Ice Mitigation

— New NASA-developed Anti-Icing Fluids
— Ice-Storm Mitigation Workshop

As we cool down from one of the hottest summers in several years, utilities in the north must look forward to another winter. Back in January, a note appeared in a NASA publication about a new anti-icing fluid that was developed at the NASA Ames Research Center. Midwest Industrial Supply was named as the licensee, so I contacted the company.

Midwest markets a series of glycol-based products which adhere to vertical surfaces and are more resistant to wind, snow and rain dissipation. Less of it falls on the ground and fewer reapplications are needed, so smaller quantities suffice. They call their latest formulation “zero gravity”.

(Note: “anti-ice” isn’t the same as “de-ice”. Anti-ice sets up a barrier to prevent ice formation in the first place, whereas de-ice attempts to remove ice that’s already formed, and usually requires a lot more material be used.)

Midwest’s extensive product line is getting a good reception in mass-transit (especially 3rd rails). The company also markets anti-freezing and dust control products used widely in managing coal piles and conveyors (including at least 3 UFTO utilities)– “Ice Free Conveyor” & “Freeze Free”. (These sales are generally at the plant level- -it isn’t clear if utilities are taking a corporate approach to these purchases.)

Railroads use Midwest’s “Ice Free Switch” product, which could apply just as well to utility switches. Likewise, public transit railroads need help keeping ice off overhead lines, and Midwest is working to add a product for powerlines and towers.

Contact Mr. Shannon Noble, 800-321-0699

Midwest will be participating in the upcoming “Workshop on Ice Storm Mitigation”, sponsored by the Canadian Electrical Assocation Technologies (CEATI), Oct 6,7, Monteal
Contact Ms. Laurie Lang, 514 866-5377,

The workshop will cover the following topics:
– Preparation for Extraordinary Climatic Events
– Lessons to be drawn from recent major system outages
around the world due to catastrophic ice storms;
– De-icing techniques before, during and following ice storms;
– Curent Developments in de-icing techniques;
– Cost effectiveness of load control devices;
– Improvements in design approaches and comparison of
international standards;
– Ice modelling: comparison between the Canadian and
American approaches;
– Ice storm crisis management: Emergency restoration plan
and mutual assistance agreement.

The workshop is part of an ongoing program at CEATI called the Ice Storm Mitigation Interest Group.
Contact: Ray Del Bianco, 514-866-5355,


Utility Telecom Has a Future – PurOptix

If you are a subscriber to the free daily email from Scientech, you saw this on July 30:
“Telecom: Utilities Remain In the Loop” – By Ken Silverstein

It begins: “…When some utilities entered the communications loop and began offering fiber-optic services, success was supposed to be a slam-dunk. But the market became saturated with bandwidth capacity and prospects for such achievement became more elusive. In some cases, companies have entirely written off their losses or ceased operations.

But contrary to conventional wisdom, utilities that made cautious investments in fiber optics could turn out to be winners. And while they won’t get satisfactory returns in the short run, the endeavors could pay off over time as the economy rebounds and as consumers demand sophisticated communications offerings that require more bandwidth.”


This recalled to mind a company I’ve been acquainted with for some time that may hold interest for those utilities that stand to benefit from the rebound Ken talks about.

PurOptix, Inc. has developed a unique and proprietary network system they call AON (Advanced Optical Network), that allows utilities, telephone and cable companies to offer a variety of services and content on an all fiber-optic based network. They’ve been making steady progress right through the telecom bust, and are set to install their first trial system later this year. They have just completed the first close of an “A” round, and are currently seeking additional investors.

—- Company Overview (adapted from company materials)

Seeing “Fiber-to-the-Home” as the ultimate network platform, and observing that Telco and CATV networks cannot be adapted support the demand for Internet and other services, PurOptix developed a cost effective all fiber-optic system which surpasses PONs (passive optical) networks based on HFC and “shared” architecture.

The PurOptix AON system provides a platform to deliver traditional telephone, television, and Internet services, and new advanced services like interactive and HDTV, Ultra high-speed Internet, true Video-on-Demand, and highly secure VPNs (Virtual Private Network connections). Applications for PurOptix’ Optical Concentrators and Gateways range from enterprise to residential service delivery. PurOptix is initially targeting leading network operators with existing fiber optic infrastructure in the Utility, Telco, and CATV segments that have aggressive plans to advance their telecommunications business.

