America’s Electric Grid: Three Companies Upgrading This Aging Infrastructure

by David Fessler, Energy and Infrastructure Expert
Monday, May 17, 2010: Issue #1261

The U.S. electrical power grid is America’s national “engine.”

In fact, it’s been described as the largest system of interconnected machines on the planet.

Just consider these statistics:

  • It boasts over one million megawatts of generating capacity.
  • It has 9,200 generating units.
  • The long-distance transmission tower infrastructure stretches more than 300,000 miles.

Like water, we take our electricity for granted. And 99.97% of the time, the process works just fine. But what about 0.03% of the time that the grid goes down?

That costs us over $150 billion every year. So what’s being done to improve an aging infrastructure under increasing pressure from population growth – and consequently, demand?

Fumbling in the Dark

It goes without saying just how vitally important electricity is to the U.S. economy, national security and to the lives of over 300 million Americans.

But if you like antiques, try the 100-year old power grid. Today, the aging and over-burdened grid is failing more frequently than ever before. There have been five massive blackouts in the past 40 years. And three of them have occurred in the past decade.

The reason? Electricity demand is increasing much faster than overall energy use. In fact, since 1982, peak demand for electricity has exceeded transmission growth by 25% every year. And demand is expected to double over the next 20 years.

This highlights the lack of “situational awareness” from grid operators. While the power grid is the ultimate model of low-cost, just-in-time delivery (most electrical power has to be used when it’s generated), it suffers from a shortage of automation. Despite the grid’s many technological marvels, the only way most operators know that the power is out is when you call them on the telephone.

In this day and age, that’s simply not good enough. But it’s hardly surprising, given the chronic lack of investment in the grid.

Consider this: Expenditure on research and development within the overall energy sector is 12% (as a percentage of overall revenue.) But utility R&D expenditure on the grid is a measly 2% – the lowest of any sector.

Such under-investment limits the grid’s efficiency and reliability in preventing energy from getting where it needs to go.

But help is on the way in the form of the “Smart Grid.” And deployment of Smart Grid technology will play a crucial role in being able to meet the rapidly growing demand for electricity.

Synchrophasors: Helping to Move Data at the Speed of Light

As demand for power increases, grid reliability will become even more crucial.

One of the ways in which utilities are making the grid smarter and more reliable is by deploying instruments called Synchrophasors or Phase Measurement Units (PMUs).

What the heck are Synchrophasors? Just think of them as traffic cameras at major intersections, keeping an eye out for accidents and traffic jams.

At the moment, PMUs take the “pulse” of the grid every few seconds. They transmit data back to the control center for the utility that owns that part of the grid.

The problem is, a few seconds is an eternity when it comes to electricity moving through wires. It travels close to the speed of light, or roughly 186,000 miles per second.

That’s where new Synchrophasors come in. They monitor the grid’s key functions much more precisely and at a much faster rate than previous equipment. Voltage, current and other data that utilities need are sampled 30 times per second. The information is time-stamped with signals from GPS satellites.

This allows for much greater control. More importantly, it gives utilities the ability to react quickly to electrical power outages. And in many cases, blackout and brownouts will be prevented in the first place.

Cue “Operation Synchrophaser Deployment”

Improving electrical grid reliability is the sole mission of the North American Synchrophasor Initiative (NASPI). It’s working to advance the installation of thousands of Synchrophasors across the entire North American power grid.

And the Department of Energy (DoE) is jump-starting a nationwide rollout of these devices. It recently dished out $54 million to states that are part of the Western Interconnection – the area covering the Pacific to the Rocky Mountains.

The DoE has also made additional funds available to other Synchrophasor initiatives elsewhere in the United States. One of the largest installation projects is the PJM Interconnection on the east coast. PJM is a regional transmission organization that directs and coordinates the movement of electric power in 13 eastern states and Washington, DC.

PJM’s $29 million deployment of new Synchrophasors will give it a comprehensive, detailed, view of the overall transmission system.

According to Terry Boston, PJM President and CEO, “It’s like moving from an old black-and-white TV to a widescreen HD TV. [Synchrophasors] will allow us to more easily detect issues over a wide area and avoid problems on the transmission system so that we can move the maximum amount of electricity safely.”

Each of the 12 electric utilities involved have a vested interest in solving grid reliability issues. After all, grid outages not only affect their customers, but also the companies’ balance sheets.

And once installed and networked together, these sophisticated Synchrophasers could make major blackouts and that $150 billion annual hit to the U.S. economy a thing of the past.

Investing in Synchrophasor Companies

You’ll be hearing a lot more about Synchrophasors – and the Smart Grid – in the near future. In the meantime, General Electric (NYSE: GE), ABB (NYSE: ABB), and Siemens AG (NYSE: SI) are three companies that manufacture and sell PMUs. They also provide installation, networking and the monitoring software to connect them together.

All three companies are excellent plays on Synchrophasors and the Smart Grid area as a whole.

Jump Aboard the “Peak Energy” Bandwagon

Before I sign off, allow me to quickly draw your attention to my brand-new Peak Energy Strategist investment service.

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Good investing,

Dave Fessler

P.S. Former Investment U Chairman, Dr. Mark Skousen, will be heading to Las Vegas again this July to host his annual FreedomFest event. And he’s invited me to participate in two debates…

The first (between Mark and I) is entitled: “What drives economic recovery – consumers or business?” We’ve battled over this one before and it promises to be an exciting tête-à-tête.

The second is with my friend and natural resource guru, Rick Rule. Rick is the founder of Global Resource Investments and he and I will debate whether or not it’s important for America to be energy independent.

FreedomFest takes place at Bally’s in Las Vegas from July 8-10. For more details and to see the extensive list of renowned economists, authors and CEOs who will speak at the event, please visit: www.freedomfest.com.