Wednesday, October 28, 2009

Electricity in NH - The Power Grid

Wikipedia calls a power grid "an interconnected network for delivering electricity from suppliers to consumers."  That makes it sound simple.  Almost trivial.  In reality, our electrical grid is a high-tech marvel that covers a huge geographic distance and contains tens of millions of connections and interconnections.

The graphic below shows a simplified schematic for a power grid (it comes from Germany, so there are probably differences in practices/technology here in the US).

I'm going to let wikipedia do the heavy lifting describing how a power grid works.  In addition to their power grid article, they also have interesting articles on electricity generationelectricity transmission, and electricity distribution.   Passing these topics off to Wikipedia leaves space here for specifics about the power grid in New England and in New Hampshire.  

New Hampshire's power grid is managed by a non-profit Regional Transmission Organization called ISO New England Inc. (ISO-NE).  ISO-NE manages the power grid for New Hampshire, Maine, Vermont, Massachusetts, Rhode Island, and Connecticut.  According to their website, ISO-NE has three responsibilities:
1) Ensure the day-to-day reliable operation of New England's bulk power generation and transmission system

2) Oversee and ensure the fair administration of the region's wholesale electricity markets

3) Manage comprehensive planning for the region's bulk power system

Also, here's another take on the role of Regional Transmission Operators like ISO-NE

Today’s power industry is far more than a collection of power plants and transmission lines. Maintaining an effective grid requires management of three different but related sets of flows – the flow of energy across the grid; the exchange of information about power flows and the equipment it moves across; and the flow of money between producers, marketers, transmission owners, buyers and others.

Although the reliable operation of the grid itself is nothing to take for granted, I'm especially interested in the operation of the bulk energy markets and in the ISO-NE planning process.  I'll cover bulk energy markets in another post and focus here on ISO-NE's plans for the New England power grid.

I found two documents on ISO-NE's website that detail the issues facing New England's power grid.  The first document is the ISO-NE 2009 Regional Power Plan.  This 171 page report, produced annually, details and tracks the 10-year planning and forecasting results for New England's power grid.  The second document is a collection of presentations made by ISO-NE at the NECPUC Symposium last May.  In this document, there's information about New England's dependence on Natural Gas for electricity generation as well as a good summary of the challenges of integrating renewable energy into the regional power grid.

Key facts about New England's bulk power generation and transmission system 
  • 6.5 million households and businesses serviced (14 million people)
  • Over 350 generators and 8,000 miles of high-voltage transmission lines
  • 13 interconnections to systems in NY and Canada
  • More than 33,000 MW of total supply
  • All-time peak demand of 28,130 MW, set on August 2, 2006
  • More than 400 participants in the marketplace (those who generate, buy, sell, transport, and use wholesale electricity or implement demand resources)
  • $12 billion annual total energy market value (2008)
  • Over $4 billion in transmission investment from 2002-2009.  $5 billion planned for next 10 years
  • Six major 345-kilovolt projects constructed in four states

So what are the most pressing issues that ISO-NE identifies in their latest planning document?  My read is that the most pressing issues fall into four broad categories:
1) Transmission line capacity - Can New England's power grid move electricity from generation resources to loads (consumers) with minimal congestion and is the transmission infrastructure robust enough to handle unexpected failures with minimal system-wide impact?

2) Adequacy of generation resources - Given the locations of the loads in the system and the available or planned transmission capacity, will there be adequate, well-located, and reliable generation resources to meet the needs of electricity consumers.  Also, is the system robust and able to handle down-time due to planned maintenance, equipment failures, fuel supply issues, or other unexpected events?

3) Integration of wind and other variable-output generation  resources - Can the power grid operate reliably with the introduction of large amounts of variable-output generation?  Wind is a particular problem in this respect, because output from wind-farms is tough to forecast and alternate generation resources can take time to bring online. 

4) Implementation of  smart grid technologies  - Strategically reducing demand during times of peak-load or equipment failure can dramatically reduce costs compared to sizing generation and transmission capability to handle worst-case scenarios.
Assuring that the transmission infrastructure can meet New England's needs both today and in the future requires ISO-NE to manage and forecast several variables simultaneously.  The introduction of minimum requirements for renewable power generation has added a new dimension to the infrastructure planning problem.  It's not enough to assure the power grid can transport electricity from the generation plants to the load areas.  Today, ISO-NE has to make sure that the infrastructure will be able to support the correct "mix" of generation resources to meet physical electricity demands as well as these regulatory requirements.

Major Transmission additions in New England (source ISO-NE)

Numeric key to map above

As you can see from the above graphics, there are several transmission projects underway or under evaluation in New England that should reduce power grid congestion, improve reliability, and help deliver energy from planned renewable projects.

