Shorting the Grid - The Complicated World of Power Generation

Some, but not all, of the things you wanted to know about power generation.

Don’t worry, this picture will make sense if you read the whole review.

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Shorting the Grid: The Hidden Fragility of Our Electric Grid

By: Meredith Angwin

Published: 2014

496 Pages

Briefly, what is this book about?

A deep dive into the convoluted nature of the electrical grid with a particular focus on how attempts to make it more effective through competition have failed. Beyond that Angwin describes how the challenge of integrating and encouraging renewables has turned a convoluted problem into an impossible one.

What’s the author’s angle?

Angwin is a blogger (her newsletter is titled “Electric Grandma”) who has dedicated her energies to the very narrow focus of the power grid and related issues. Before retiring she worked with the utilities as a chemist. Since then she’s been a consumer advocate, primarily in the northeast where she has been closely involved in the laws and regulations for many years.

Who should read this book?

This is a book for infrastructure nerds. Particularly if you’re interested in the fragility of infrastructure or the challenge of grid management in an era of intermittent renewals.

An initial caveat:

I read this book a year ago, and it felt important and consequential. But it was also something that I wasn’t hearing from anywhere else, so I wanted to make sure I got it right. That takes time and focus and I ran out of one or the other, or maybe both. So this review languished. But I was reminded of it recently by a post from Construction Physics (CP) titled “What’s Happening to Wholesale Electricity Prices?” Which discusses the dramatic increase in electricity prices. Which is exactly the sort of thing Angwin predicted. CP even mentions that some part of that may be transmission prices associated with getting solar from where it’s generated to where it needs to be, something Angwin hammers on.

This seems like partial confirmation of Angwin’s thesis. Nevertheless, I’m still not sure what to make of her claims. She appears to know what she’s talking about, and the claims make sense, nevertheless no one else seems to be talking about it. Mostly all I see are graphs which show how consistently the deployment of new solar capacity has been underestimated.

So this review is not up to my normal standard of polish. (Which isn’t high to begin with.) It’s rough, and contains many uncertainties. I’m not sure what credence to give the book. Perhaps the grid is getting ever more fragile year after year. Or perhaps we’re on the verge of solar solving all our problems. If I had to bet it would be the former, but if so the “Electric Grandma” seems to be one of the only ones sounding the alarm about it.

Specific thoughts: Electricity is not a commodity

I actually picked up this book thinking that it would be talking about the vulnerability of the grid to deliberate sabotage. Instead I got a book about the complexity and fragility of the grid even in the absence of bad actors. From whence does this complexity emerge? The sense I get is that it’s a situation very similar to healthcare. They’re both industries where various attempts have been made to make things more receptive to market pressures, while at the same time still imposing onerous regulatory and supply burdens. No one can be turned away from a hospital ER, and there always has to be sufficient power.

One of the additional problems with electricity is that it seems like it should be a commodity. That all electricity is the same, but that’s not the case. Each type of power plant has different issues which must be dealt with. From environmental restrictions with coal, to the intermittency of wind and solar. Natural gas is often seen as striking a good balance, providing baseload power without intermitancy, so lots of generation has moved in this direction. But natural gas has a just in time delivery issue, and as Angwin tells it there have been several winters where the northeast has avoided disaster at their natural gas plants by only the slimmest margin. Basically, as Angwin describes it, it’s a typical regulatory mess with just enough of a market to make the mess worse.

From the preceding you might imagine that this is a book all about how renewables are never going to be able to meet base load requirements and that therefore our obsession with low-carbon in the absence of a nuclear baseload is ultimately doomed to cause all manner of problems. And yes, it is that book, but Angwin goes as long as she can before really diving into the weaknesses of renewables. Because the weird regulatory environment around electricity causes lots of problems without even considering the type of electricity. This is most clearly seen through the dysfunctional operation of regional transmission organizations (RTOs).

Angwin convincingly argues that grid management under RTOs is already pretty broken even before considering the difficulties that come with tying a greater and greater percentage of generation to intermittent renewable sources. I know you want me to get to her takedown of renewables, but now you’re curious, what’s wrong with RTOs?

RTOs were an attempt at deregulation. It was thought that we could do for electricity what had previously been done for long distance calling and air travel. But as I already mentioned though electricity looks like a similar commodity, it is not. And the deeper you get into why the more byzantine things get, but let me present her analogy about zucchinis, and then maybe we can break it down a bit:

RTOs are not a market. If you are raising zucchini, you could factor into your prices the fact you bought good riverside land at high prices, and you have a tremendous yield of zucchini. Meanwhile, someone with rather bad land that yields few zucchini per acre, but the land was cheap, can base his prices on his situation. RTOs, however, force everyone to bid into (usually … some RTOs are different) two main markets: the energy market, which you can consider to be the marginal price of the next zucchini (you have to bid low, because your land is very productive, and the RTO is watching you and knows everything about your excellent soil), and the capacity market, which you can consider to be the fixed costs of land and capital. In the capacity market, you probably will have to take the clearing price set by the guy who bought really awful, hilly, somewhat acidic soil and struggles to grow even the next zucchini.

Since neither of you can recapture your major costs, you and the hilly-land guy are both going to be hard-pressed to make a profit.

