An International Crisis
Shortly before Hurricane Sandy, since September, the US Federal Energy Regulatory Commission (FERC) was handed the task by the Obama administration to create a security strategy for the power generating sector, electric grids, and gas and oil hydrocarbon facilities including pipelines and refineries, through the newly created Office of Energy Infrastructure Security. For the media, and for many politicians both in the US and elsewhere, the prime focus for concern is the terrorist threat. As the media often reports, energy infrastructures such as LNG terminals and nuclear reactors are "atomic weapon equivalent" and vulnerable to sufficient organized groups with basic weapons, equipment and the know-how.
As Sandy showed, however, no terrorist is needed for worst-case weather events to "crash" infrastructures and in this case leave up to 10 million persons with no electricity for days on end. Even worse, however, as the FERC has said in an early status report released in November, energy infrastructures can be self-damaging and in certain cases "self-crashing". Reasons for this include a long list of causes: years of not-benign neglect, under-maintenance, policy dithering, brusquely changed corporate and political goals, new energy supplies and energy needs, and a plain simple lack of cash - a lot of cash.
As Washington hunts shadowy terror groups like al-Qaeda in the Middle East, North Africa and worldwide, and mulls options for either aiding or stopping Israel from bombing Iran’s real nuclear installations and supposed nuclear weapons production potential, it has more pressing energy infrastructure security problems at home. We can forget, or at least relegate cyber warfare and highly organized terrorist attacks to the pulp fiction shelf for bored readers because the real problems include an absence of strong political control and leadership, undersized but also sometimes over-sized physical equipment, outdated control and monitoring systems, disputes between different power producers and energy companies on who pays for what, and even a lack of spare parts result in creaking energy infrastructures with massive technological and economic obsolescence.
As the FERC's early status report indicated, the triple task of upkeep, maintenance and modernization of the USA's energy infrastructures is simply not possible, and new rules and new political powers to decide and enforce are urgently needed.
Media and public opinion is easily roused by the creaky state of power grids when an event like Hurricane Sandy cuts off power to nearly 10 million people. For at least a week, talk about energy infrastructure spending can edge its way into mainstream news shows and conversation spots on the Web. Also, at such times the specter of terror attacks, including cyber attacks which could take down large portions of the grid, blow out oil refineries and gas reforming plants, or cripple nuclear power stations are given a trot through news shows and the press media.
But the mega challenge of how we change and renew energy infrastructures, and who pays for it, is a lot less thrilling and a lot more real - so it gets no media attention.
The FERC’s recent gloom-and-doom status report comes on the heels of the recently declassified 2007 report by the National Academy of Sciences (NAS). The NAS warned that a potential terror attack on the US power grid could wreak damage a lot larger than Hurricane Sandy really did in 2012. It could cause massive blackouts for weeks or months at a time. But this would only be the beginning, the Academy warned, spelling out a "countdown to zero" scenario in which power blackouts lead to system failures across the energy sector, in the economy and in transport, creating a web of fear, panic and instability.
The big difference was this: Sandy was real and was not caused by terrorists. Sandy-type crises can occur almost anytime and anyplace - more so when no preventive action is taken.
When it comes to doing something and taking action on the energy infrastructure crisis, however, there are almost as many theoretical options available as the multi-billion-dollar spending needed for each option. Worse again, whatever the option chosen for reinforcing and strengthening, renewing and upgrading or changing energy infrastructures, the construction and works programs will take years, even decades, during which technology changes, even breakthroughs may make it all unnecessary.
In turn this has created a default "wait and see" syndrome, and an allied "stay hopeful" syndrome which afflicts US energy infrastructures and those of all the other developed countries in the OECD group at this time. One thing is however certain: waiting for something you dont want, but doing nothing to avoid it coming, makes sure that all bets are on the worst case outcome.
In some countries and regions this set of syndromes and the same accumulated problems which have created the US energy infrastructure crisis are coming to a head even faster than in the US. One key example is Europe and its national renewable energy action plans (REAPs), set by the December 2008 European Parliament climate-energy vote to change Europe's energy future. The climate-energy policy, and the member state REAPs now guide Europe's energy future - which has a huge infrastructure renewal and development component.
The problem is that since 2008, the extreme high costs of changing Europe's energy infrastructures - especially power grids but also gas grids, road transport, urban development and housing energy systems, and others - has daunted national governments battling with Europe's debt-and-deficit crises in a near-zero or declining economic growth context. Adding up Europe's energy spending plans for the 7 years to 2020, these may total more than 750 billion euros, about $1 trillion. Power grid spending alone, if it was fund-able, could take as much as 500 billion euros but building works, if they started today would stretch far into the 2030's.
