When Ed Risse and I write about dysfunctional human settlement patterns, the context is usually transportation gridlock and affordable/accessible housing. That’s because the dysfunction in transportation and housing are so painfully evident to all. But dysfunctional human settlement patterns manifest themselves in other ways, and one of those is the cost of electric power.
We do not find ourselves at this moment in an electric power “crisis” — at least it’s not a crisis as defined by the political class. That’s due in large part to the fact that Dominion, Virginia’s dominant power company, has frozen its electric rates (with relatively minor fuel cost adjustments) through 2010. Not only are rates lower than the national average, they are stable.
Under these circumstances, electricity, like water, is one of those things that people don’t give a rip about until they don’t have it. Thus, for most Virginians, the shape of our electric power system is a non-issue — until the power goes out. In which case, it rockets to the top of the list, most likely provoking some ill-considered, short-term remedy to allow the politicians look like they’re “doing something.”
The good news is that a state commission is currently in the process of assembling a 10-year energy policy for Virginia, which means that, crisis or no, our electric-power system is under scrutiny. There are two aspects of the problem, one of which is getting the attention it deserves, and the other of which is not.
A growing chorus of voices is questioning what I call “Big Grid,” an electric power system that relies upon a relatively small number of giant power plants, located in out-of-the-way places where they don’t bother the neighbors, and upon giant, high-powered transmission lines to move the electricity to the population centers. That system exists because economies of scale had traditionally favored large power plants, despite the fact that transmission lines leak about six percent of all the electricity generated. However, any cost-benefit analysis of Big Grid needs to take into account the social costs of pollution as well as hidden vulnerabilities and risks — as demonstrated vividly by the blackouts up north that affected 50 million people back in 2003.
The alternative to Big Grid is “distributed generation” in which small-scale power production takes place in proximity to the electric consumers, decreasing the load on the power grid. We’re talking solar and cogeneration in tandem with a reduction of electricity consumption through investments in energy efficiency. I explore those issues in my recent column, “Big Grid.”
One commonly touted strategy for reducing energy consumption is variable pricing: Rate structures that reward business and residential consumers for shifting consumption from peak seasons and times of the day to off-peak periods. That spares the power companies from running their expensive, peak-load generators. I’m all in favor of peak-load pricing. But it’s incomplete. The concept of variable pricing should encompass location-variable pricing as well.
Here’s a little-noted fact: Scattered, low-density development requires major investment in power lines and sub-stations and is more expensive to serve with electric power than is more compact development. Unfortunately, electric rates do not distinguish between energy-efficient and energy-wasting settlement patterns: Everyone pays the same rate. In effect, people living in energy-efficient settlement patterns are subsidize those who live inefficiently.
Any reform of state energy policy needs to adopt location-variable pricing as a supplement to peak-load pricing. Failure to do so will translate into unnecessary capital expenditures on transmission lines and sub-stations, unnecessary electricity leakage and unnecessary costs for electric consumers.
Electric power rates are not a crisis in Virginia… yet. But they’ve become a major political football in Maryland where rate caps have been lifted. We will face the same issues as Maryland soon enough.
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