Thursday, February 16, 2006

Public Utilitie; Electrial Power Detailed By Allan Dane

Electric utilities in North America are characterized by very large investments of money, as you know. Today the cost of large steam generation units that are fitted with steam condensers is about $1.50 per watt of generation capacity. Most units having capacity greater than 300 megawatts will be such.

Most electric utilities, if they have any options available to them, will employ a mixture of generating units because the utilities experience a varying daily load cycle. If the utility were to attempt to employ only high efficiency steam units, those units would be operating for hours each day at much less efficiency than at peak efficiency. Thus the very large increments of power required by customers, which usually occur about 11:00 AM and about 4:00 PM, are supplied from a mixture of less-efficient and maximum efficient generating units.

Prior to 1960 the less-efficient generating units were driven by diesel engines. Although some diesel engines having ratings of perhaps 6,000 kilowatts were available at that time, most of them were around 1,000 kilowatts.

The advantages of internal combustion engines were that they were relatively inexpensive compared to the cost of steam turbines fitted with condensers and they could be quickly started and stopped after the peak load had passed. The disadvantage of internal combustion engines was that they consumed fuel that was more expensive than coal.

Hydro power is extremely expensive because the individual units are very large, very heavy, and usually the dam structures are very expensive. However, once hydro units are started, there is very little cost to keep them fuel costs.

Nuclear power must be considered as extremely expensive in terms of capital costs. The thermodynamic cycle for nuclear power plants is not very efficient because the fuel rods do not return to their original state if the temperature is allowed to exceed much more than 500 degrees celsius. For that reason, very large artificial lakes and very tall hyperbolic cooling towers must be constructed to reject the waste heat from the condensers attached to the steam turbines.

There are two further difficulties associated with the American and the Russian nuclear power plants.

Firstly the American nuclear generation units cannot be refueled under load and secondly they are not intrinsically fail-safe.

As you know, both the Americans and the Russians have had nuclear power plant failures. The Americans have been forced to remove Three Mile Island from service since 1979 and it is very doubtful that it can ever be returned to service. The Russians have been forced to construct a sarcophagus around Chernobyl and it seems quite likely that it can never be returned to service or even that people can live near that power plant.

The fact that the American nuclear power plants cannot be refueled under load means that replacement power and energy must be obtained from a neighboring electric utility while refuelling...and replacement power and energy are very expensive.

I am not certain that the Russian nuclear powerplants cannot be refueled under load but I suspect that would be true. The Russian nuclear powerplants had a graphite moderator and a rapid thermal cycle is believed to have caused the disaster at Chernobyl. British scientists had known of the difficulties of this nature and decided not to use a graphite moderator in their nuclear powerplants.

The CANDU reactor can be and usually is refueled under any load.

The American, Russian, Canadian, and probably British and French nuclear reactors exhibit severe corrosion problems. Approximately 50% of the tubes in the Palisades Nuclear Steam Generation unit have been welded closed due to this problem. In simple terms: this powerplant can only generate about 50% of the megawatts it was expected to be able to generate.... The CANDU reactors leak deuterium oxide (heavy water) and replacement is very expensive.

While several American utilities have expressed interest in constructing new nuclear generation powerplants, no new nuclear generation station has been placed in service in the USA since 1979.

When President Reagan was elected in 1980, interest rates on mortgages in the USA were generally "decent", about 7%. Shortly after his inauguration, President Reagan started the USA on a wild expenditure to rebuild the US Military. By 1984 the US Federal deficit was about $350 billions each year and interest rates that electric utilities were paying for borrowed capital reached 20%. Soon it became obvious that any electric utility which had an incomplete powerplant still under construction at that time would be seeking protection from its creditors.

Late in 1984 I was one of two individuals in the corporation for which I worked assigned to determine how much money had been invested by a consortium of three utilities that were constructing a nuclear powerplant at Sandusky, Ohio. Sandusky is located about one-third of the distance between Toledo and Cleveland between Interstate 80 and Lake Erie. The consortium had invested about $6 billions and were seeking protection from their creditors.

On August 14, 2003 there was a blackout which affected most of Ontario, New York State, Ohio, and parts of Michigan. This blackout lasted several days. By placing a Google Alert on Electric Power I was able to learn that the blackout was due to failure of "FIRST ENERGY" to trim trees along one of its rights-of-way. Electrical engineers have known for at least a century that utilities must trim trees so I put a Google Alert on FIRST ENERGY. Not long after that, I learned several things:
(1) FIRST ENERGY owned the nuclear powerplant at Sandusky
(2) FIRST ENERGY had been granted permission to discharge more than 100 employees at the Sandusky powerplant
(3) FIRST ENERGY has been charging homeowners $200 per month to be connected to their system and that does not include the cost of energy....