Exactly as in the US, Europe has embarked on an energy revolution that will most and first affect electric power production, power transport and utilization. The leader country in Europe for energy transition, Germany, has official plans set by its Energiewende policy for achieving at least a 35% share of renewable energy in its power supply by 2020, and over 60% by the late 2030's. Also including the complete abandonment of nuclear power, its Energiewende is a national symbol of progress - turning back is not politically possible. Outside the political arena, however, the complex set of options for Germany's power sector, set by Energiewende, are so contradictory and difficult to reconcile that on-the-ground power grid development and reinforcement to avoid blackouts and brownouts is nearly moribund. For Germany, and for the US and other developed countries - and increasingly China and India - the options are starkly different. The only common denominator is that all options are expensive and will all take many years, in fact decades to achieve when they are decided, and if they can be funded.
Smart Grid, Super Grid or Local Power
Germany is far ahead in the race to shift away from fossil fuels to clean energy: despite the country being nearer the Pole than the Equator, Germany has the world's largest installed solar power capacity - closely followed by China, which today has solar cell production capacities estimated at around 2 times world total market absorption capacity, with an inevitable sharply depressive impact on solar cell prices. In Germany, there now daily conversations, even on afternoon phone-in TV shows, as to whether it needs Smart Grids, a national Super Grid or maybe no grids at all - just local power supply systems.
Sharpening the conversation and showing how fast power systems can change, but how peoples' thinking does not, Germany in Summer 2012 had weekends and public holidays, of low power demand, when the combined output of its solar power plants and wind farms was more than the country could consume! This was in no way comfortable for power grid operators or power producer companies - or local and neighboring countries. The complex power pricing system designed and voted by legislators to favor renewable-source power had not anticipated straight oversupply: power producer and distribution companies were forced to pay consumers to take electricity, or shed it, or demand that power grid companies transport it "somewhere else". This included neighboring Poland, leading to large technical problems - similar to terror attacks - at Poland's frontier transformer stations which overheated, and in some cases melted down with the onrush of German surplus power.
For Poland this was attempted sabotage of its power grid, by Germany, with Polish politicians adding they even suspected Germany of wanting to do this because Poland continues to generate most of its power from coal, and has taken a tepid line on European energy transition policy targeting "all renewable" power. Effects on spot and short-term power pricing were and are as anarchic as any cyber attack. Under extreme conditions of oversupply, Germany's massive renewable power capacities result in consumers being actually paid to use it. The reverse side of the coin is that at night, in winter and when the wind doesn't blow, power prices can spiral to around 20 euro cents per kWh, pricing this power at $320 per barrel of oil equivalent.
The bottom line is however simple: only a European-sized, continental scale Super Grid able to transport huge chunks of power could resolve this problem.
European Union energy regulatory and advisory agencies including the ENTSO-E (electric power transport operators' advisory agency) can give the figures on what is theoretically needed and how much it might cost: a minimum of about 45 000 kilometres of all-new high capacity power transport systems featuring HVDC lines (High voltage DC), often located underground for environmental reasons, costing a total of as much as 400 - 500 billion euros. If building work started tomorrow, it might be completed before 2035.
This European Super Grid, whose chances of ever being built are likely no higher than Mitt Romney winning the 2016 presidential election, would need to be able to shift about 90 GW (90 000 MW or the output of 90 industry standard nuclear reactors) in any direction around Europe, on a sustained basis. Current largest power exchange and transport capacities between countries in Europe are the 6 GW link between Germany and France, which does not have 24 hr/365 day transport capacity but only operates as a peak demand transport link. Other reasons the Super Grid will likely never be built are due to what are called "systemic risks": a continental power grid would under worst-case conditions be more likely to cause continental-scale power blackouts, rather than local-only.
Smart or Dumb?
Smart Grids are developing, and basically only concern better, more precise metering and therefore prediction and control of power demand and distribution needs in existing networks. Public and consumer reaction to Smart Grids is often hostile, due to vastly variable, often punitive tariffs being applied to consumers, with no real compensating benefits. Their main benefit for power producers is simple: they can avoid having to build more power generating plants and transport infrastructure, making their infrastructures a "tighter fit" with the power demand at any one instant, and in general terms saving the costs of producing power that isn't needed.
This goal is in fact directly opposed by growing renewable power output - which is variable and intermittent - and has a marginal cost of nearly zero: each additional kilowatts costs almost nothing. Making power demand more predictable and lower, runs right against the main problem for renewable electricity supply, which is too much supply at the wrong times, as Germany has already found with its Polish neighbors.
The main technical problem is simple but the answers are not: How do we store surplus power? Electricity is hard and costly to store; the subject has been kicked around by academics and engineers for close to 150 years with no breakthrough answers in view. Because there are no easy answers, no action is taken.
So what is being done to mitigate risk? In the US, the "energy infrastructure debate" is rumbling along and the media awaits another Sandy-type crisis to bring the subject back on prime time. We can also move back to Germany and find one major response that nobody predicted 5 years ago. All of Germany's world class automobile markers now have their own electric power plans featuring in-plant, company generation and supply of power. Essentially, the automakers seek independence from national power grid supply - smart, super, dumb or otherwise.