I sort of get this and maybe you do too, but when I had people review my explanation it made me realize I didn’t entirely get it. So I spent some time with ChatGPT, trying to plumb the depths of my understanding (something it’s actually pretty good at). There was a whole long back and forth, but I think it can be summarized in two observations:

If people run out of zucchinis it’s not a big deal, and creating new zucchini farms is straightforward, but if people run out of power it’s a huge deal. So the power companies pay people for the capacity to produce power, separate from actual power generation. In other words they get paid for existing. Angwin asserts and it sounds entirely plausible that this system presents plenty of opportunities for abuse.

Secondly, even if you have a “good piece of land” there are systems in place to keep power plant operators from maximizing their profits. RTOs can cap the offers towards verified costs in some conditions. So if your costs are low the RTOs know that and can cap your potential profits as well, in situations where an open market might be more advantageous.

To return to the central point, electricity may seem like a commodity, but it’s not. The difference between generating power through solar and generating power through a combined cycle natural gas plant is enormous. And whatever other questions or objections you might have, there is a final, damning point: RTOs areas do not have cheaper power than non-RTO areas.

So things are pretty screwed up before we even get to the problem of integrating renewables into the grid. But once that happens things get even more complicated. Absent storage, the electricity produced has to exactly match the electricity consumed. And when electricity is intermittent, you have to spend a lot of time juggling things to get that match. Here Angwin offers up another analogy, this time it’s she compares things to riding a bicycle:

The energy you put into the pedals will move the bike forward, but you also have to put some energy into maintaining your balance, or you’ll fall over and won’t be able to move forward at all. If you are a good bicyclist on a smooth road, the “maintaining your balance energy” will be small. If you are a poor bicyclist who swerves around a lot, or if you’re on a bad road, the “maintaining your balance” energy will be larger. In either case, the “maintaining your balance” energy is necessary. That energy is also a parasitical drain on your energy effort: it doesn’t move the bike forward.

A well-run grid is like a good bicyclist on a smooth road, while a more-difficult grid (more sudden ups and downs in power or energy requirements) requires more of the balancing-type energy.

As you might imagine pricing is used to smooth out this problem, but in order to do that additional complexity is introduced. Renewables are particularly thorny in this regard as sometimes they will produce an abundance of power, which can be purchased very cheaply, and sometimes they won’t be able to produce any power regardless of how much one is willing to pay.

At this point we have at least three layers of complexity and possibly more.

First, there’s the complexity of the RTOs with their two systems of pricing. Second there’s the difficulty presented by renewables of balancing power in with power out. Third there’s the complexity of setting pricing in such a way that you don’t waste all of your energy on keeping things balanced. As just one example of this complexity, lots of states have rules around net-metering, where household solar generation gets credited for the full retail price of the electricity it puts into the grid.

To all of the foregoing we should probably add government bureaucracy, and the fact that power shortages aren’t just inconvenient they’re catastrophic. Also, layered on top of everything, like a malevolent storm cloud, power generation has become very ideological, which produces poor decisions.

I came to this book looking for a discussion of grid vulnerability in the face of malevolent actors (e.g. terrorism). Angwin didn’t touch on that at all, probably because it’s exceptionally vulnerable even without that complication. One can only imagine how awful it would be if someone purposefully tried to exploit these vulnerabilities.

Most of these problems would be solved if we could easily (and losslessly) store electricity, but while technology has improved things, we’re still a long, long, long way away from grid-scale storage. This is not just a problem for renewables, it also affects natural gas. As Angwin describes it, the grid is increasingly becoming natural gas+renewables, and natural gas is mostly delivered in just in time fashion through pipelines. There are subtleties to this problem (for example some NG plants can run on oil which does give these plants a buffer, but because of arcane regulations, it’s difficult for RTOs to encourage such storage) but in general grids are becoming more fragile. Most of the time this fragility is hidden behind the scenes, and we only become aware of it during times of crisis. But if you look under the hood you see things like the increase in wholesale prices I mentioned at the beginning, and lots of near misses. Angwin offers up the example of the winter of 2018, when natural gas was hard to get because of the huge demand and the only thing keeping the grid going was oil stockpiles. These stockpiles were gradually reduced, until the entire grid was one day away from disaster when, mercifully, on January 8th the cold spell finally broke.

How many other near misses have there been? What kind of warning signs should we be looking for? My attention is drawn to the Iberian Peninsula blackout in April of this year. In very simplified terms, the bicycle rider lost his balance. Oscillations in the power supply became too great and the entire grid shut down. At the time of the blackout renewables accounted for about 60% of the power generation. Looking at the period around the blackout, sometimes that percentage climbed to as high as 80% and partially as a result of this there were moments when wholesale electricity prices were negative.

Disconnected from the blackout (and indeed there might be no correlation) 80% renewables and negative electricity prices seems like great news. But it’s also unprecedented, and it takes us back to the uncertainty I started with. I’m not sure where things are going. We have negative prices, raising prices. Signs of instability, and signs that renewables are doing better than expected. And I just now heard that there’s a 10x spike in the capacity markets because of expectations around the energy demands of future AI data centers. My confusion remains.

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Hopefully, even if you’re similarly confused, I’ve given you something to chew on. It’s a meaty and kind of esoteric topic, but it’s out of such topics that the modern world is created. A variety of changes, complications, and innovations that lumber around like Frankenstein’s monster. I suspect something similar could be said about this blog. Though I assure you that underneath everything there’s a kind soul. I refer both to the blog and the modern world. Whether it will be enough is hard to say, but I’ll keep poking at it day after day and week after week. Hopefully you’ll continue to tag along.