Power Black-out in First World Countries

I was checking my corporate mails and I got this news report from The Economist. So what do you think about this? I wonder...

THE DAY THE LIGHTS WENT OUT
Aug 15th 2003
The Economist Global Agenda

President George Bush has ordered an inquiry into a massive power failure affecting up to 60m North Americans. Whatever the immediate cause, an overloaded transmission system and poor regulation may be the real culprits.



So this is what happens when two of the first world’s richest countries suffer a third-world blackout. On Thursday August 14th, a massive power failure switched off lights and shut down factories across a large swathe of the north-eastern United States and southern Canada. The outage affected some of the world’s biggest and busiest cities, including New York, Detroit, Cleveland and Toronto, leaving up to 60m people without electricity, equivalent to the entire population of France or Britain.

So severe was the disruption in New York state that its governor, George Pataki, declared a state of emergency. The centre of New York became gridlocked as traffic signals failed. Confused workers spilled on to the streets, while thousands more were trapped for hours in lifts and hot, crowded subway trains. Hordes of stranded commuters ended up having to spend Thursday night in the city's parks and plazas. Thieves in Brooklyn in New York, and in Canada’s capital, Ottawa, took advantage of the absence of streetlights and burglar alarms, and went on a looting spree. Officials were taken aback by the speed at which the chaos unfolded. The blackout spread in a matter of seconds, tripping circuit breakers installed to protect electrical installations from sudden, potentially damaging power jolts. A nonplussed President George Bush described the incident as a “massive national problem” and promised a full investigation into what caused it.

That is still a matter of some debate. At first, naturally, there were fears of terrorist involvement, but this was quickly ruled out. However, officials were left arguing about what had actually happened. The office of Canada’s prime minister, Jean Chrétien, said that a severe outage at a nuclear-power plant in Pennsylvania may have been the cause. Earlier, American and Canadian officials had said a fire or perhaps lightning had hit a power plant near Niagara Falls in New York state. By Friday morning, investigations were focusing on plants in northern Ohio.

What is clear is that this was the biggest power failure ever to strike North America. In total, more than 20 power plants were temporarily shut down, including nine nuclear reactors in four American states. This makes it even more disruptive than the “Great Blackout of 1965”, which affected about 30m people in America and Canada. That outage was triggered by a single circuit-breaker tripping on one power line, again near Niagara Falls. This overloaded other transmission lines, triggering their circuit-breakers and thereby isolating some power plants, setting off a chain reaction that, within five minutes, had blacked out much of the north-eastern United States and part of the Canadian province of Ontario.

Like Mr Bush, Lyndon Johnson, America’s president at the time of the 1965 blackout, demanded a full investigation. He called in the defence ministry and the Federal Bureau of Investigation to take part in the inquiry. One of its main outcomes was the creation of the North American Electric Reliability Council, a New Jersey-based industry group that works to ensure reliable service on the 500,000 miles of high-voltage power lines across North America. But as demand for electricity has grown, the council has found it increasingly hard to maintain the transmission system. Indeed, industry experts have been warning for some years that it is creaking under the weight of ever-heavier power loads. And the problem continues to get worse: the Electric Power Research Institute, based in Palo Alto, California, estimates that demand for power in America has grown at twice the rate at which transmission capacity has increased in the past decade. The rapid growth of power-thirsty air conditioning systems has played a big part. “We’re a superpower with a third-world grid. We need a new grid,” Bill Richardson, the governor of New Mexico and a former federal energy secretary, told CNN. “The problem is that nobody is building enough transmission capacity.”

But there are obstacles in the way of building new capacity. Attempts to upgrade the electricity system usually face strong opposition in local communities, which want access to all the electricity they can use but are loth to have power plants and transmission towers on their doorstep. Industry watchers say that since the power-transmission business is so tightly regulated, companies do not have enough incentive to invest in beefing up the network. As with California’s energy crisis in 2000-01, poor regulation of the energy market is likely to be among the underlying causes of the latest east-coast blackout.

Plenty of companies outside the power industry will also have something to say about the blackout. On Friday morning, oil prices rose on fears that the temporary closure of refineries would lead to fuel shortages. Late trading on America’s financial markets on Thursday was hit by the outages, which shut dealing rooms across the region. But the New York Stock Exchange and Nasdaq opened on Friday morning as usual, and most big Wall Street firms said contingency plans were working well and emergency power generators were running smoothly (though many bankers and brokers could not get into work). Seven big airports were affected for several hours and hundreds of flights delayed or cancelled. By Friday morning, though, the Federal Aviation Administration had lifted its temporary ban on flights into New York and some Canadian airports.

With Detroit losing power, the heart of North America’s car industry was caught in the blackout. At one point, 23 of Ford’s 44 North American plants were down, and nine of DaimlerChrysler’s 13 vehicle-assembly plants. Some of these were planning to reopen on Friday, while others may have to stay shut until the weekend or Monday. It is not yet clear how much this will cost the industry. An unplanned plant shutdown can hit profits directly, since some carmakers book revenues when a vehicle is built, although short interruptions can usually be made up through overtime.

North America’s electricity systems are more closely interconnected than they were when the 1965 blackout struck. Most of the vast area between the Atlantic and the Rocky Mountains is now plugged together in one massive electricity grid, with thousands of generating plants pumping energy in and hundreds of millions of electricity users drawing it out: the grid has been called “the biggest machine in the world”. When it works, this hugely complex contraption is highly economic because, at any given moment, the demand for electricity can be matched with the cheapest set of power sources available at that time across the entire region. But when this monster machine malfunctions, as tens of millions of North Americans have just found out, the consequences can be spectacular.