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Electric Reliability is a Must for Today's Ideal Business Location

31 Dec, 2003

By: Zach Narrett

When executives look for an ideal business location, they are giving more attention these days to whether a site provides access to a secure, highly reliable electric grid.

Energy availability has long been one of the top considerations in site selection, along with other key factors such as the overall quality of the labor pool, transportation network and the business climate offered by one location versus another. Headline events of the last few years, however, have heightened the focus on electric system reliability as a major influence on business location decisions. The California energy shortage of 2001 brought curtailments in electric power supply to businesses and homes, as well as skyrocketing bills. More recently, the widespread blackout that began in the Midwest on August 14, 2003 resulted in the temporary loss of electric service for 50 million people across a large part of the eastern United States and Canada.

To be sure, the California crisis and last summer’s massive blackout were exceptional events. A high standard of electric reliability is par for the course – to such an extent that Americans generally take it for granted. The nation’s electric power grids typically deliver better than 99.9% reliability during the year. Storms are the most common cause of power interruptions.

Reliability in a Digital World

From a long-term perspective, the demand for more robust electric-system reliability is being driven primarily by the growth of the Internet and the global economy. In a networked and wired world, businesses can afford precious little, if any, “downtime” to win in the marketplace. The need for an uninterruptible power supply is especially acute for critical facilities and businesses that rely on huge amounts of digital information – including financial service firms, telecom providers and a range of high-tech enterprises.

Even momentary power outages or dips – of a few seconds or less – can result in unacceptable risks and costs for these businesses.

With the Internet continually growing in importance, it is not surprising that power quality and reliability loom large on many companies’ site-selection checklists. In comparing the reliability of one electric system to another, they are focusing on a number of key factors on which reliability depends.

In general, electric reliability boils down to two things: having an adequate power supply and an effective system for delivering the power to meet customers’ needs. “In evaluating the infrastructure surrounding a site, there is an important regional as well as local dimension to reliability,” explains Tim Comerford, manager of area development for Public Service Electric and Gas (PSE&G), New Jersey’s largest utility and one of the largest combined electric and gas utilities in the nation. “Regionally speaking, you want to be in an area that not only has sufficient reserves of electric generating capacity, but also strong mechanisms to coordinate power dispatch to enhance reliability.”

The Regional Dimension

PSE&G is a long-time member of one of the nation’s most highly respected regional power grids, the PJM Interconnection, an organization that PSE&G helped establish in 1928. As its initials suggest, PJM originally operated in Pennsylvania, New Jersey and Maryland. Today, PJM coordinates power flows to ensure reliability across a region with 25 million people in the Mid-Atlantic and adjacent areas. PJM directs the region’s high-voltage grid and administers the nation’s largest competitive wholesale electricity market. It also plans regional grid improvements to maintain and enhance reliability and relieve congestion.

“PJM is a market equipped and able to reach efficient prices for energy and capacity while keeping reliability front and center,” observes Comerford, who also serves as president of the Utility Economic Development Association (UEDA). PJM’s thriving wholesale electric market has cleared approximately $17 billion in energy transactions since 1997, resulting in significant savings to electric end users. The PJM system has a pooled electric generating capacity of more than 76,000 megawatts.

As the nation focuses on ways to improve the grid, the regional framework of PJM is being widely looked to as part of the solution. The federal agency that oversees the nation’s transmission systems – the Federal Regulatory Energy Commission, or FERC – is actively promoting the creation and development of independent regional organizations like PJM in other parts of the country. Regional coordination is critical since electricity, in the words of PJM President & CEO Phillip G. Harris, is “a speed-of-light product that does not respect state or even international borders.”

It is not an accident that it was in PJM – and in PSE&G’s service territory specifically – that the blackout of August 14, 2003 was stopped and prevented from spreading further. One major reasons for this, Harris has noted, is the effectiveness of the PJM’s planning process for designing and siting hardware to protect against outside faults, voltage drops and other system disturbances. “As a result of a transparent planning process undertaken by PJM with the involvement of all stakeholders,” Harris told a U.S. Senate panel earlier this year, “reliability is maintained proactively and at a prudent cost to the consumer.”

System Delivery: Getting the Power to Where It’s Needed

Reliability is a function not only of adequate supply and a strong network to move power over great distances, but dependable and cost-effective delivery of this power to the end customer. In industry parlance, transmission refers to bulk energy flows, and can be compared to the major arteries of a vast transportation system. The distribution networks that actually deliver electricity to homes and businesses can be likened to the state and local roadways.

Executives in the site-selection field should carefully scrutinize the quality of the energy delivery company that provides service in a given area. This review will generally begin by asking a range of questions about a utility’s track record, performance standards and overall capabilities.

  • How does the utility compare to its peers in delivering safe, reliable service – and in providing it at reasonable cost?

  • Does it continually invest in maintaining and improving its delivery infrastructure? Does it go about this in a systematic, proactive way?

  • Is its electric system designed with strong built-in safeguards that minimize service interruptions to customers, help isolate problems that do occur and limit their impact?

  • Does it deploy advanced technology and systems not only to prevent service interruptions in the first place, but also to restore service quickly and safely in the event of an outage?

  • Does it have an effective program of vegetation management to prevent trees from contacting energized lines?

“Utilities should be in a position where they can provide answers about each dimension that contributes to high-quality, reliable service,” observes Ralph LaRossa, vice president of electric delivery for PSE&G. “To meet the crucial credibility test, they need to show they have a strong track record and high performance culture that contribute to safety, reliability and affordability.”

 

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