Wind Promises Blackouts as Obama Strains Grid With Renewables

By Christopher Martin and Mario Parker

Aug. 7 (Bloomberg) -- President Barack Obama’s push for wind and solar energy to wean the U.S. from foreign oil carries a hidden cost: overburdening the nation’s electrical grid and increasing the threat of blackouts.

The funding Obama devoted to get high-voltage lines ready for handling the additional load of alternative supplies is less than 5 percent of the $130 billion that power users, producers and the U.S. Energy Department say is needed.

Without more investment, cities can’t tap much of the renewable energy from remote areas, said Jon Wellinghoff, chairman of the Federal Energy Regulatory Commission. He serves as the administration’s top official on grid issues and recognizes the dilemma it faces.

“As we add more and more wind power, the grid will get more stressed, and there’s going to be a point where the grid can’t handle any more,” Wellinghoff said at an energy conference in Chicago. “The first thing we need is to build out transmission.”

The country’s electricity network sprawls over 211,000 miles (340,000 kilometers) of high-voltage power lines, a patchwork connecting substations and transformers owned by utilities and federal agencies.

Obama’s $787 billion stimulus plan to end the deepest U.S. recession since the 1940s dedicates $6 billion in the next two years to expand the country’s transmission system for renewable energy. By contrast, China is spending 23 percent of its 4 trillion yuan ($585 billion) in stimulus to make its grid ready for alternative sources, using advanced electrical technologies from Zurich-based ABB Ltd. and American Superconductor Corp.

Grid Gets Less

“China’s our fastest-growing market,” said Jason Fredette, investor relations manager at Devens, Massachusetts- based American Superconductor, which has outperformed the Standard & Poor’s 500 Index by 93 percentage points this year. “We’re not counting on U.S. stimulus money.”

The Energy Department’s latest round of loan guarantees, announced July 29, underscored the government’s emphasis on alternative energy over the transmission system itself. The department said it will provide as much as $30 billion for renewable projects, compared with $750 million to increase the reliability of the nation’s power network.

The administration is counting on private utilities and transmission developers to complement its investment, according to Wellinghoff. Yet a full refit of the U.S. grid would cost $13 billion annually over 10 years, compared with the $5 billion a year averaged over the last decade, said Rich Lordan of the Electric Power Research Institute, an industry-funded energy research organization in Palo Alto, California.

Consumer Backlash

The amount utilities will spend is limited by how much consumers are willing to pay for transmission work and alternative energy, said Keith Martin, a lawyer at New York- based Chadbourne & Parke LLP who represents developers of renewable projects. A new solar-power facility costs three times as much as a coal-fired plant of the same size, the Energy Department estimates.

“Five years from now, we could experience ratepayer backlash,” Martin said.

Encouraging alternative sources without preparing the grid heightens the risk of shortages, said Will Gabrielski, an analyst with Broadpoint AmTech Inc. in San Francisco. He ranked first in a Bloomberg analyst survey based on the 12-month accuracy of his calls on Houston-based Quanta Services Inc., the largest U.S. builder of power lines.

Texas Misstep

The consequences of failing to improve the grid played out last year in Texas, the biggest U.S. generator of wind power with 7,907 megawatts, enough to supply about 6.3 million homes. When winds died in February 2008, utilities had to cut power to factories and offices as output dropped 82 percent.

Texas’s transmission network is mostly independent of the nation’s. Without added power lines, operators were unable to draw enough replacement electricity to keep businesses supplied.

“The rule of thumb is by 2011 we need to see significant upgrades” to avoid such shortages caused by the intermittent, unreliable nature of renewable-energy sources, Gabrielski said.

The outdated network led to the nation’s worst blackout six years ago this month. It cut power to 50 million people in eight states and the Canadian province of Ontario, causing about $10 billion in damages.

