Lester Lave Carnegie Mellon Electricity Industry Center

www.cmu.edu/electricity

Carnegie Mellon Electricity Industry Center (CEIC)

Founded in August 2001 after competitive proposals Long-term core funds: The Sloan Foundation & EPRI Project funding from industry & government Co-Directors: Lester Lave & Granger Morgan

Executive Director: Jay Apt

17 Faculty & 23 Ph.D Students in Business, Engineering & Computer Science schools Strategic, interdisciplinary examination of industrys problems and opportunities
2

Current Research Areas

Market Structure & Performance Distributed Energy Resources Advanced Generation & Transmission Technologies Environmental & Sustainability Issues Reliability & Security

Supported by: The Alfred P. Sloan Foundation Tennessee Valley Authority Electric Power Research Institute U.S. Office of Naval Research U.S. National Science Foundation McDermott Technology U.S. Environmental Protection Agency ABB U.S. Department of Energy Alliant Energy National Rural Electrical Cooperative Association Pennsylvania Office of Energy & Technology Development New York State Research & Development Authority
3

Market Structure & Performance

Market Design to Control Monopoly Power Modeling Investment Incentives in Deregulated Electricity Markets Risk Management in Electricity Markets Designing complete markets all services Demand estimation & management Autonomous Agents that Learn Valuation of Ancillary Services
4

Distributed Energy Resources

Distributed Decision-Making Engineering-Economics of DER Regulatory/Institutional issues for DER Market Evolution Air Quality & Life Cycle Analysis of DER Distributed Generation & Microgrids Interconnect Problems & Standards Benchmarking Test Systems
5

Advanced Generation & Transmission

Modeling Advanced Environmental Controls in New Generation Plants Multipollutant Regulation & the Cost of CO2 Control via Carbon Capture & Sequestration The Cost of Regulatory Uncertainty in Air Emissions for a Coal-fired Power Plant Advanced Transmission Technologies: Cost & Benefits, Reliability, Controlling Congestion, Investment Incentives Is It Better to Ship Coal or Electricity?
6

Environment & Sustaintability

Life Cycle Assessment of Fuel/Technology options Large-Scale Wind Generation Understanding Opposition to New Transmission Lines Animal Waste to Power Biomass Cofiring Reducing CO2 Emissions (2010 to 2050)
7

Reliability & Security

Architecture of a Survivable Power Grid Managing Congestion Modeling a Grid with Merchant Transmission Survivable Missions Lessons for Grid Operations from Air Traffic Control & Other Critical Infrastructures

Benefits of Opening Electricity Markets to Competition

A New Competitor has No Obsolete Plants or Excess Manpower or High Labor Costs They Can Offer Low Prices & Take Business from Current Company To Survive, Current Company Must Cut Costs or Force Customers to Pay Their Prices Bad Decisions Cost Investors, Not Customers BUT New Company Needs Transmission No Simple to Introduce Competition
9

Benefits of Joining US Market

Canada & Mexico Have Resources to Sell Joining the US Market Gets Better Prices Expanded Generation & Transmission Capacity Builds Local Infrastructure, Providing More Energy Needed Upgrade to Technology & Infrastructure BUT It may Raise Local Energy Prices & Lead to Disruptions
10

Integrating North American Electricity Markets

Electricity is Different A Shortage of Petroleum, Natural Gas, or Coal is Handled From Inventories. A long Outage Leads to High Prices & a Few Unhappy Consumers Electricity has No Storage: Shortages Cause Massive Blackouts (California 2000, August 14) Integrating NA Energy Markets has Major Benefits But Also Major Costs August 14
11

 Before Deregulation the Answer was Yes

Opportunities to Sell Resources at High Price Economies of Scale in Generation Financing for Home Infrastructure

Should Mexico & Canada Join a NA Electricity Market?

After the US Market is Restructured, the Answer is Probably Yes Be Careful

A Competitive Market Should Allow Good Prices for Resources & Greater Reliability It Will Help Integrate the Three Economics & Produce Environmental Gains Meet Kyoto Goals
12

Collateral Damage From US Deregulation

Californias Debacle in 2000 Led to High Prices Throughout the West: Montana, BC, Arizona This Disrupted the Economy (Aluminum in Washington) & was Costly to Consumers Deregulation Problems Caused the August 14 Blackout: Major Costs to Ontario Some Previous NE Blackouts Caused by Canada
13

Risks & Rewards to Mexico & Canada From Integration

US Restructuring is Imposing Costs & Reducing Reliability in the US And Elsewhere There Will be Difficult Times Until the Restructuring Issues are Resolved Integrating the Energy Markets, Like Integrating the Economies Opens Mexico & Canada to Fluctuations in US Markets & Vice Versa Integration Presents Many Opportunities & Risks
14

Should Mexico & Canada Open Electricity Markets & Integrate with the USA?
Open Markets Should Lower Prices But Impose Costs on Electricity Company & Workers Restructuring Must be Careful & Learn From Experience in UK, Austrailia, California, Integration has Large Benefits & Costs Careful of Unsettled US Markets Perhaps a DC Interface? 15

Thank You.