The AON System delivers bi-directional information at 155 Mbps and provides extremely secure dedicated connections through its Private Virtual Circuit technology. PurOptix has developed strategic relationships with leading hardware and software vendors including Marconi, SGI, and Sun.

The company has secured a Pilot Network Deployment contract with Batelco, the Bahrain Telecommunications Company and is projecting initial follow-on revenues from this engagement of approximately $2 million this year for engineering services, software licenses, and hardware for initial network installations. The Company is in discussions for a contract for production network deployments with Batelco in later this year with rollouts beginning in the first half of 2003. The last-mile optical market is expected to exceed $2.5 billion over the next three years ? a market that is on the verge of a revolutionary change. PurOptix is projecting revenues of $30 million by 2003 and over $150 million by 2005.

With billions of dollars spent laying fiber optic cable, network operators have a dire need to leverage this infrastructure by offering revenue generating telecommunications and media-rich services to businesses and consumers. PurOptix’s end-to-end optical solution enables network operators to support a broader offering of voice, audio, video, high-speed Internet, and data communications services in a secure, full duplex environment.

The PurOptix AON System family of products provides a scalable community and metropolitan network platform for fiber-optic infrastructures. The proprietary design delivers maximum bandwidth to each subscriber and maximum return for the network operator’s capital investment. The PurOptix system can be implemented as an open network, an exclusive closed network, or any variation therein for delivery of Internet, telephone, television, video and data services.

The first product set, the AON System (Advanced Optical Network), consists of four proprietary technologies ?

1. Network Operating System software running on carrier grade OEM network servers and switches;
2. Low cost ATM concentrator;
3. Optical gateways for commercial and residential applications; and
4. High speed internet enabled-digital settop box.

The ATM concentrator and Optical gateways devices can also be sold and deployed in existing telco and CATV optical network applications serving business customers enabling network operators to seamlessly integrate ISPs, broadband content providers, phone, TV, and other digital service providers via fiber to the home or enterprise.

PurOptix is first targeting utilities moving to generate additional revenues over existing fiber infrastructure. Then, PurOptix will be the system provider of choice for incumbent telcos and CATV companies to migrate from copper/cable to all fiber optic plant. Internationally, PurOptix is targeting major network operators who are rapidly deploying new optical infrastructure due in part to a global environment of privatization and deregulation. Similar to Batelco, these companies are building only fiber networks in new developments and are aggressively replacing copper infrastructure.

Manufacturers of PON (Passive Optical Network) technologies have begun to announce field trials and some slightly different Ethernet-based solutions are moving forward as well. Hybrid Fiber/Coax (HFC) and Digital Subscriber Line (DSL) systems manufacturers are focused on non-optical plays and are not considered to be direct competitors.

PurOptix’ Competitive Advantage
– PONs face a shortage of upstream bandwidth for delivery of advanced two-way services–they are bandwidth constrained. PON’s additionally are difficult to deploy and have proven to be too expensive (both opex and capex) to be a viable solution on a large scale. The AON System delivers 155 Mbps to and from the subscriber today. HFC and competing fiber solutions are flawed by following a “broadcast” architecture which consumes the majority of the bandwidth available. These systems also restrict network operator’s business options due to the legacy architectures and restricted access models. The AON System manages bandwidth efficiently, is infinitely scalable, and offers numerous flexible business implementations. The flexibility in business modeling stems from the open architecture design which allows for variations from full wholesale implementation to the traditional retail provider deployment.

– Unlike competing solutions, PurOptix AON System is completely secure from the subscriber to any point on the network or any external network node connected via PVCs (Private Virtual Circuit). In addition, the PurOptix devices cannot be cloned or pirated, absolutely barring theft of service on the network.

– Using ATM as the core transport we provide proven reliability and allow for easy integration into most networks today. Equipment can be implemented in standard ATM and SONET networks leveraging the installed base of equipment.

– Upgrades in the future to competitor platforms will be costly due to architecture limitations and limited service capability. The AON System can be upgraded easily as bandwidth needs grow.

