A Bold Vision for Transmission and Distribution Conference on Electricity Transmission in Deregulated Markets Carnegie Mellon University December 15, 2004 Kurt Yeager, EPRI Transforming Society The vast networks of electrification are the greatest engineering achievement of the 20th century – U.S. National Academy of Engineering 2 Copyright © 2003 Electric Power Research Institute, Inc. All rights reserved. The obligation to serve remains alive and vital in the public mind 3 Copyright © 2003 Electric Power Research Institute, Inc. All rights reserved. Breaking the Limits on Electricity Value Performance • Networked digital economy Transformation • Electric Light • Refrigeration Investment 4 Copyright © 2003 Electric Power Research Institute, Inc. All rights reserved. Pacing Issues to be Resolved 1. Poorly designed market reforms that ignore the laws of physics 2. Depressed financial health reinforced by regulatory confusion 3. Ineffective commingling of regulation and competition 4. Lack of clear accountability and incentives for infrastructure development & investment 5. Growing tension between electricity sector & national well-being 5 Copyright © 2003 Electric Power Research Institute, Inc. All rights reserved. Restructuring Trilemma Politics Economics Technology Policy 6 Copyright © 2003 Electric Power Research Institute, Inc. All rights reserved. What is the root cause? 7 Copyright © 2003 Electric Power Research Institute, Inc. All rights reserved. Average U.S. Price of Residential Electricity Service (1984 $) ¢/kWh 20 • Economies of scale • Demand growth 18 16 14 12 10 8 6 4 2 0 1920 8 1930 1940 1950 1960 1970 1980 Copyright © 2003 Electric Power Research Institute, Inc. All rights reserved. 1990 2000 Average U.S. Price of Residential Electricity Service (1984 $) ¢/kWh 20 18 16 14 Corporate “Liposuction” 12 10 8 6 • Fuel costs • Environmental requirements • Lack of innovation 4 2 0 1920 9 1930 1940 1950 1960 1970 1980 Copyright © 2003 Electric Power Research Institute, Inc. All rights reserved. 1990 2000 Relative Consumer Prices, 1985-2001 (Prices calculated in 2001$, 1985=100) 160 150 140 Health Care 130 Phone Service* 120 Single-Family Homes 110 Cars 100 Electricity* 90 80 70 60 1985 1987 1989 1991 1993 1995 1997 * Average Household Monthly Bill 10 Copyright © 2003 Electric Power Research Institute, Inc. All rights reserved. 1999 2001 Relative Consumer Prices, 1985-2001 (Prices calculated in 2001$, 1985=100) 160 150 140 Health Care 130 Phone Service* 120 Single-Family Homes 110 Cars 100 90 Electricity* 80 70 60 1985 1987 1989 1991 1993 1995 1997 * Average Household Monthly Bill 11 Copyright © 2003 Electric Power Research Institute, Inc. All rights reserved. 1999 2001 Four Areas of Vulnerability SQRA • Security of power delivery and market systems • Quality of power supplied • Reliability of power supplied • Availability of high value energy services 12 Copyright © 2003 Electric Power Research Institute, Inc. All rights reserved. Cost Pressures on the Electricity Sector 12 11 Price per kWh 10 9 8 7 1. 2. 3. 4. 5. 6. 6 5 4 3 2 Fuel Environmental Reliability Costs Security Capital Labor Today 13 Copyright © 2003 Electric Power Research Institute, Inc. All rights reserved. 2015 Electricity Sector Life-Cycle A Fork in the Road Formation Consolidation/ Growth Maturity/ Stability Energy Crisis Transformation Financial Crisis Decay PUHCA 1900 14 1935 1970 2005 Copyright © 2003 Electric Power Research Institute, Inc. All rights reserved. 2035 Key Issue to be Resolved Will the bulk electricity system evolve to become the critical infrastructure supporting the digital society of the 21st century, or be left behind as an industrial relic of the 20th century? 15 Copyright © 2003 Electric Power Research Institute, Inc. All rights reserved. Forward to Fundamentals • Electricity is the engine of prosperity and quality of life • Electricity is a consumer service- based enterprise • Technology can relieve cost pressures through elevation of electricity service value • Realizing these opportunities requires transformation of the electricity infrastructure 16 Copyright © 2003 Electric Power Research Institute, Inc. All rights reserved. Needed: An Interstate Electricity Communications Superhighway 17 11/22/02 3163c1.17 Copyright © 2003 Electric Power Research Institute, Inc. All rights reserved. The Transformed Electricity Enterprise for the 21st Century • Digitally control the power system • Integrate electricity and communications • Transform meter into a two-way consumer services gateway • Integrate distributed resources • Accelerate end-use efficiency • Enable a robust advanced generation portfolio 18 Copyright © 2003 Electric Power Research Institute, Inc. All rights reserved. Value of the 21st Century Transformation Increasing the functionality and value of electricity through consumer benefits that far outweigh the cost • Increased U.S. productivity and GDP growth rates • Substantially improved energy efficiency and electricity intensity • Accelerated reduction in carbon emissions • Improved power system security and functionality • Reduced cost of infrastructure upgrades and expansion 19 Copyright © 2003 Electric Power Research Institute, Inc. All rights reserved. The Intelligrid: The Power Delivery System of the Future • “Smart”: With sensors • “Flexible & Resilient”: An intelligent network w/real-time monitoring & control • “Self Healing”: Capable of predicting and immediately containing outages • Established Standards: Enabling “plug & play” distributed resources and digital appliances & devices 20 Copyright © 2003 Electric Power Research Institute, Inc. All rights reserved. The Intelligrid Technology Program Intelligrid is centered around five active projects: 1. Integrated Energy and Communications Systems Architecture 2. Advanced Distribution Automation / Distributed Energy 3. Resources / Fast Simulation and Modeling 4. Customer Portal 5. Power Electronics 21 Copyright © 2003 Electric Power Research Institute, Inc. All rights reserved. What Will it Take to Achieve this Vision? • A modernized power delivery infrastructure will cost ~$15 billion a year for 20 years • Broken down per household, the cost is equivalent to one medium pizza each month! • Consumers would save $100s per year in cost of goods and services, and enable $1000s more in personal income 22 Copyright © 2003 Electric Power Research Institute, Inc. All rights reserved. Capital Invested as % of Electricity Revenues 60% 50% 40% 30% Generation 20% Transmission 10% Distribution 19 25 19 30 19 35 19 40 19 45 19 50 19 55 19 60 19 65 19 70 19 75 19 80 19 85 19 90 19 95 20 00 20 05 20 10 20 15 20 20 0% 23 Copyright © 2003 Electric Power Research Institute, Inc. All rights reserved. The Plan of the Best Minds in Electricity R&D “Every node in the power network of the future will be awake, responsive, adaptive, price-smart, eco-sensitive and interconnected with everything else” 24 Copyright © 2003 Electric Power Research Institute, Inc. All rights reserved. “Consumers and businesses need reliable supplies of energy to make our economy run -- so I urge you to pass legislation to modernize our electricity system,…” George Bush State of the Union 1/20/2004 25 Copyright © 2003 Electric Power Research Institute, Inc. All rights reserved. 26 Copyright © 2003 Electric Power Research Institute, Inc. All rights reserved.