This is both a risk-averting strategy and a way to save money: in the same way as German private consumers they like the idea of free electricity on good days, but electricity at 20 euro cents a kWh spells economic ruin. Their generating plans include all possible supply sources: fossil energy, from coal to gas (potentially shale gas), to all the renewables with a strong focus on solar power, because solar PV cell costs are now at extreme lows.
Also in Germany but increasingly in other countries including Japan and South Korea, city-scale localized power development projects are moving ahead rapidly. The goal for German Stadtwerke (municipal energy suppliers) is the same as for the country's automakers: independence from the grid, and developing own source and local energy and power resources, with great potentials for also locally producing and selling winter heat, summer cooling, and transport services based on locally-produced or locally-sourced energy and power, either fossil or renewable.
Corporate Inaction, Government Confusion
In the above German case the results are simple: a national Super Grid is beginning to look unlikely; local Smart Grids will certainly develop, but the previous national-based 20th century style power system is breaking up, down and apart. During this process which could stretch for decades, vulnerability to breakdown will be high - forgetting all about terror attacks.
In the US, the FERC has already bluntly said utility companies aren’t doing enough, and this complaint is commonplace in Europe. One reason is simple: as we saw above the options are so far apart, but are all expensive, making for "policy freeze" or the rabbit-in-a-headlamp syndrome for energy sector corporate deciders. Also as in the US, where the FERC does not have the power to order utilities and energy companies to act to protect or develop energy infrastructures, governments elsewhere can't force the pace. In any case they are themselves undecided on what is the best strategy. Under extreme conditions, perhaps, they may re-nationalize power production or at least power transport systems, but this again is a difficult option - including politically.
When we add the new media favorite of Islamic or Narco-gang terror switching their ire to power and energy systems, bolstering our energy security status is however just one more mega spending demand, added to all the others. Security is expensive, and in the US and most other OECD countries more than 90% of the country’s grid is privately owned, even if it is regulated by local or national governments. Private utilities and energy companies are already unsure on what energy transition options to choose and how to pay for them - and do not feel responsible for footing a new mega bill for increased security. Facing a constant retreat of investor confidence and ever-rising debt, utility companies and grid operators in most developed countries already have more than enough problems.
Both in the US, Europe, in Japan and other developed countries the "hands off" attitude to energy infrastructures, in particular power grids, oil pipelines and gas lines - has often resulted in tragic accidents, loss of life and massive pollution. One extreme example was the BP Deepwater Horizon event, concerning deep offshore oil production capacities.
One key problem is a theoretically simple one to resolve: a lack of systematic maintenance and stocks of key spare parts. But this faces the immediate problem of scale. Taking the US case, its power grids are vulnerable because they are spread out across a total of about 275 000 kilometres (170 000 miles) of voltage transmission line fed by nearly 2500 high-voltage transformers delivering power to 125 million households. US oil pipelines span a total of more than 300 000 kilometres, and gas pipelines more than 200 000 kilometres. This creates an image of rich and dense infrastructures, but the reality is that an already large and rising percentage of these infrastructures are in "low level care" status, either unused or operating at a fraction of their design capacity because of years or decades of critical under-maintenance and lack of spare parts.
The Army Goes for Energy Independence
Especially in the US but also in other countries, one key result of this "on the brink" status of energy infrastructures is that the military, at least, is acting to protect its own energy and power supplies.
Recent action includes the US Army Corps of Engineers awarding a $7 million contract for research on how the Army can use more electric vehicles, wind generators and solar arrays. Pentagon plans are for US military forces to source at least 33% of their fuel and energy needs from renewable and alternate energy sources by about 2017. Without this ever being stated, one key reason is not the cost-saving potentials, but the rising frequency of outages, breakdowns and failures of external and existing energy and power supplies.
Back in the civilian world, however, things are unfortunately moving slowly and in opposing directions, as the German example shows. While the media amuses or thrills readers with already dated talk about energy-crippling cyber attacks, or physical terror attacks on power plants by Koran-wielding guerrillas, the real world system of energy infrastructures in all developed countries is under attack every day from changing needs, new energy options, different political and economic demands on the energy system and rapid technological change. These are imposed on creaking, outdated, often obsolete existing infrastructures.
To be sure, the supposed lessons from "Frankenstorm" Sandy are that weeks-long power outages from the storm show that electric grids are too fragile and easy to disrupt, and need bolstering to protect and secure energy infrastructures from terror attack. Sandy was far from a terror attack, and only showed how weak existing systems really are. The FERC has itself, in the small print of its report explained that cyber attack and bin Laden may be "sexy" for readers of pulp fiction, but this is only a small piece of the security puzzle. It underlined that US authorities are still neglecting the myriad of simpler and real threats to the electricity grid and other energy infrastructures. These don’t make for easy headlines but do concern the real world. Time and cash are short, and the present outlook is for more and further "systemic breakdown events" in energy infrastructures, without the need of a single rustic AK47 or theatrical Fatwa.