The website has detailed technical information:

Stan Gafner President & CEO
Puroptix Inc., Carlsbad CA 760.804.7890 x5101

Subject: UFTO Note- E-lecTrade Enables Trading of Structured Products
Date: Thu, 01 Aug 2002

E-lecTrade has developed a sophisticated solution for buyers and sellers of power to manage and procure complex structured power contracts that cost-effectively and with a proper risk profile meet their needs for the supply and demand of electricity.

Most power contracts are for “standard products”, fixed large blocks of power at constant MWs for many hours(think baseload). Everything else under the load curve (think intermediate and peak) needs to be filled in–with “structured products”. Despite the fact that these needs represent 50% of all transacted power, no efficient process for executing structured power transactions exists. RFPs are messy and time consuming, and most of the need is met on the spot market.

E-lecTrade’s sophisticated technology manages the assembly, evaluation, and buying and selling of “structured products” — contracts to purchase or sell power in which either the volume and price of power or duration of a contract varies over time.

E-lecTrade’s products include ShapedPowerTM, %PoolTM, Swing Options, Generation Tolling, Ancillary Services, Transmission, Real Time Power and Standard Power. In addition, the platform provides real-time risk measurement and portfolio management capabilities including MTM, VaR and Scenario analysis seamlessly integrated with the marketplace. The technology can be used both as principal-driven private marketplace serving its own customers and as an independent exchange. Energy and Power Risk Magazine recently named E-lecTrade the Energy Innovation of the Year.
—— ——
Very recently however, electronic trading has all but collapsed in the US, due to credit risk (and career risk aversion on the part of utility personnel) in the entire power industry, and with it the E-lecTrade’s “runway” to grow the business. As a result, the company is now for sale. Discussions are already underway with several potential buyers.

The original business model was to operate an exchange; 24 companies have already signed up as participants. Now, a new owner of the company would have exclusive control of the software and IP assets, with the option to leave the exchange in operation or not.

For a utility with many large commercial and industrial customers, a private exchange based on E-lecTrade’s unique platform could be a powerful tool to serve customers better in managing their forward structured needs. Large C&I customers could manage their portfolios, get offers from the utility, and even bid to sell power back (i.e. DSM).

I have a six page technical overview document from the company, which I can supply on request. The company website is

For more information, contact:
Anil Suri, President and CEO
E-lecTrade, Inc. Tarrytown, NY

914- 524-7390

EPRI Distributed Resources Venture Forum

— Business Venture Forum for Emerging Distributed Resources Technology Companies, Investors, and Market Channels
— 7/25/2001 – 7/26/2001

Agenda download is still available:

EPRI solutions’ Second Annual Business Forum was designed to bring together leading Distributed Resource (DR) technology companies, the energy utility industry, and energy industry investors for the exchange of information related to business and investment opportunities. The Forum was structured as a venture fair with 15-minute presentations from 13 leading DR companies, followed by an afternoon of “breakout” sessions, for small group/individual meetings with the company representatives.

EPRI will issue a CD with all the presentations. Most were provided in hard copy in a binder. Additional company materials were selectively provided at the breakout sessions.

We’ve seen a number of the presenting companies before, as they’ve appeared at other similar events over the last couple of years. Side conversations also led to some interesting additional leads.

These notes are intentionally brief. If you’re interested in contacts or more details for any of these companies, let me know.


Dais Analytic – yet another small company pushing PEM. Distinctions include “great” reformer technology, about which nothing was disclosed, and a proprietary membrane material. The membrane is the subject of a major JV with a major chemical company (unnamed), and holds great promise in an air-to-air heat exchanger, MERV, which exchanges not only heat, but also water vapor. MERV greatly reduces heating and A/C loads by preconditioning incoming fresh air. This company’s “dual” play is either appealing or not, depending on your investment philosophy (and your view of PEM’s prospects). MERV appears to offer prospect of early real revenues while awaiting PEM to ripen. On the other hand, it’s two different businesses, which can be hard for a small company to do effectively.

Candent Technologies – a brand new stealth (til now) arrival on the microturbine front. Very experienced personnel coming out of Rolls Royce, (which decided not to do a microturbine) take a different design approach, and will target a 750 KW unit size, eventually as low as $350/KW. They specifically are avoiding the use of recuperators, as expensive and unreliable, and will use a high pressure spool instead. No new technology is involved, so they’re projecting a rapid development, direct to beta pre-production stage, skipping a prototype. Looking for $3 Million now, and $20 M in another round following demonstration.