This presentation by Merrill Lynch/Bank of America, discusses the economics and financing of transmission projects.  Slide 6 shows some cost estimates for some of the projects listed above.  The cost estimate for the NSTAR project (number 3 above) was $275 million, while the Main Power Reliability Program (number 9) is estimated to cost $1.5 billion.  Now you know where that "transmission charge" line item on your electric bill comes from.

Slide 8 of that same Merrill presentation  lists financing details for some other transmission projects.  It appears that as with other capital projects, financing costs are highly dependent on how the deal's structured and who bears the risks.  For example, the $600 million Neptune project in NY and NJ was apparently financed with all debt at 1.25% over the LIBOR rate (say 4-5% total in 2008).   Meanwhile, the $1.1b TrAIL project in PA, WV, and VA was financed with a blended 50/50 debt/equity mix.  That means half the financing was at LIBOR+1.875% and the other half cost 12.7%.  Apparently, a key to Neptune's low financing cost was a 20-year power purchase agreement that helped minimize the risk to debt holders.

Proposed HVDC transmission line projects for New England (source ISO-NE)

The map above shows some proposed high-voltage direct-current (HVDC) projects that are under evaluation in New England.  HVDC transmission technology represents the state-of-the-art in moving large amounts of electricity over medium and long distances.  It can be used in both over-land and under-sea applications.  Many of the proposals listed above will help assure that renewable energy can be carried from places like Canada, New Hampshire, and Maine to population centers in Boston and points west and south.

The figure below shows the capacity for wind projects that are currently in the ISO-NE connection queue.  Interestingly, the total for proposed new wind capacity for New England is 2.7 gigawatts.  That might sound like a lot, but in the US overall, 1.6 gigawatts of wind capacity was installed in just the last three months. 

Wind projects in ISO-NE queue (source: ISO-NE)

In addition to transmission capacity issues, some electricity sources, particularly wind, have output that's variable and tough to predict.  Quick-start natural gas fired generators, demand management techniques, and pumped storage resources can provide a good complement to wind.  Coal and nuclear generation, while valuable as base-load resources, aren't as good at complementing wind generation, since they take too long to fire-up when wind output is much lower than predicted.

Demand management is another topic that's getting plenty of attention in power grid planning.  When planners encounter constraints in either generation or transmission capacity, under the old model, the only solution was to build more power plants and transmission lines.  But building an infrastructure that's sized to handle the very peak of demand,  or the unlikely failure of multiple generating resources, adds lots of cost and may not be the most economical solution. 

Newer smart grid technologies, along with various existing load management techniques, allow ISO-NE to incorporate demand-management into their planning process.  For example, a large industrial user may agree to turn off large power-hungry machinery when called upon to do so.  In exchange, this industrial user will receive a regular capacity payment similar to payments that power plant owners receive for agreeing to provide at-the-ready standby power.  From a planning perspective, a promise of load reduction can be just as good as a promise to start up a gas turbine generator.  

The simple example above is just the tip of the iceberg for demand-response and demand management.  Equipment is being installed to allow grid operators to automatically control large amounts of load.  Also, ISO-NE has implemented market-based approaches to securing demand-response resources.  As of summer 2009, ISO-NE had over 1.9 gigawatts of committed demand-response resources (page 43, tbl 4-8).  That's more than one and a half times the output from the Seabrook nuclear power plant and it could mean that fewer power plants and transmission lines will need to be built. 

One last smart grid concept is the use of smart meters.  The cost of providing electricity is highly dependent on system-load and thus, on the time of day when the electricity is consumed.  It only makes sense to tie the price of electricity to the cost to produce it.  With smart meters, electricity consumers will be incentivized to shift their consumption to when it makes the most sense for them.  In many cases, consumers will be able to shift demand to night-time, when the system is usually under-utilized.  If everyone does this, and if appliance makers build features into their devices to help, peak loads are likely to go down, or at least grow at a much slower rate.  In addition to saving money, shifting demand is also likely to reduce pollution because the power plants that run to meet peak demand are often the biggest polluters.

For just one example of the potential savings from smart meter installations, consider the state of Pennsylvania.   In 2008, a legislative mandate required utilities to install smart meters for all electricity customers.  The cost for the meter upgrade will add $12-24 to a customer's annual electric bill.  However, the savings from shifting demand to lower-cost periods are estimated at $46 per year.  Utilities all around the country are beginning to install smart electric meters.   


Thursday, October 22, 2009

Taxes in New Hampshire - Tax summit meeting day 2

Prof. Ross Gittell: The [most] relevant and important question is how to ensure that NH’s tax structure supports what “we” want the future economy to be.

In general, today's tax summit presentations contained a bit more advocacy than yesterday's, but overall they were still very informative and thought provoking. As with yesterday, the NH Watchdog blog has a very detailed (and still mostly non-partisan) recap of the day's session.

