IBM Business Consulting Services. Rebuilding the grid. deeper. Executive brief

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1 IBM Business Consulting Services Rebuilding the grid deeper Executive brief

2 The following article was written for and published in The Utilities Project: Volume 4 - Positioning for Growth by Montgomery Research. March, 2004.

3 Contents 1 Rebuilding the grid 2 The transmission infrastructure 3 The human grid 6 The computer grid 7 Robust, yet fragile 8 About the author 8 About IBM Business Consulting Services 8 References Rebuilding the grid The recent blackout emphasizes the need to rebuild three grids: the transmission infrastructure, the human grid of decision and control and the computer. I recently bought a top-of-the-line clock radio to replace the aging one I d had for years. When I unpacked it, I began looking for the slot to insert a battery when a power outage cuts the power to the clock. To my surprise, there was no such slot. Looking over the instruction manual that came with the clock I learned that my new clock radio had a ride-through memory that would last up to one minute in the "unlikely" event of a power outage. This unexpected find raised a number of questions in my inquiring engineering mind. Why only one minute? Why no battery that could keep my clock accurate for hours? Could I rely on this design to ensure I wouldn t miss important business meetings? After a little thought, I remembered the work I had done years earlier on outage durations. Indeed, the vast majority of outages to the end customer are momentary. Perhaps the designers of the radio got it right. They knew that data and designed to it, or perhaps it was just cheaper to put in a one-minute circuit instead of a battery slot. The experience of examining my new clock radio highlighted a point I have frequently told people about our electric system. A reliable electricity supply has become an expectation. We expect our clock radio will wake us because we expect that the electricity that enables it will be uninterrupted. 1 Indeed, the electrical system of generation, transmission and distribution in the United States is actually quite reliable. Built up over the decades since early in the last century, it is one of the enduring elements of the New Deal. It is the foundation for commerce and everyday living. Economists look at energy usage as a proxy for the degree of development of a society. We expect energy reliability issues in Third World countries, but not in the U.S. This reality makes the U.S. blackout of August 2003 ever more remarkable and startling. Within hours of the event, politicos and pundits were on TV speculating about the cause. The blackout was the result of an aging and failing grid. Deregulation was at fault. A computer worm had invaded the control computers. It was an al Qaeda cyber attack. It would take billions of dollars of investment to fix. The grid needed to be rebuilt. 1

4 We now have the luxury of time and good analysis in regard to the blackout. The interim report on causes of the blackout by the US-Canada Power System Outage Task Force outlined three key causes: Inadequate situational analysis; Inadequate reliability coordination diagnostic support Inadequate tree trimming. 2 Not to over-simplify, but the report says trees downed three key transmission paths. Some of the computer systems designed to detect this were also down. Thus the operators responsible to affect remedial action were in the dark (so to speak); they had ineffective processes and information to isolate the problem before a cascade of outages required the failsafe process of system protection (i.e., blackout) to take over. So which grid failed? The electric grid? Was it the human grid of decision and control or was it the computer grid controlling the electrical grid? Of course, it was all three. And all three require rebuilding if additional events of this nature are to be prevented. The good news is that the actions required to rebuild all three are known. The transmission infrastructure The facts with regard to the need to invest in rebuilding the electric transmission grid are uncontestable. The infrastructure of transmission has endured a dramatic level of under-investment for years, if not decades. Energy demand continues to grow, and the introduction of competitive electric markets has exacebated the situation by placing demands on the transmission network never envisioned while it was being designed and built. This fact is not only known, it has been known for some time and is well documented. Consider the following finding in the 1998 (yes, 1998) NERC Reliability Assessment: 2

