Power firms grasp new tech for aging grid

Published: July 11, 2008 5:41 p.m. ET




BROOKHAVEN, N.Y. (MarketWatch) -- On the ground beneath a forest of power transmission towers in suburban Long Island, experimental wires cooled by liquid nitrogen carried 138,000 volts in flat strands about the size of linguini.

Power executives, engineers, and the media gathered recently to officially throw the switch at the $60 million Holbrook Superconductor project, the world's first transmission power cable transmitting waves of electricity from the grid to a substation that feeds actual U.S. homes.

Surrounded by stainless steel tubing and insulation, the three superconductors at Holbrook move power down a corridor only four feet wide. The 600-meter-long underground cable system consists of about 99 miles of superconductor wires from American Superconductor chilled to minus 371 degrees.

"These are electricity pipelines," said Greg Yurek, CEO of American Semiconductor AMSC, +4.88% as he waved his hand at the giant power lines above. "Just look at the right of way, 200 to 300 feet wide. That costs a lot of money. Compress all that down to those three simple superconductor cables, and that's a lot less right of way. That's going to reduce overall system cost. That's gonna go right to the ratepayers."

Faced with the threat of a major crisis from handling increased loads over electricity bottlenecks with 100-year-old gear, electric power providers are eying new technology to help shore up America's aging grid with about $17 billion in spending by 2010.

"If we don't invest in technology and we continue to have an antiquated system that's not able to predict problems before they happen, we'll be looking at increasing power quality problems and blackouts," said David Brewster, president of EnerNoc ENOC, +1.64% a provider of so-called "smart grid" technology.

The times remain challenging on several fronts for utility providers, saddled with uncertainty over climate legislation and questions over how much more power will be needed in the face of the economic slowdown. The need for system upgrades brushes against political pressure to keep rates down.

While they've been criticized in the past for moving too slowly, the monolithic electric power generation industry in the U.S. is finally picking up the pace of adopting high tech.

For example, Xcel Energy XEL, +0.39% has been applying new grid technology in Boulder, Colo., which it's dubbing the nation's first "SmartGridCity." And Dominion's D, +0.22% Virginia Power unit has been offering smart meters to home owners to tell them how much energy they're using and how much it costs.

For American Semiconductor and others in the electric power equipment game, it's been a long haul before the power industry turned on its light for superconductors and other cutting-edge technologies, even as demand for electricity rises.

Superconductors first emerged in the laboratory in the early 20th century. And American Superconductor has been among those pushing it for some 20 years.

Rate increases move to center stage

This year the power industry is emerging from a relatively quiet period following the headline-grabbing blackout of 2003 and the rolling California brownouts of the Enron era in 2000-2001.

Then, as fuel prices began their record run in 2007, utilities around the country started scrambling to cover costs by imposing fuel surcharges and regular-approved rate hikes.

More than 100 state regulatory actions are planned or in progress to address rising electricity costs, according to the Edison Electric Institute.

In June, giant Florida power provider FPL FPL, -2.34% won the OK to hike residential monthly bills by an average of 8% from August through December to cover half of an estimated $746 million in unanticipated fuel costs. All told, FPL is moving to get a 19% boost spread into 2009.

Nationally, electricity rates have been increasing at about 2.5% a year since 2000, ahead of the 2% rate of inflation.

Some argue that even with fatter rates, electric power providers aren't moving fast enough to update the grid.

"They're the biggest bunch of troglodytes this country has ever seen," said analyst Michael Carboy of San Francisco-based Signal Hill. "They're utterly resistant to change."

He pointed out that the industry has yet to live down a massive summer 2003 blackout, when power outages struck from southern New England to Michigan.

While FirstEnergy FE, +0.71% faced blame after the problem was traced to its territory in Ohio, a combination of power plant shutdowns, line failures and voltage problems that were building for several hours before the final crash were also a cause.

"Utility people often wait until a crisis," Carboy said. "Part of that is their nature, part of it is from aspects of the regulatory environment."

Rate hikes are reluctantly OK'd by public utility commissions, which often resist the political will of state governors and other chiefs. Leaders shy away from unpopular decisions to hike rates, even at the cost of long-term health to the grid, Carboy said.

"Energy prices are going up for everyone for the next decade," Carboy said. "For utilities, the cost of generating energy and orchestrating or administering its transmission is going to get more expensive, not cheaper over time. You have to accept that fact and start paying more."

Throwing the switch for technology

Saddled with soaring costs and a scramble to boost utility rates, the techno-shy U.S. power industry now finds itself flirting with advanced superconductors and other high technology to shore up the creaky American electricity grid, amid jumbo demand growth.

"Despite the lousy economy, the lousy stock market, the lousy real estate market, the demand for energy continues to go up, especially on Long Island," said Kevin Law, CEO of the Long Island Power Authority, one of the largest public utilities in the country. "Our demand is going up 2% a year in Nassau and Suffolk counties and 7% a year on the eastern end of Long Island."

Customers will continue to snatch up power-soaking air conditioners, flat-screen TVs, cell phones, portable digital devices, video game consoles and even electric cars in the near future.

"The cost of oil and fuel to generate the power is skyrocketing. And we need to be doing things much more efficiently," Law said.

Law, who joined the officials celebrating the launch of the Holbrook Superconductor project after two years of construction, pointed out that much of the technology in the grid hasn't had a major upgrade since Dwight Eisenhower lived in the White House in the 1950s.

"We have a high-tech economy but we have a low-tech electrical grid," Law said. "We need to bring our electrical grid into the 21st century. Our system here is about 60 years old. And just like in any area, technology is improving on a daily basis."

Law said the superconductors offer the opportunity to transmit on lines that take up much less space and hold much more power.

"One of the biggest issues New York State has is there's a lot of power up state. There's hydro power. There's wind power. We can't get it down state. Because we have a transmission bottleneck," Law said.

American Superconductor's Yurek would love to help as utilities begin moving ahead with pilot projects to use extremely cold temperature to pipe electricity.

"We're talking billions of dollars a year as the market that's addressable," Yurek said.

Superconductor cables are in commercial use for distribution voltage projects in Columbus, Ohio with American Electric Power AEP, +0.59% and in Albany, N.Y. with National Grid NGG, -0.54% Consolidated Edison ED, +0.29% is installing a superconductor system in New York City as well, he said.

Southern California Edison, Con Edison and Hydro-Quebec officials have also stopped by the Holbrook Superconductor to see the technology working reliably outside the lab.

"Utilities around the world have been looking at demonstrations and tests now for 11 years, since 1997. So there's a lot of questions that they've asked that have been answered year over year," Yurek said, striking a hopeful tone after many years of effort. "Now we've got those cables operating in commercial grids in the United States. We're at the final stages of the customers' adoption cycle."

Quote References

  • AMSC
    +0.20 +4.88%
  • ENOC
    +0.07 +1.64%
  • XEL
    +0.14 +0.39%
  • D
    +0.15 +0.22%

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