Power Issues

So I was returning from my business trip in D.C. when we hit Stamford, CT around 4:45. Mr business partner Chris suggested that we dodge Stamford traffic by getting off the highway and eating an early dinner, returning to the road in an hour and a half or so. Given that the highway appeared to be a parking lot, I agreed. So we took exit 9 off 95 in search for food.

We immediately noticed the lights were out in Stamford, and so we figured we’d drive down the street to the next town over, looking for a place to eat, given that nobody was cooking anything without lights in the kitchen. After crossing two town borders, we realized something was substantially wrong, and we turned on the radio, and heard about the blackout that you all know about now. Luckily, we were able to grab dinner on the grill at Chris’s friend’s house, who lived nearby. Still, I didn’t get home until 1:30 AM. I should have been home at 7.

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I once concepted an Internet power retail company for the consultancy I used to work for back in the dot com heyday. In the process of doing that, I researched the power industry and the issues surrounding it, compiling with the help of an assistant, a extensive compendium on the industry, it’s history, it’s issues, and the deregulation movement that was spawning companies like Essential.com and utility.com. So I know a fair amount about the power industry, and Thursday’s fiasco has prompted me to write this missive. Sorry if it’s long winded. Go look at this if you’d prefer something that will numb your brain.

When commercial electricity networks were first being rolled out, the politicians who dominated government were big government, central planning types. And they believed that it would be wrong to just let anybody who wanted to to lay wire down around an urban area. Rather, they thought that what made sense was for there to be one power company in any one area, heavily regulated such that they didn’t behave like a monopoly and gouge on prices. This is the power paradigm that we all grew up with, one power company, often known as simply “the power company.” It was basically an unbranded public service whose bill you paid every month.

Prices were regulated at a specific margin above cost. In other words, the state would allow the power company to charge X% above the cost of producing the power, so as to not gouge the citizenry. This of course, led the power company to try and do everything in their power to increase the cost of providing service, because if the cost were increased, the revenue could be increased as well. That is why unlike the stereotype in the Simpsons, power plants are actually some of the safest industrial environments in the world. Every safety measure that could be built into the plant, would be built into the plant, so that it too could produce a state regulated margin of X%.

So costs were creeping up ever higher, and the power companies came to be dominated by, you guessed it, cost accountants. Who better to assign costs around to grab that state regulated margin than cost accountants? And the power companies became further and further distanced from the customers they were serving. In fact, in power company parlance, they weren’t even called “customers,” but rather “rate payers.” Costs were further driven by the fact that environmentalists were successfullt blocking the construction of new power plants, nuclear and otherwise. This meant that the supply was actually getting restricted, and now prices were climbing higher not just because of the manipulations of cost accountants, but because there simply wasn’t enough power to go around.

The first device to bring this problem to the consumer’s attention was the digital clock. Consumers would come home to see that all of their clocks were blinking, thus alerting them to a problem that they previously were unaware of, that the service that they were overpaying for was lousy. Further, as the workplace became further computerized and Bill Gates’s vision of a computer on every desktop came to pass, brownouts became a serious issue for businesses, who couldn’t afford to have entire workdays ruined by dataloss caused by unreliable power. especially given how much they were paying for it in the first place.

That was when companies started taking themselves off the grid. Oracle decided they’d simply had enough, and they built their own power plant right on the Oracle campus, guaranteeing them power 24/7, while lowering their cost of electricity. This began to scare the power companies. Further, advances in technology were making power generators available even to smaller businesses, and soon even to homes. Natural gas powered generators like those offered by Microturbine threatened to turn the entire industry on its head. Costs needed to be lowered immediately. Consumers and businesses needed to have a choice among electricity providers, in order to keep them on the grid. And so the electricity companies reluctantly agreed to deregulation, ending their monopoly over their rate payer’s power consumption.

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There are a number of issues that stem from the problems caused by the original mis-management of the rollout of commercial electricity in the United States. They are:

–> Peak Management Issues
–> Grid Sustainability/Electricity Routing
–> Local Wire Administration

Let’s deal with these one at a time.

Peak Management Issues

Americans are very familiar with the concepts of supply and demand, that when supply is short or demand is high, the price of a good rises, and when supply is plentiful and demand is low, prices decline. Everyone who has a telephone, cellular or otherwise, is familiar with the notions of peak and off-peak times during which the rates are different. Electricity, however, isn’t metered that way. All that is metered is how much electricity has passed into your home or business between two points in time. But it doesn’t measure what time of day or what day of the week you were using the most electricity. So the electric company bills you at an average rate.

This causes two problems. First, individuals can’t save money by planning their electricity usage around the lower rates, e.g. when to start the laundry machine or dishwasher. As a result, they do these things during the times when it happens to be convenient to do them, i.e. at peak times. As a result, the system is strained, and more power plants need to be built to handle the peak hours strain, but then remain idle during off-peak hours. This is a tremendous waste, costing everybody money and resources.