Obama targets 25 percent renewables by 2025, more than five times the current amount, excluding hydroelectric, the Energy Department says. That would add about 272,000 megawatts to the grid’s capacity of 830,000, further straining a transmission system largely built more than five decades ago.

Oil-Import Decline

As drivers shift to hybrid and electric cars, oil imports will decline from 58 percent of supplies to 40 percent by 2025, according to Energy Department data.

Alternatives such as wind demand more power lines and substations than coal-fired plants, which provide a steady stream of electricity. If the wind is blowing hardest in North Dakota, yet needed in Chicago, lines must transport the power. That’s not an issue with nuclear and coal plants, which tend to be built closer to where the electricity is used.

“We need a national policy commitment to develop the transmission infrastructure necessary to bring renewable energy from remote areas, where it is produced most efficiently, into our large metropolitan areas, where most of the power is consumed,” Wellinghoff said at a July 20 conference in Seattle.

Disrupting Service

Regulators don’t know when additional wind and solar power would disrupt service. FERC has commissioned a study to answer that question by the first quarter of 2010, Wellinghoff said in a July 31 Bloomberg Television interview.

He was first named to the commission by President George W. Bush in 2006. Wellinghoff, 60, an energy-law specialist, previously represented federal agencies, renewable developers and clean-energy advocates. Obama designated him chairman of the commission in March.

His challenge is persuading utilities and developers to expand transmission fast enough to support Obama’s renewable- energy plans without inciting fears that it could cause shortages, said Katie Renshaw, a lawyer with Earthjustice, an environmental group based in Washington.

“It’s not an easy task,” said Renshaw, whose group filed a complaint in a San Francisco federal court on July 7 accusing U.S. agencies of planning 6,000 miles of rights-of-way for new power lines and pipelines, yet leaving areas with renewable energy resources “stranded or underserved.”

“We’re concerned the Obama administration isn’t moving fast enough,” Renshaw said in an interview.

‘Hard Work’ Ahead

The North American Electric Reliability Corp., a nonprofit group based in Princeton, New Jersey that oversees power systems serving 334 million people, said in an April report that grid monitoring must be improved to add wind and solar power without harming reliability.

“It’s absolutely a concern, but not something that we think is impossible,” said Kelly Ziegler, a NERC spokeswoman. “It will require a lot of hard work.”

One obstacle is the lack of federal authority to choose locations for new lines. Investor T. Boone Pickens, who met with Obama in Reno, Nevada, last August, is helping lead the push to address that.

“I told Obama that it has to be like Eisenhower did in 1956 with the national highway,” Pickens said in a July 7 interview, referring to President Dwight Eisenhower’s expansion of the interstate highway system for economic development and national security. “You could solve this within 10 years. All we need is federal siting authority.”

Pickens’s Wind Farm

The lack of lines forced Pickens to shelve a $10 billion Texas wind farm last month. He is searching for a place with transmission capacity for the 667 turbines his Mesa Power LLP ordered from General Electric Co.

Upgrades face opposition from state officials who want to retain control. Southern California Edison, based in Rosemead, canceled a plan to import solar power from Arizona in May after state regulators there criticized the project as a “230-mile extension cord” that wouldn’t benefit their residents.

On June 17, the Senate Energy and Natural Resources Committee voted 15-8 for a bill that would give FERC the ability to overrule state objections to the siting of interstate power lines. The panel’s chairman, Democratic Senator Jeff Bingaman of New Mexico, sponsored the legislation.

Without addressing such issues, only so much solar, wind and other new-energy sources can be loaded onto the grid, said Tucker Twitmyer, who helps manage $380 million in energy technology funds for EnerTech Capital in Wayne, Pennsylvania.

“Reliability remains the top priority for utilities,” Twitmyer said. “That’s a natural boundary in terms of what can be done with renewables.”

To contact the reporters on this story: Christopher Martin in New York at cmartin11@bloomberg.net ; Mario Parker in Chicago at mparker22@bloomberg.net .