5 "Very few bulk transmission additions planned. Only 6,588 miles of new transmission (230 kv and above) are planned throughout North America over the next 10 years. This is significantly lower than the additions that had been planned five years ago. The majority of the proposed transmission projects are for local system support. As the demand on the transmission system continues to rise, the ability to deliver remote resources to load centers will deteriorate. New transmission limitations will appear in different and unexpected locations as the generation patterns shift to accommodate market-driven energy transactions and new independent generators. Delivering energy to deficient areas may become more difficult." The lack of investment in the transmission infrastructure has, as its root cause, the uncertainty in how the cost of such investment will be recovered. The process of deregulation has caused such uncertainty. It will take tens of billions of dollars of investment to replace and expand the network required. That much money does not come easily if investors don t see how they are going to get their investment back. And we know what to do. Every ISO/RTO has a grid planning function, and all have completed the analysis of the issues in their jurisdiction and determined what should be done. But, who will make this investment, and how to pay for it, is the issue. The human grid The term "grid" is commonly understood to mean the thousands of miles of transmission infrastructure that connects generation with load. But an equally important grid is the system of organizational and human processes that coordinate and control the transmission grid. Prior to deregulation, the process of control of transmission was undertaken by utilities via their control centers. The process and protocols of this control were governed by the 10 coordinating councils under the auspices of NERC. Extremely detailed and well-understood sets of procedures and standards were developed and monitored by NERC. 3

6 Under deregulation, in the jurisdictions where ISO/RTOs were implemented, the ISO s took over the role of grid control and security coordination. These ISOs assumed the coordination role under the procedures of NERC. Deregulation also added to the role of grid control the function of operating competitive wholesale energy markets. ISO/ RTOs implemented forward energy markets, realtime balancing markets and other support markets for ancillary services required to provide appropriate reserve to the grid operators. It is clear that rebuilding this computer control grid is an equally critical element to rebuilding the transmission grid. The ISO/RTO role in grid management evolved from different points depending on the historical operating construct of the region. In some cases, the ISO simply took over an already running tight energy pool operation. In other cases, ISOs were established through the consolidation of multiple control areas into one control area. In each case, the operational elements of the grid were expanded or more tightly formalized under the ISO structure. But, the basic process of control area control changed little, albeit it was performed over ever-larger geographical and operational areas. The market side of the ISO operation was new. Although there was a general framework that was consistent among the ISOs, each ISO/RTO built a market structure that was different from their neighbors. In some cases the fundamental underpinnings of the market design were radically different. This fact has led to a number of issues, primarily economic in nature. The so-called "seams issue" is currently an important issue among various RTO/ISOs and FERC, who regulates the various ISO markets. Indeed, FERC s Standard Market Design (SMD) was an attempt to standardize market design across ISO/RTOs in an effort to address the seams issue, among other things. Of course, SMD has been stuck in political quagmire for years now, and the likelihood of the full vision of SMD being implemented soon is remote. A number of ISO/RTOs have been working relatively collaboratively in the recent past to solve the "seams issue" with technology. The notion in play was to standardize and share market information in realtime across ISO/RTO market boundaries. Some functions envisioned were as aggres sive as creating a common market portal that could tie multiple divergent market transactions across multiple market constructs into a single transaction (see Figure 1). 4

7 Figure 1. Cross-ISO/RTO business transaction integration. Process service request Business activity T1 Business process T2 Transaction 1 C Transaction 2 C Transaction 1 Atomic transaction Response (T1) Response (T2) Response (T3) Coordinator Coordinator Coordinator Transaction RTO 1 Completed Completed Transaction RTO 4 Completed Transaction RTO 2 Transaction RTO 3 Transaction RTO 4 Source: IBM Business Consulting Services. Interestingly, prior to the blackout, the idea to share realtime opera tional information across the ISO/RTO seams also was introduced. The blackout gave rise to a heightened interest in this notion as a way to more effectively counter a number of the issues that were seen as contri buting to the scope of the blackout. Prior to this, the seams issue had been, for the most part, viewed as only a market issue. The opera tion al implications of market transactions are simply handled through the interchange scheduling process completed the day before in realtime as it has been for decades. However, the reality is that today s markets and operations are much more dynamically linked than the operating processes of ISOs reflect. Just as the seams issue is a market issue, it is also an operations issue. And, just as market participants need cross-iso/rto market infor mation, the ISO operators need cross-iso/rto realtime operations information to effectively run the grid. 5

