within a month and the promised lower rates have in fact risen significantly since 2000 in deregulated states.
Another consequence of deregulation was that no incentive remained to build new power generation plants. In fact, investor owned utilities profited from electricity shortages and as we learned from the Enron catastrophe actually induced artificial shortages to drive up wholesale prices. A December 2001, Wall Street Journal article noted, â€œThe profits on the tradesâ€¦ of cubic feet of gas it didnâ€™t extract or burn, of kilowatt-hours it didnâ€™t generate, and of fiber-optic lines it didnâ€™t lightâ€¦ sent Enronâ€™s revenues soaring.â€
Today, there is concern about legitimate electricity shortages across the US. Along the West Coast, Bonneville Power Authority is warning that it may not be able to meet load demands as early as 2011. In Southern California, San Diego Gas & Electric is proposing a 150 mile, $1.4B fossil fuel corridor through sensitive state parks and forest land. The line, which connects coal powered plants in Mexico, is to avert projected rolling blackouts by 2013.
Transmission lines take years to complete and cost $1M per mile. In cities like Chicago and New York the cost can be $10M per mile. Wheeling losses, the inefficiency of electrical transmission is almost 10% globally equaling the combined energy demands of Germany, France and the UK. These costs, the time required and wheeling losses are some of the reasons New York City is installing more distributed CHP generation.
Combined heat and power (CHP) generators capture the heat normally lost in the production of electricity and use it to heat buildings, districts or neighborhoods where the generators are installed. The Christian Science Monitor recently wrote, â€œA typical electric plant uses only one-third of its fuel’s energy to push turbines. The other two-thirds are lost as waste heat. Boilers, on the other hand, can achieve up to 85 percent efficiency. By combining both processes, CHP can capture between 70 and 80 percent of the energy in the fuel. Theoretically, cogeneration delivers the same energy as separate generation, but with half the fuel and emissions. Because of close proximity to the end-user, relatively little electricity is lost in transmission.â€
Reliability of electric service is another primary benefit of distributed generation. During the 1998 ice storm in Canada hundreds of transmission towers buckled leaving over 4 million people in Canada and parts of the US without power. Multiple deaths were reported, many from hypothermia. Power was restored fairly quickly to urban areas however almost 700,000 rural residents were without power in the middle of winter for over three weeks.
CHP generators require fossil fuels but renewable distributed power generators like small wind and solar are viable and once installed not dependent upon the vagaries of foreign policy, market demands, regulatory actions or the expense of maintaining a decaying grid to allow for long distance commodities trading.
Ironically, decentralizing may be forced by the consequences of energy deregulation and the free market theory so dependent upon centralization. An article discussing barriers to centralized wind energy in Energy Biz Magazine states, â€œFederal Energy Regulatory Commission Chair Joseph Kelliher said it would require strong regional power grids. Today, there are more than 500 transmission owners, â€˜500 sets of hands pulling the levers for those 500 machines,â€™ he said, in a personal interview. Coordinating an array of relatively small generators spread over a vast expanse for the benefit of far off urban centers will require complex coordination, something made difficult by todayâ€™s Balkanized grid. Furthermore, while annual investment in transmission has doubled since 2002, Kelliher said, it is â€˜still not adequateâ€™.â€
Rural America including the Southern Oregon coast is uniquely suited to deployment of wide scale distributed energy to relieve already congested transmission lines. The capital costs of installing distributed generators at the local, neighborhood and district level are significantly less than the standard centralized model. The value of energy independence for rural communities is priceless.