The challenge to our legislators to envision NH's desired future economy came up repeatedly during both days. One of today's presenters, Union Leader Columnist Charlie Arlinghaus, provided some historical perspective on successes NH has had with changing the structure of the tax code to achieve desired economic results.

According to Arlinghaus, the business profits tax (BPT) and Business Enterprise Tax (BET) are good examples of strategic tax restructuring in NH's past. These two taxes, implemented in 1970 and 1993, replaced taxes that were discouraging high-tech businesses from locating in NH. Both of these taxes were enacted as part of revenue neutral restructuring efforts. The BPT in particular represented a major shift for NH, away from taxing businesses based on their assets and instead taxing them based on their profits. This change is credited with helping NH develop and maintain its strong high-tech economy in the 80s and 90s.

Remember my earlier MVP Series post on Lonza Biologics? It's hard to imagine Lonza building their $110 million manufacturing plant in Portsmouth if these earlier structural tax changes hadn't occurred. (Although, several panelists did warn that today's business tax rates are on the high side and could now be hurting our competitiveness).

Gary Hirshberg, President of Stonyfield Farm presented a different spin on how to create a tax structure that helps forge the economy we desire. He believes NH should act intentionally and strategically to create a tax climate that encourages environmentally responsible activity while discouraging activity that harms our natural resources. His ideas included pollution taxes and targeted tax credits to encourage green business practices. Common Man Restaurant owner Alex Ray agreed with Hirshberg's ideas, and added that NH's tax structure should help preserve our natural resources and beauty.

Laurel Redden, of the Granite State Fair Tax Coalition, emphasized tax fairness and our heavy reliance on local property taxes to fund education. Redden called this reliance unfair, unjust, and inadequate. Interestingly, until today, the focus of the panelists was on tax structures to fund expenditures that are already being made at the state level. The idea that the state should increase the scope of its responsibility and contribute more for k-12 education to reduce local property taxes was hardly mentioned in yesterday's presentations. Today, several of the presenters hit on this theme.

Out of the entire summit, there was one presentation that left me a bit confused. It was a presentation by demographer Peter Francese, of Exeter. Francese presented statistics demonstrating that New Hampshire is now the forth oldest state in the country. He attributed this trend partly to the boom in age 55+ housing that many communities are encouraging to broaden their property tax base. Since retiree communities don't allow children, they typically don't increase local tax burdens as much as other development. That all made sense.

Next, Francese warned that the NH legislature "wouldn't be able to increase taxes enough" to pay for the coming onslaught of retirees into the state. This was the part that confused me. My understanding is that population trends between various age groups aren't a zero sum game. Attracting more retirees to the state doesn't have to come at the expense of attracting younger workers. In-migration to the state by either group is a good thing and both should be encouraged, IMO.

To me, in-migrating retirees are like fully charged batteries, They plug themselves into the local economy and continuously feed money to local businesses. Their expenses are generally paid-in-full by Social Security, Medicare, and their own nest-eggs. Sure, they don't directly increase economic production (like residents that work out of state), but they do increase local demand and this should help local businesses and increase employment in the state. In particular, they increase demand in the health-care sector, and these jobs are typically high paying.

I must be missing something on this because of all demographics, I just don't see the burden that in-migrating retirees could place on the state or the local communities. Mr. Francese mentioned that low-income retirees often receive property tax abatements, but the evidence that I've seen is that these abatements are a tiny percent of total property tax bills (usually a few hundred dollars). I just don't believe that these small abatements are offsetting the other benefits that retiree in-migration brings to the state and local communities.

OTOH, I do see an issue if we aren't successful in attracting enough young workers (here I agree with Mr. Francese). IMO, it's very important that we don't enact policies that discourage young workers from staying here or migrating in to NH. My point is just that I don't see the problem as "too many old people." Rather, it's a problem of not enough young people.

Ok. I think I've rambled on enough about the tax summit. Audio for the entire summit and all of the presentations are now available on the House Ways & Means website.

Wednesday, October 21, 2009

Taxes in New Hampshire - Tax Summit Meeting

I spent today in Concord at the House Ways & Means "Revenue Structure Informational Session," where I learned lots about New Hampshire's tax structure.

The chart below, presented by Dennis Delay of the New Hampshire Center for Policy Studies, provides a great summary:

I was planning on doing a more complete recap, but Grant Bosse of the Josiah Bartlett Center for Public Policy has been live-blogging the event in  great detail (Disclosure - although the coverage seems neutral, these folks are fiscal conservatives and oppose any new broad based taxes).

IMO, the presentations were jam packed with lots of interesting information.  Although a bit of advocacy did rear its ugly head from time to time, overall things were pretty balanced.   Also noteworthy was that out of the 7 or so economists presenting, only one favored an income tax.  

