Power grid faces biggest challenge of summer

Peak energy demand said to place region at risk of blackouts

By Peter J. Howe, Globe Staff, 8/9/2001

New England's electric grid faces its biggest challenge of the summer today, with some analysts warning of considerable risk of rolling blackouts.

ISO-New England, the Holyoke-based group that runs the six-state power grid, is forecasting a record demand of 24,925 megawatts between 4 and 5 p.m., based on forecasts of near 100-degree weather and soaring humidity that is expected to drive massive use of air conditioning in the region's homes, office towers, and factories.

If the forecast hits the mark, it would be the fourth power-demand record set since July 24, and nearly 1,200 megawatts over the first record of 23,709 megawatts set on that date.

Jaya Bajpai, a consultant with Energy Security Analysis Inc. in Wakefield, said that by this afternoon, ''The grid could be potentially very vulnerable'' to forced rolling blackouts to ensure demand does not outstrip available supply from in-region power plants and Quebec- and New Brunswick-based suppliers.

But Dominic Slowey, an ISO spokesman, said ''We are projecting that we will have enough supply to meet that demand and the 2,000-megawatt reserve'' the ISO strives to maintain to cover the risk of a big power plant suddenly breaking down.

Slowey added, however, that ''They're going to have to watch that on an hour-by-hour basis, and people should definitely be practical about their energy use.'' Slowey said the ISO was prepared to issue a power watch this morning if necessary.

To many market analysts, what has been most surprising about this summer is how well New England's grid has coped with record power demand. The ISO has issued ''power watches,'' or voluntary appeals for conservation, on only two days.

And in the wholesale power spot market, prices have soared to the federally capped maximum of $1,000 per megawatt hour only about a dozen times so far, including an eight-hour stretch on July 25. On Tuesday, when most of New England was socked with temperatures and humidity levels that climbed over 90, wholesale prices never cleared $200 a megawatt hour - normal afternoon levels are $40 to $50 - and yesterday never got above $80.

In New England and most US markets, it is not unusual for spot-market power prices to spike up to 10 to 20 times normal levels during the hottest summer afternoons, and long-term power contract prices normally factor in the likelihood of several big summer price spikes. During a freak May 2000 heat wave when several plants were down for maintenance, prices soared to $6,000, prompting NStar Electric and others to push for the current $1,000 price cap.

Bajpai and other market analysts said they have been surprised that wholesale prices have remained generally well below historical norms this summer.

Neal B. Costello, general counsel of the Competitive Power Coalition, a generators' trade group, said such low wholesale price increases during extreme heat show that the market is not being allowed to work properly.

''We certainly don't want to be in the position of advocating for higher prices, but clearly it is a sign that there is something fundamentally wrong with the ISO-New England's management of the system,'' Costello said. ''The spot market is settling at what is an artificially low number.''

Some economists and power plant developers contend that occasional price spikes are actually good for consumers in the long run, because they increase more investment in building ''peaker units'' like jet turbines that are run just a few hundred hours a year to cover the highest demand.

But Costello said wholesale prices in recent weeks ''aren't sending the right signal to the investment community'' because it appears there is no need for more generating capacity.

Ironically, earlier this year, power generators were facing widespread charges that they were attempting to drive up wholesale prices by keeping plants out of operation.

Some market analysts say this summer's small wholesale price spikes could in fact be an indication the system is working as intended, and that new plants already are having an impact on curbing price increases.

Ellen Foley, an ISO spokeswoman, noted that 3,000 megawatts of new power supply have been built in New England since 1999.

''ISO-New England is operating the marketplace in accordance with'' both power-grid rules and price bids from plant owners, Foley said. ''Competition has increased in New England as a result of the increase in supply within New England and the availability of power from adjacent neighbors'' in New York and Canada.

Gary K. Markowitz, president of Kilojolts Consulting Group, a Lexington firm that advises businesses on electricity management, agreed, saying, ''I think the marketplace has developed nicely in New England. Because of higher prices for electricity and a developing competitive marketplace, suppliers and potential suppliers have come to the market and have installed capacity. That's the part of [industry deregulation] that has worked so far, unlike in California.''

Markowitz said he expects that large commercial customers will be getting calls from utilities today to take voluntary steps to reduce power use to stave off any risk of rolling blackouts.

''Will it be enough? I think so,'' Markowitz said.

This story ran on page 1 of the Boston Globe on 8/9/2001.

http://www.boston.com/dailyglobe2/221/business/Power_grid_faces_biggest_challenge_of_summer+.shtml

-- Martin Thompson (mthom1927@aol.com), August 09, 2001