The American electric-power sector has existed since 1886, but it only experienced explosive growth since the 1940s. Today, there are over 3,000 traditional utilities, including 210 investor-owned suppliers (that provide 71% of public consumption and own 38% of generating capacity), 2,009 publicly owned utilities, 883 consumer-owned cooperatives and nine federal electricity producers operating about 200 plants, mostly hydroelectric.

Further, there are 1,738 non-utility producers, mostly industrial plants that supply internal needs and sell excess power to wholesale markets from predominantly “combined heat and power” plants. Total net generation in 2007 was 4,157 billion kilowatt hours, of which 2,504 was generated by traditional utilities, with 72% of output from fossil fuels (mostly coal and gas), 20% contributed by nuclear reactors and 6% to 8% from hydroelectric sources. All renewable sources (wind, solar, geothermal and biomass) contribute between 0-2%.

In the context of this column, let it be clear (as your President often says) that talk about renewable-energy sources as a meaningful contributor to national energy use is not a practical or realistic part of the foreseeable future – a reality greens and politicians do not grasp.

The above only addresses “generation” of electric power, with the total system also containing a “transmission” and a “distribution” component. All of this has been coordinated by the North American Electric Reliability Corporation (NERC) since 1968 in the contiguous 48 states and portions of Canada and Mexico. In recent years, massive changes in these two areas are under way. The Energy Policy Act of 2005 enables identification of critically constrained transmission corridors, and the Energy Independence and Security Act of 2007 provides a framework for transmission modernization, including initiating a “smart grid” that encourages efficient consumption and reduces peak demand.

There are two major drivers for overhaul and upgrade of the grid – the transmission portion covering over 325,000 miles of lines for long-distance wheeling of power into interconnected distribution locales for voltage step-down. The first concern is a topic touched upon last month, and that is national security. An attack an adversary could initiate by an above-the-atmosphere nuclear blast to emit an electromagnetic pulse (EMP) would induce staggeringly large and rapid voltage and current surges that would catastrophically fry all modern electronic and electrical systems in seconds. Such an event 62 miles above Omaha would shut down North America, including all banking, automotive traffic and electric power usage. Everything would remain out of service until every fried device was replaced – each and every gazillion of them.

What to do and how to do it was the subject of a paper, “Cascade-Based Attack Vulnerability on the U.S. Power Grid,” by Wang Jianwei of Dalian University in China discussed in Congress March 10, 2010. In response to this, on June 9, the House passed H.R. 5026 (Grid Reliability and Infrastructure Act) authorizing the Federal Energy Regulatory Commission to issue emergency orders protecting critical infrastructure. The bill was referred to the Senate, where it is pending. Let the record show that I commend the sponsor of this bill, Ed Markey (D-MA), whom I have monitored since he arrived in Congress in 1974 and with whom I am typically opposed.

A second reason for grid improvement is that $46-$117 billion could be saved in the next two decades from avoided transmissions losses. Power outages and inconsistent quality costs industry an estimated $100 billion annually because the U.S. power grid has become dangerously antiquated. Transmission wheeling is inefficient, with some places below 30%. It is imperative that transmission infrastructure is improved for both security and efficiency reasons.

The distribution grid is where the politicians and greens are currently focused. As of January 2010, utility companies had installed 13.6 million smart meters, with only a small portion (43,000 of 5.5 million installed last year) having any problem. That’s a less than 1% failure rate compared to 3% for conventional meters. The smart meters allow the power provider to monitor and record consumption at a device level but also control the device for time-of-day or “best price” consumption. All this is for consumers to accept or not, which is quite a different concern for a business than a residence.

Studies shows that a “home area network” capability will be included in 81% of U.S.-installed smart-grid devices by 2013. There are questions over how current regulatory environments do not reward operational efficiency by utilities, that consumer privacy concerns are ignored and that the extent of government mechanisms for control over power use is not considered. All this is not trivial. The smart-grid industry was a $21.4 billion business last year and is expected to double by 2014, with world markets growing faster to $171.4 billion over these four years.

For an interesting view of this topic, check out July 2010’sNational Geographic, pages 118-139. Fascinating. And you are a part of it both at home and at work.IH