Sunday, September 10, 2006

The shape of America by Allan Dane-Worthwile read

As a electrical engineer who has been employed as both an employee of a large consultine engineering corporation and as an independent consultant to electric utilities I have a few insights to share with you.

Firstly, as you surely know, investor-owned utilities are struggling to obtain capital to construct new generating stations. This is not just in California: it is prevalent throughout North America.

Secondly, the large deficits of the USA from 1970 to 1992 required the individual States and the Federal Government to borrow huge amounts of money, largely from Japan, and interest rates soared, as a consequence, to 20% per annum or higher. No utility can afford such interest rates if it is regulated to 10% profit. As a consequence much-needed new generation was not constructed in the period 1972 to 1992. It is this much-needed new generation that is forcing some California utilities to request "others" to submit tenders to supply them with bulk power which they can retail to their customers.

Thirdly, the present Federal Government of the USA is borrowing about $2 billion each day. The utilities are being "pinched" again. Very little new generation has been constructed since 1992 yet the need for more power continues to grow as a result of increasing population and bigger industries.

Fourthly, you surely know that the automotive industry is virtually bankrupt. The USA soon will be faced with healthcare costs which will be impossible to meet.

Fifthly, the recent blackout in New York City seems to indicate that underground cables had failed. It is much easier to inspect overhead circuits because most of them are clearly visible whereas unerground circuits often require deliberate de-energizing of the circuit to determine if the insulation is in satisfactory condition. In other words, it is more expensive to install circuits underground and it is more expensive to inspect them, on a regular basis, than it is to inspect overhead circuits.

It is insanity to believe that significant percentages of the new service areas of American cities can be served by underground circuits: the capital costs will be too high and maintenance costs will be too high.

Finally, the NERC issued a report in 2004 in which they estimated that North America would need 70 gigawatts of new generation by 2013 and probably would have 68.2 gigawatts at that time. Judging from reported data in 1985, for every dollar spent on new generation there will be need to spend an equal dollar on transmission and distribution. Combustion turbine generation at that time cost about $500 per kilowatt and steam turbine generation cost about $1,000 per kilowatt. With the rapidly increasing cost of fossil fuels there will be a strong tendency to use steam turbines which have much better thermodynamic efficiencies and, of course, there has been inflation...

If North America is to have 68.2 gigawatts of new generation by 2013 investments of approximately $210 billions will need to be made in the next 5 years. The investor owned utilities will have great difficulties assembling that amount of capital in the next two years, make their plans, and execute those plans.... Frankly, I don't think they can do it and, at the same time, repair the damages that are happening....

Allan Dane, M.Sc.(EE)
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