16

Some Recent Large Blackouts

11/9/65 6/5/67 5/17/77 7/13/77 1/1/81 3/27/82 12/14/94 8/24/92 7/2/96 8/10/96 Jan 98 Feb-Apr 98 12/8/98 8/14/03 8/30/03 9/18/03 9/23/03 9/28/03 11/7/03 Northeast PA-NJ-MD Miami NYC Idaho-Utah-Wyoming West West Florida West West Qubec Auckland San Francisco Great Lakes-NYC London Tidewater Denmark & Sweden Italy Most of Chile 30 million people 4 million 1 million 9 million 1.5 million 1 million 2 million 1 million 2 million 7.5 million 2.3 million 1.3 million million 50 million million 4 million 4 million 57 million 15 million
17

Probability per event of an outage larger than P

0.8

0.6

0.4

0.2

0 0 5000 10000 15000 20000 25000 30000 P, the size of the power outage in megawatts 35000

18

Can Blackouts be Prevented?

The HV part of the system contains 157,000 miles, thousands of nodes Natural disasters: Ice storms, hurricanes, earthquakes, etc.
Qubec Ice Storm 770 transmission towers Hurricane Andrew 300 towers down Hurricane Isabel 3 million without power

19

A Solvable Problem

Survivability is the ability of a system to fulfill its missions, in a timely manner, in the presence of attacks, failures, or accidents.

H.F. Lipson & D. A. Fisher, Survivability A New Technical & Business Perspective on Security, Proceedings of the 1999 New Security Paradigms Workshop, Caledon Hills, Ontario, Sept. 2124, 1999, Association for Computing Machinery, New York, NY, available at http://www.cert.org/research/.

20

A simple example
When the power goes out, traffic snarls in urban cores, making it impossible for emergency vehicles to get through.

In a normal blackout, this is a problem. If a blackout were part of a terrorist attack, it could be very serious.
While old style traffic lights required something like 150 watts, modern traffic lights that use light emitting diodes (LEDs) use less than 15 watts. Combined with solid state electronic controllers, LED traffic lights can be kept running for several days on battery back-up. DHS might consider helping cities with the incremental cost of the batteries & controllers.

21

A Solvable Problem
Recognize that blackouts will happen Reduce the social & economic costs by assuring that critical missions continue
Traffic lights Water & sewer pumps Natural gas pressure Emergency service systems Exit from subways & elevators Crucial economic functions
22

What Went Wrong in California?

Everything every requirement not met:
Big generators could control price by withholding supply No markets for reactive power, etc. All power in hour ahead market no day ahead or long term contracts System operator assumed that demand completely inelastic, didnt control transmission, and could not control fraud
23

Curtailing Market Power

To ensure that no firm has the power to raise price & profit by withholding capacity: Regulate price during high demand Increase generation capacity Increase transmission capacity Increase demand response Control firm size by divesting assets Long-Term contracts
24

25

Transmission Muddles: Operation Transmission grid designed to get power from companys generators to customers not serve deregulated market Locational Marginal Prices (LMP) handle congestion Kirchhoffs Law makes LMP extremely sensitive to location of supply, demand, & transmission capacity Susceptible to gaming by market participants
26

Transmission Muddles: Investment Dont use LMP to site new transmission! Merchant transmission => gaming, e.g., railroads in 1900 greenmail & disruption Transmission must be centrally planned, operated, & maintained
Ownership & control by utility ISO rules? Control by ISO maintenance, etc. by utility?

Pay for new transmission with LMP plus constant fee per MWhr-mile
27

16

ME
14

Maine
Residential

12

10

/ kWh

Industrial
6

0 1990

1992

1994

1996

1998

2000

2002

28

16

OH
14

Ohio

12

10

Residential

/ kWh

Industrial
4

0 1990

1992

1994

1996

1998

2000

2002

29

16

NC
14

North Carolina

12

10

Residential / kWh
8

Industrial
4

0 1990

1992

1994

1996

1998

2000

2002

30

16

CA
14

California
Residential

12

10

/ kWh

Industrial

0 1990

1992

1994

1996

1998

2000

2002

31

16

NV
14

Nevada

12

10

/ kWh

Residential

Industrial
4

0 1990

1992

1994

1996

1998

2000

2002

32