PEPCo Technologies – GenerLink. Spinoff of PEPCo, selling an standby generator interface for homeowners. Said they have 2 investors that are going ahead (one is strategic, the other a VC). I have to agree with what I heard most people say– it’s hard to imagine there are very many people who would want this.

Pentadyne Power Corp. High speed flywheel, continuing development work by Rosen Motors. Targeting high power/short duration ride-through application. First units will be 120 KW for 20 seconds. Novel approach to safety containment using double shell with liquid in-between (originally conceived for onboard vehicle use, where heavy shielding is not possible). Claim very low standby loss/idling load, and low cost once in large quantity production.

Powerco US/Ocean Power — a new private marketing arm, formed as subsidiary to Ocean Power (NASDAQ PWRE). Initial focus on small stirling engine they acquired in Norway, but parent company has too many breakthrough technologies in its arsenal to believe, ranging from diesel CHP, dish PV, fuel cells…and they didn’t even mention desalination, another area they claim to have cornered.

Ceramic Fuel Cells Ltd — Solid Oxide FC contender in Australia that appears quite credible. In the breakout session they showed a new all-ceramic stack configuration that is looking very promising. Market entry product is a 40 KW generator, to operate on straight methane (SOFC is autoreforming, so no fuel processor needed).

BCS Technology — a tiny company from Texas, founded 1990, with “self-humidified” PEM fuel cell stacks and MEAs. They’ve sold over 100 small stacks.

ALM Turbine — This company looked overly ambitious when they started raising money 1-2 years ago, but they say their progress is on track. Their first engine is just about ready for tests, and preliminary emissions data for their burner technology is promising. Their engine is completely scalable in size, from 25-350 KW, and they claim high efficiency, and high part load performance. Design relies heavily on exhaust gas recirculation.

Sixth Dimension — Until recently, it was difficult to understand what this company did, but they’re doing better at explaining it now. They’re a “network operating system” for communicating with any/all types, brands etc of energy producing, consuming and monitoring devices, e.g. meters, gensets, building control systems, energy analytics systems, etc. They put a “gateway” box on site which they call “Embedded Site Server”, to which 16 devices can be connected. Each device gets a smaller box called the “Power Tone Adapter” which can be outside or inside the device. The system of proprietary hardware and software makes possible all manner of clever monitoring and control functions. This sounds like what Encorp says, but they say Encorp can only do these things if you have Encorp switchgear. 6th is far more equipment-agnostic.

Alternative Designs Inc — ADI has unique stirling engine technology enabling operation at much higher temperatures, attaining efficiencies of 50% and greater. Other enhancements include an advanced regenerator, and simplified heater head design, leading to big cost reductions and higher reliability. [I am an advisor to this company.]

DayStar Technologies — Unique PV cell technology. Company first developed a “flat-plate concentrator” technology that was clever and intriguing, but would require extensive capital development. DayStar is now focused primarily on their own cadmium-telluride “thin-film-on-metals” solar cells. The cells are manufactured in sheets, which can be used whole, or cut into cells which can be a direct “replacement” for Si cells, at half the cost.

Rolls Royce — as noted above, RR decided not to pursue a microturbine development, despite having invested quite a bit of money in it. Instead, they’re going for a special purpose turbine to be combined with their own planar SOFC. Program began in 1992. This 1 MW hybrid is to be ready by 2005. RR will fund most of the program internally, but will seek strategic partners for funding, and technical/marketing support, leading to a possible spinoff company.

Vanteck(VRB) Technology Corp. — (public company, CNDX symbol VRB ) commercializing the vanadium redox battery technology, and in particular VESS, for Vanadium Energy Storage Systems. The company is in the midst of straightening out a particularly messy history of corporate ownership of IP and market rights, but assuming that can be done, are focusing on the US market. This is flow-battery has some uniquely attractive features, including high round trip efficiency, and freedom to size a system’s power (KW) and capacity (KWH) separately (either aspect can be added to over time). In concept, this is very similar to the Regenesys battery, but with different chemistry, and targeted at smaller systems. The first commercial installation outside Japan is starting up now — a 250 KW/ 520KWH unit at ESKOM, in South Africa.

