There have been numerous discussions, reports and suggestions over the years on how to reform the Alaska Railbelt’s aging power transmission grid, to overcome inefficiencies in the grid operation and deal with some single points of failure along its length. Those inefficiencies translate into higher than necessary bills for electricity consumers, while weaknesses in the grid infrastructure could result in power outages.
In a talk to the Regulatory Commission of Alaska on May 20, Antony Scott, senior economist and energy analyst with the Alaska Center for Energy and Power, suggested a gradual approach to grid reform, with the commission facilitating improvements in the way in which the grid is managed while also ensuring that new power generation connected to the grid fits within a regional plan for coordinated generation capacity.
Independent utilities
Six independent electricity utilities and the state of Alaska currently own different sections of the grid, with the dispatch of power around the grid being managed through several distinct sectors. This fragmentation of the grid management impedes the possibility of making best use of the generation capacity available on the grid while also making it difficult for individual utilities to invest in major grid upgrades. The grid stretches from Homer in the southern Kenai Peninsula to Fairbanks in the Alaska Interior. It hooks together several major population centers along its route, as well as linking to power stations including several gas-fired power plants, a couple of hydropower systems and two wind farms.
The Alaska Legislature has directed the commission to investigate whether there would be benefit in having some form of independent operator manage the grid. In conjunction with the commission’s investigation, Scott has been conducting a series of talks, presenting to the commissioners an analysis of the costs, benefits and options for establishing a single operator.
Iron quadrangle of inertia
Scott characterized the current situation as an “iron quadrangle of inertia,” an impasse involving four key players: utility management, utility boards, regulators and the state Legislature. Each of these players has some issue that inhibits action towards solving regional grid problems. Utility management teams have high levels of expertise but suffer from a long history of inter-utility mistrust; utility board members often lack the expertise necessary for dealing with the complex technical and management issues involved; the regulators have some authority but have tended not to be trusted with furthering policy agendas; and the Legislature has power but lacks expertise.
At the same time, there is in the state a culture whereby the utilities tend to want to act individually, without being told what to do, while the citizens of the state ultimately pay for any inefficiencies in the electrical system, Scott commented.
And so the crux of the question that the commission faces is whether to recommend continuing the status quo, or whether to recommend that the utilities not be left to their own devices. And that latter option would inevitable require some level of coercion, to force the utilities along a path that they might not otherwise take, Scott said.
Costs and benefits
In previous talks to the commission Scott had presented the results of some economic analysis that indicated that, while the cost of implementing a system of more unified management for the transmission grid would be modest, the unification would bring benefits, particularly in the form of “economic dispatch,” the ability to always use the least expensive generation sources along the grid to meet the constantly varying electricity demand.
Linked to the economic dispatch issue is the question of upgrading the transmission grid, given the limitations of the current grid infrastructure’s ability to carry power reliably from wherever it is generated to wherever it is needed. In 2013 the Alaska Energy Authority recommended a program of grid upgrades that would cost in excess of $900 million. But the utilities have balked at that cost, especially given the large amount of money that they have spent in recent years making major additions and upgrades to the power generation assets on the grid.
However, Scott, as part of his analysis, has determined that the benefits to be gained from economic dispatch on an upgraded grid would approximately pay for the cost of the upgrades. And the upgrades would in addition bring improved power supply reliability, a benefit that is difficult to quantify in dollar terms but which most people would agree is important.
Inadequate business model
Scott said that a key problem with the current situation is the lack of a business model for making transmission upgrades, with no one having the authority for global planning and with a lack of clarity over who should set reliability standards for the grid.
Moreover, the current fragmentation of the grid management constrains the ways in which the grid can be used, with those constraints inevitably leading to inefficiency in the way the grid operates. In a previous talk Scott had mentioned the constraints associated with the multiplicity of transmission fees charged by the multiple utilities, with that complex fee structure inhibiting the flexible use of the system to move electrons from one place to another.
So what should the commission recommend to the Legislature for the future management of the grid? And should the Legislature dictate a solution to the utilities? And what should be the commission’s role in this, given the commission’s duty to oversee efficient and effective utility operation? In 2010 the Legislature debated a bill to force all of the Railbelt transmission and generation assets into a single generation and transmission entity, but that legislation failed to pass.
Not highly prescriptive
Scott cautioned against proposing some highly prescriptive solution to the transmission grid problem. It is simply impractical to provide the necessary information for generating the required legislation, given the complexity of the issues involved and the many competing interests and voices, he suggested. Moreover, it is the utility management that has the depth of expertise in the issues involved, with that expertise currently being directed at the effective running of the individual utilities.
Scott argued for a more gradual approach to reform, with any new institutions being thought of as starting points rather than a final approach. However, it may be useful to enact some enhanced standards for utility practice and management, possibly extending to inter-utility management, he suggested.
But, in any transition, the commission would have a critical role in facilitating a process whereby the utilities move towards a more unified approach to transmission grid management, with the commission also retaining coercive authority as a backstop, to make sure that progress is made.
Scott suggested that this situation could be achieved with some legislative action. Firstly, the Legislature should clarify the commission’s authority over inter-utility issues, rather than just over individual utilities. Secondly, the Legislature needs to empower the commission to use the regulatory fees it charges the utilities to fund an increase in the commission’s staffing level to accommodate the work effort required to conduct its facilitating role, he said.
It would also be helpful if the commission had the authority to require the utilities to obtain approval for the construction of new power generation assets - this authority would enable the commission to ensure that new facilities are consistent with a regional plan that the utilities themselves would have to maintain, Scott suggested.