8 This point was driven home to this author during a recent meeting at an ISO. The topic of discussion was the development of a Rosetta Stone to translate terms used in operations into terms used in markets. Such a translation was needed because the physical model of the network did not correspond to the commercial model of the network. Busses, etc. that were singular in the real world were consolidated in the commercial world and, interestingly, vice versa. Understanding that operations are dynamically linked to the market requires that the operations view of the big picture in realtime has to be refined and expanded significantly if the grid is going to work effectively and reliably in the future. The computer grid The third grid that needs to be rebuilt is the grid of computers and telemetry that controls today s electrical system. During the blackout, a number of these systems either failed or were unavailable. As ISO/RTOs have been established, ISOs relied to a large extent on the embedded infrastructure of control. Although nearly all have imple mented new systems for the ISO/RTO itself, the technology in the field that is performing the monitoring is largely what was in place before deregulation. This inherited control infrastructure suffers from the same issues as the transmission infrastructure it controls. It was designed to monitor and control an infrastructure not designed with deregulation in mind. With the lack of investment in transmission infrastructure already outlined, a parallel under-investment in control systems has occurred. And, the sophistication of computer control technology has revolutionized itself many times over in the decade or more since these transmission systems were put into service. With much of the computer control infrastructure aging and being technologically obsolete by any current standard, the demand for ever-more realtime information to both the market participants and operators has become a significant problem. It is clear that rebuilding this computer control grid is an equally critical element to rebuilding the transmission grid. 6

9 Robust, yet fragile In the interim report, the authors point to a fascinating body of work by professors Carson and Doyle. In their paper titled "Complexity and Robustness," they outline the idea of complex systems being "robust, yet fragile." Carson and Doyle go on to explain that complex systems are "robust to what is common or anticipated but potentially fragile to what is rare or unanticipated and also to flaws in design, manufacturing, or maintenance." This notion of complexity gives us excellent context to understand how a system that was designed and built to be so reliable to support "electrification" of the United States can be so fragile in the new dynamics of deregulation. It is the fragile nature of the complex system we see emerging because the human and computer control elements of the grid, in addition to the grid itself, did not anticipate the new dynamics of today s energy markets. Thus, it is clear that rebuilding the grid is just not as easy as building new and better transmission. The grids of human and computer systems required to support the reliability of the trans mission grid are equally as important to the grid rebuilding process. 7

10 About the author Stephen J. Callahan is a partner with IBM Business Consulting Services. With 22 years of business and systems management and planning experience within the electric utility sector, he has held management positions in a wide range of functions including strategic planning, systems development and implementation. Mr. Callahan has led the startup of ISOs and power exchanges implementing electric deregulation throughout North America. He has also led the implementation of major transmission rights auction exchanges in the US. He can be reached at stephen.j.callahan@us.ibm.com. About IBM Business Consulting Services With consultants and professional staff in more than 160 countries globally, IBM Business Consulting Services is the world s largest consulting services organization. IBM Business Consulting Services provides clients with business process and industry expertise, a deep understanding of technology solutions that address specific industry issues, and the ability to design, build and run those solutions in a way that delivers bottom-line business value. References 1 Author observations. 2 U.S.-Canada Power System Outage Task Force. Interim Report: Causes of the August 14th Blackout in the United States and Canada. November,

Copyright IBM Corporation 2004 IBM Global Services Route 100 Somers, NY 10589 U.S.A.

11 Copyright IBM Corporation 2004 IBM Global Services Route 100 Somers, NY U.S.A. Produced in the United States of America All Rights Reserved IBM and the IBM logo are registered trademarks of International Business Machines Corporation in the United States, other countries, or both. Other company, product and service names may be trademarks or service marks of others. References in this publication to IBM products and services do not imply that IBM intends to make them available in all countries in which IBM operates. G

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