New EIA report on Industry Mergers

Happy Holidays! See you in the next thousand years…

UFTO Note – New EIA report on Industry Mergers

An early Christmas present! This week’s issue of the ” Electric Utility Restructuring Weekly Update” arrived via email today, instead of Friday. (If you’re not a subscriber, I recommend signing up for it. It’s also available on the Internet at

This item caught my eye. It’s an impressive compilation of data on utility mergers. the Update’s writeup came from the Sustainable Energy Coalition “Weekly Update,” Dec. 19, 1999

In a report titled, “The Changing Structure of the Electric Power Industry, 1999: Mergers and Other Corporate Combinations,” the Energy Information Administration finds that competition is causing the number of mergers to increase rapidly. There have been twenty-two mergers completed by investor-owned utilities (IOUs) over the last three years and another twenty-five mergers will most likely be completed by the end of 2000. In addition, by the end of 2000, approximately fifty-one percent of all IOU power production will come from the ten largest IOUs. The twenty largest IOUs will have seventy-three percent of all IOU power generation capacity. Since 1997, IOUs have been divesting or have divested over 300 power plants, usually selling at prices that are 1.5 to 2.5 times their book value. Nuclear power plants have sold for far less than their book value.

The report can be retrieved [as a PDF file] at:

The complete executive summary from the report is included below.

The EIA has a wealth of information about the industry.
Home page:

One particularly interesting resource:
— Status of State Electric Utility Deregulation Activity Monthly
A map/chart of the status of deregulation activities by state.


The Changing Structure of the Electric Power Industry 1999:
Mergers and Other Corporate Combinations

December 1999

Executive Summary

Since the passage of the Energy Policy Act of 1992, which opened the U.S. electric power industry to the start of competition,1 investor-owned electric utilities (IOUs) have been under pressure to cut costs, to become more efficient, and to expand their products and services. Mergers, acquisitions, asset divestitures, and other forms of corporate combinations have become widespread as IOUs seek to improve their positions in the increasingly competitive electric power industry.

Since 1992 IOUs have been involved in 26 mergers, and an additional 16 mergers are pending approval. One effect of these mergers is that the industry is becoming more concentrated. In 1992 the 10 largest IOUs owned 36 percent of total IOU-held generation capacity, and the 20 largest IOUs owned 56 percent of IOU-held generation capacity (Figure ES1). By 2000, the 10 largest IOUs will own an estimated 51 percent of IOU-held generation capacity, and the 20 largest will own an estimated 73 percent.

E Commerce & Utilities

At the recent PICA meeting in Santa Clara, there was a good session on ecommerce and utilities. Here’s the summary from the program. The actual list of presentations follows.

The Power point presentations themselves are TEMPORARILY available for downloading on line (and I have ecopies). I caught part of the Anderson Consulting presentation, and thought the characterization of the various segments was rather well done.


Panel Session 1: “e-Commerce in Electric Utilities”

Tuesday, May 18th, 2:00 – 5:00
Moderator: E. Dobrowolski, KEMA Consulting

“Where Do You Go From Here – Preparing for the Future”
Edward P. Meehan, Managing Director, Legg Mason Wood Walker, Inc.:

With the quickening pace of electric utility deregulation, utility executives are faced with growing challenges on a daily basis. Couple that with the emergence of e-Commerce as a new driver of corporate strategy and the complexity of your business increases geometrically. As regulated utilities look forward, they need to evaluate how to utilize e-Commerce from a defensive basis to reduce costs and streamline operations and from an offensive position to provide superior customer service and develop new business opportunities. One of the challenges today is to understand the strategies being developed by potential competitors and identifying how to bring such competencies in to your organization. We will look at what is developing in this market and raise some focused issues on the new competitors you may be facing.

“e-Commerce and the Virtual Utility”
Paul Daugherty, Partner, Andersen Consulting &
Brad Holcombe, Partner, Andersen Consulting: 212-708-8279

e-Commerce offers transformational opportunities for Utility companies in both business-business and business-consumer interaction. This topic will discuss the new “virtual” business models that are possible with e-Commerce.

