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Oil, Gas and Wires

October 28, 2008

By Peter W. Huber

The backbone will let cheap fuels like coal and water displace expensive gas-fired power.

Online shipping or energy arrived a century before Ebay. The electric grid has long let us buy cheap fuel by the smidgen and rent billion-dollar, million-horsepower turbines by the millisecond. We can also use the grid to beat oil.

The wires that move electricity from power plant to wall outlet have done more to raise efficiency and lower energy costs than all the improvements made to car engines since Henry Ford rolled out the first Model T. We could gain as much again by building a high-voltage, continent-spanning backbone grid to establish a single national U.S. market for electricity. This would also unleash domestic capital, labor and ingenuity in the one energy market that stands a good chance of cutting us loose from foreign oil suppliers.

We use as much raw energy generating electricity as we get out of the 7 billion barrels of oil we burn every year. At $70 a barrel we spend four times as much on oil as we do on the fuels used to generate electricity, yet big electric power plants turn their fuel into a lot more useful power than we get out of oil-fired engines and furnaces. The huge capital investment in our power plants isn't fully used, either. Idle capacity could power just about all the miles we drive, at a cost comparable to buck-a-gallon gasoline. A further 10% boost in electrical output could take care of all the heating supplied by oil-fired home furnaces, and at off-peak prices electric heat is cheaper than heating oil.

The price of electricity varies all over the map. Demand moves from east to west with the sun, tracking human activity and afternoon peaks in air-conditioning loads. At many hours on most days some utilities are burning expensive gas as they strain to meet peak demand while others have cheap capacity standing idle. Often someone is selling wholesale electricity for 20% to 50% less than others are paying elsewhere. Several hours later many of the cheap sellers and expensive buyers have traded places. This happens because the grid's three main "interconnections"—east of the Rockies, west of the Rockies and Texas—are hardly linked to one another at all, and within each there's too little transmission capacity to deliver much of the cheap power to the expensive buyers.

A single 765,000-volt transmission line can move about 1% of the total average U.S. electric load. Thousands of miles of these lines are already up and running. It will take another 22,000 miles to knit the existing wires together into a national grid. This backbone will be able to move about 25% of our current electricity consumption over distances that span significant fractions of the continent. Electrical losses will be modest, because very high voltage lines are fantastically efficient. The backbone will cost $75 billion to build. It will add about 0.3 cents of transmission cost per kilowatt-hour to the retail price of electricity, which currently averages about 9 cents.

By pooling demand, the backbone will let cheap power chase high demand around the clock and across the country. It will let inexpensive coal, uranium, water behind a dam or (eventually) wind, sun and other renewables displace expensive gas-fired power. It will lower the capital cost of electricity by allowing fuller use of billion-dollar power plants, much as filling every seat on a jumbo jet lowers the average cost of flying. A plant located in (say) Lebanon, Kans., the geographic center of the country, will be within easy reach of peak loads on both coasts and everywhere in between.

By pooling supply and demand nationwide, the backbone will cut the average cost of generating electricity by somewhere between 30% and 50%. And it will reduce it still more over the longer term, by allowing producers to locate power plants where the land is cheap, the neighbors are friendly, the coal, uranium, gas, wind or sun is most readily available, the ecosystems are durable and the obstructive lawyers are scarce.

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