A few of the panelists suggested that a sales tax would probably be the best way to go if a new revenue source was absolutely necessary.  But only with the caveat that in exchange, business taxes would be reduced.  All the panelists (I think) agreed NH's high business taxes are hurting our economic competitiveness.  Apparently, we rank 50th (worst in country) for business tax climate.  

Finally, nearly all the panelists issued a strong warning to the committee that NH's tax advantage has to remain intact or our economic growth trajectory, which is already under stress, will be impacted.

More to come tomorrow...

Monday, October 19, 2009

Borrow a kill-a-watt meter from... the local library?

In Portsmouth now everywhere in NH, residents can "check out" a kill-a-watt electricity meter from the library as if they were borrowing a book.

I've blogged a few times about the kill-a-watt electricity consumption meter. This device is simple to use and helps track down power hungary appliances in your household to save money and reduce your carbon footprint.

The meter provides a real-time readout of the wattage consumed by an attached appliance and can also track power consumption over time. For example, you can plug your refrigerator into the kill-a-watt for 24 hours to see its daily power usage. Next, you can multiply the power usage by your electricity rate (say around $.15 per kWh) to get the daily cost of running your fridge.

One snag is that the device costs just under $25 and this initial investment can really eat into your potential savings. Portsmouth residents however, can "check out" a kill-a-watt meter from their local library as if they were borrowing a book.

Apparently, the city of Portsmouth is in a friendly competition with the city of Keene to see which town can inform more of their residents about how to reduce their carbon footprint. As part of the effort, two kill-a-watt devices were purchased for the library. It seems like a clever idea to increase awareness and to help residents save some money. Maybe other NH towns could follow this lead?

Here's a link to the Portsmouth Library's web page on the kill-a-watt.

UPDATE: It looks like Portsmouth wasn't the first town with this idea. Check out the comments on the above post for lots of other libraries doing it as well.

UPDATE2 (1/23/09): According to this tweet I just saw from PSNH, and this PSNH energy brief, apparently all NH libraries have kill-a-watt meters that can be loaned out. It's probably a good idea to call first though, since I'd bet these will be hot items.

Saturday, October 17, 2009

News You Can Use - LCD TV Edition

I recently read an LA Times news report about new energy efficiency regulations that have been proposed in California for televisions.  The draft proposal by the California Energy Commission implies that TV manufacturers are not using the most efficient technologies available and could easily reduce the energy consumption of new TVs by almost 40% by 2013.  

I was skeptical to say the least.  Most new televisions use LCD technology that's an outgrowth of the computer laptop market.  Manufacturers of computer laptops have been relentless in their attempts to reduce laptop power consumption to improve battery runtime.  If there were any easy LCD power savings available, I was sure the marketplace would have already ferreted them out.  

So I decided to dig a little further into the draft proposal and I found my answer on page 10 of the report.  Although there's plenty of hand waving about potential innovations that might reduce television power consumption, the real reason why dramatic power reductions can be achieved without increasing cost is this:

Significant reductions in energy consumption can be achieved in Plasma and LCD TVs by adjusting the contrast and brightness screen settings by manufacturers before shipping TVs to the retailers. The power consumption of the TV drops significantly with screen setting modifications. On average, plasma TVs will consume almost 21 percent less power when set to a low power factory preset, sometimes called “movie” or “pro” settings.

Ok.  Now  we're getting somewhere.  Apparently, television manufacturers ship TVs to retailers with the brightness max'ed out.  This gives their TVs greater showroom appeal.  Unfortunately, it also causes the TV to consume more power than needed, and unless consumers lower the brightness once they get the sets home, power is wasted.

Now this is news I can use.  I decided to test out the theory with our Samsung LCD TV.   First, I measured the TV's power consumption with the default factory settings.  My trusty kill-a-watt meter showed a reading of 160 watts.  Next, I  adjusted the brightness to its lowest level.  Surprisingly, there was only a slight drop in power consumption, so I returned this setting back to its default.  Next, I noticed a "backlight" setting on the TV's display menu.  I adjusted the backlight from 5 down to 2.  With that, I saw a dramatic reduction in power consumption - from 160 watts down to 116 watts.  Given the lighting conditions in the room, this low setting seemed pretty workable.  

This simple change reduced power consumption by 44 watts per hour.  According to Wiki Answers (if it's on the Internet, it must true, right?), the average American watches over 8 hours of TV per day.  This means that the average household could save 128 kW per year of electricity (44*8*365/1000) or around $20.   

That may not sound like much savings, but when you consider that it's free money, and also consider the reduction in greenhouse gasses from reduced power plant emissions if everyone makes the change, it seems like it could be worth it.  Of course, now that we're armed with this new information, we don't have to wait for new regulations to start saving.