I had known that there were "very friendly" relations between the Investor Owned Utilities of the USA and the Republican Party for many years. To give you a better picture...

One of the men who contested with FDR for President of the USA was Wendell Wilkie. Before Mr. Wilkie entered politics he had been CEO of the Commonwealth and Southern Group. One member company of that Group did the engineering and design duties for the whole Group and later was known as Commonwealth Associates, Inc. which employed me from 1971 until 1986.

Before the "crash" of November 1929, investor owned utilities had been borrowing money leaving the impression with the banks that the money would be invested in generation, distribution, and transmission facilities but invested the money in real estate.

In 1935 the US Congress passed the "Public Utilities Holding Companies Act of 1935". If the Holding Company had connected the various entities together by transmission lines, PUHCA permitted the Holding Company to continue to operate as such; otherwise the Holding Company was forced to dissolve and the individual Public Utilities were forced to operate independently under the supervision of the Securities and Exchange Commission. The Commonwealth and Southern Group was one that was affected by PUHCA.

The "Southern" part of the Commonwealth and Southern Group still operates as the Southern Corporation but the "Commonwealth" part is now called Consumers Power. I doubt if I knew anyone that was employed in the Southern Corporation but I knew several who were employed by Consumers Power.

About the middle of 2005 Congress repealled PUHCA.

My point? Do not expect the Investor Owned Utilities of the USA to criticize, publicly, the economic policies of a Republican administration. Privately it may be done, however, and Kenneth Lay, former boss of Enron, apparently had a private meeting with Vice President Richard Cheney for that purpose.

Presently the annual US Federal deficit is approximately $470 billions and the final bills are not yet paid with regard to Hurricane "Katrina". Some expect that the deficit for 2005 will exceed $500 billions. If President Bush carries out his threats in regard to Iran the possibilities of American withdrawal from Central Asia before 2009 become vanishingly small and the deficit likely will accelerate well past $500 billions each year.

Back to the "fall-out" of the black-out of August 14, 2003!

As a consequence of this black-out a new organization was formed, calling itself the National Electric Reliability Council. The dominant players in this organization appear to be American Investor Owned Utilities but, supposedly, all utilities of North America are members of this organization and it appears that the NERC has no real power to enforce its decisions/recommendations.

About the middle of 2004, the NERC issued a report in which it estimated that North America would need 70 gigawatts of new generation by 2013 and that 68.2 gigawatts of new generation probably would be available....

I have continued to track electric power matters. For practical purposes there is no significant new hydro power that could be developed south of the 49th parallel except in the Bay of Fundy. For practical purposes, therefore, all new generation in the USA must be either nuclear or conventional thermal because wind power is not sufficiently reliable for large quantities of power.

It is true that there are potential sites for huge hydro powerplants on the Yukon River on its headwaters in Canada and in Alaska. Similarly a significant hydro site could be developed near Gull Island in Labrador. Both projects would require several very long transmission lines to be constructed, probably operating at 765 kilovolts or more.

On the West Coast of the USA and Canada the highest voltage is 500 kilovolts. In New York State, other than for experimental transmission lines, the greatest transmission voltage is 345 kilovolts.

It's a safe bet that any attempt to construct transmission lines in the USA to operate at 765 kilovolts or more will be met with very strong opposition.

My conclusion is that the present cost to develop 68.2 gigawatts of new generation, excluding inflationary tendencies, would be about $102 billion for high efficiency thermal generation in the USA, about $102 billion for transmission, and about $102 billion for distribution. I would not be surprised if inflation would double those costs and I wouldn't be surprised if interest rates reach 20%.

Such giant Investor Owned Utilities as SanDiego Gas and Electric and Pacific Gas and Electric are requesting tenders from "others" to supply them with bulk power which they would retail to their customers. No Investor Owned Utility would like to admit that it cannot meet the power requirements of its customers so you know that these giants have very severe financial constraints. I previously provided information concerning "FIRST ENERGY" so you know that the problem is not isolated to the West Coast of the USA.

If North America is to have 68.2 gigawatts of new generation by 2013 it cannot be nuclear because it takes 10 years from "get-go" until a nuclear powerplant produces useful energy and none have been started since 1979. There is no prospect of new hydro power in the USA within that time-frame either. In other words all new generation in the USA likely will be from fossil fuel, probably coal and/or natural gas. I'd bet on natural gas and combustion turbines with their low initial cost but poor thermodynamic efficiency and very expensive fuel costs....

Allan Dane, M.Sc.(EE)
Edmonton, Alberta, T6G 0A6

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