The problem is that it costs thousands of dollars to replace the electric meter on an existing home, so the return on investment for individuals is very long-term. It may be shorter for businesses. A number of companies, I’ve heard, are working on individual time of day meters for high-energy-consumption appliances, so that you’d plug your air conditioner into the meter, and then plug that into the wall. These devices would help people plan their electricity usage, and thus lower strain on the system, but what’s really needed is for congress to mandate that all new construction use time of day/day of week metering, and then to slowly mandate the replacement of meters in homes around the country. Eventually, the current metering system will need to be replaced anyway, for reasons I’ll explain in Grid Sustainability.

But there’s one further issue regarding electricity: futures. Individuals need to be given the option to buy electricity in bulk when the rates are cheaper, by paying for the service up front. Electricity is cheaper typically because the source powering it is cheaper, such as natural gas or coal, and so electricity futures would work in much the same way as coal or gas futures. Except that all you’d do is prepay for a year’s power when the power company offered special rates. These sorts of financial instruments can help lower the cost of power for individuals and businesses.

Grid Sustainability/Electricity Routing

During deregulation, power generation was separated from grid maintenance and customer service/billing. This was generally a good thing, encouraging individual power generators to compete with each other on price and helping to lower the cost of power for everybody (What California did was something entirely different and completely screwed up, and would take too long for me to explain here. Suffice it to say, they’re not included in this analysis.) But the grid is still maintained by the power company. The problem with the grid is not just that it’s over taxed, which it is, but that it’s architecture is technologically ancient, and is in need of a complete redesign.

The metaphor often used to describe the way the current system works is that of a lake, where you have a number of “water providers” pumping water into the lake, and lots of consumers siphoning water out of the lake. And so long as the two remain at equilibrium, everyone is happy. A consumer can buy his water from any one of the providers, and even if the individual molecules of water he consumes didn’t come from his provider, since every drop is the same as every other drop, it shouldn’t matter.

The problem with this, of course, is that it’s a centralized system, much like the telephone system. If one water provider dumps poison in, everyone’s affected. People marveled how during 9-11 the telephone system seemed to crash and burn, but the Internet sayed up and remained viable. That’s because the Internet is based on routing, and is decentralized. So if any one line goes down, or any part of the network blows up, the rest of teh network adjusts and routes traffic accordingly. Power needs to be routed similarly.

A number of people have theorized on how this would work. Here’s an example, written in a wise assed demeanor. But here’s how I envision it. Right now, you’re reading the samaBlog, which is hosted at a server farm somewhere. That’s similar to a power generator that exists somewhere. If the connection between you and the samaBlog were to be disrupted, every router in between would find an alternate path, and you’re enjoyment would be uninterrupted. That is because each bit of information contained on the net is numbered, and can be tracked and moved about at will, with a different path taken every time.

Right now power works more like the phone system. In fact, it’s much worse, because at least the phone system can electronically switch itself, whereas the power company requires fleets of trucks to carry engineers out to poles and make switches manually. What’s needed is for each “packet” or grouping of electricity to be inventoried and numbered, in a manner of speaking. This will facilitate the construction of large backhaul networks, much like the Internet currently has, which will carry electricity by means of the most efficient route available, from the place you’re buying power from to your home or business. And if some freak in Canada blows up his own power plant, no worries. Not only will everybody else remain unaffected, but even those Canadians within range of teh original problem could quickly and easily be routed power from someplace else, minimizing the downtime for everybody.

Such a system would require that every individual have a new kind of electricity meter, one that can handle IP routing instructions as it were, and it would spawn a host of new companies, back haul carriers, who make the connections between generators and retail sellers of electricity.

To implement such a system requires standard setting and deregulation on a scale that has not been attempted by this country before. But we’re long overdue, so let’s start now.

Local Wire Administration

You may not realize it, but telephone poles are actually not owned by the phone company. They’re owned by the power company. Phone companies, cable companies and others rent space on the lines to deliver their services. This represents a problem. None of the essential utilities currently have direct competition, and this is because of the lines coming into your house. Muicipalities have essentially handed monopolies out to cable tv companies, while local phone companies have had a traditional monopoly disrupted only by the bill mandating competition from DSL carriers, which worked miserably. And given that power companies own the lines, it is unlikely that they will let other power companies hang their wires from the lines anyway.

The original thinking that said that there should only be one set of wires running through a town is hogwash. Redundancy from multiple providers is a good thing, and congress should separate the poles from teh electric companies, and place them in the hands of municipalities as public infrastructure akin to the roads. Then congress should mandate that anyone who can pay the fees must be allowed access to the poles to hang their wires, i.e. no more locally granted monopolies.

Again, this would spawn a whole new kind of company, the local provider, whose job it is to bring you electricity uninterrupted. That means that they maintain their grid and buy electricity cheaply and reliably, because if they don’t, it’s a trivial matter for you to change providers. Competition will encourage the maintenance of the local grids, and will spawn creative products and services which I’m sure I haven’t even thought about yet. Once the power companies stop servicing “rate payers” and instead start serving “customers,” everybody will be better off.

And it will probably spawn an economic boom too.

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If you’re still reading this, thanks. Had to get that off my chest. Now I’m off to a BBQ.


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