“Practical Experiences in e-Commerce”
Aaron Daisley-Harrison 425-451-3100 &
Lloyd Robinson, DMR Consulting 206-521-2178

Orchestrating a successful e-Commerce project involves all of the classic issues that have faced IT with the added complexity of needing to stitch together software and platforms that were never conceived to work cooperatively. Experiences from actual projects will be presented and the many pitfalls along the road to attaining the brass ring will be pointed out.

“TransaXions and the Internet: E-Commerce for Energy”
Adam E. C. Yeh, Development Manager, Connext:

Whether itis delivering reports, authorizing payments, collecting usage information or scanning records, Internet based E-Commerce provides the most cost effective way for business-to-business and business-to-customer transactions. Both Energy Service providers and their customers should be looking at this new form of interaction and business model to evaluate their bottom line savings. Technical issues for deploying Internet technology and E-Commerce solutions in the energy industry, especially in the areas of billing, customer metering and energy transactions will be presented. Emphasis will be on the system architecture and the Graphic User Interface.

“Providing Deregulation Benefits to Non-Traditional Players through the Internet”
Frank Koza, General Manager, UniGrid, LLC:

UniGrid is an Internet based system that is designed to provide the benefits of the newly deregulated energy industry to the Commercial & Industrial sector. The concepts behind UniGrid will be presented with emphasis on the potential uses through the Internet. Leveraging technology from other industries to accomplish this goal will be highlighted.

“ The Internet Business Strategy for the 21st Century Utility”
Will Knight, Director, Online Business 404-506-4956
& Martha Driscoll, C&I Online Business Development 404-506-2317

Why companies should view customer access as a value-creating asset. Leveraging the Internet as a customer acquisition and retention tool in a competitive marketplace.

(Powerpoint presentations)

Panel Session #1 — Tuesday, May 18th, 2:00 P.M.
e-Commerce for the Power Industry

Where Do You Go From Here – Preparing for the Future
Edwin P. Meehan, Legg Mason Wood Walker, Inc.

eCommerce: The Virtual Utility
Paul R. Daugherty, Andersen Consulting

Lloyd Robinson, Aaron Daisley-Harrison, DMR Consulting

Transactions and Internet E-Commerce for Energy
Adam Yeh, Microsoft Corporation

Developing an Internet Business Strategy for the 21st Century Utility
Martha Driscoll, Will Knight, Southern Company

e-Commerce for Electricty
Edward G. Cazalet, CEO Automated Power Exchange, Inc.

Emerging Transmission Market Segments (IEEE Article)

The article cited below is from the January issue of Computer Applic in Power, and for non-subscribers interested in T&D issues, it happens to be available in its entirety on the IEEE website:

I thought you might find it useful as an overview of the various ways transmission systems are being organized around the world.

Who’s coming to the IEEE PICA Meeting in Santa Clara this month (May 17-20)??

Let me know, and maybe we can get together, or at least say hello at the conference.
Complete details available at:
Remember QuickStab? (UFTO Note March 22) Dr. Savalescu will be at PICA, and would be pleased to offer a private demonstration. Give him a call!
(I just joined IEEE, and am beginning to appreciate the wealth of information it provides to the power industry.)
IEEE Computer Applications in Power January, 1999 Volume 12 Number 1 (ISSN 0895-0156)

Meet the Emerging Transmission Market Segments
Farrokh A. Rahimi & Ali Vojdani

Around the globe, the electric industry is undergoing sweeping restructuring. The trend started in the 1980s in the U.K. and some Latin American countries, and has gained momentum in the 1990s. The main motivation and driving forces for restructuring of the electric industry in different countries are not necessarily the same. In some countries, such as the U.K. and the Latin American countries, privatization of the electric industry has provided a means of attracting funds from the private sector to relieve the burden of heavy government subsidies. In the countries formerly under centralized control (central and eastern Europe), the process follows the general trend away from centralized government control and towards increased privatization and decentralization. It also provides a vehicle to attract foreign capital needed in these countries. In the United States and several other countries where the electric industry has for the most part been owned by the private sector, the trend is toward increased competition and reduced regulation.

This article presents an overview of the evolving structural models and the main structural components of the emerging deregulated electricity industry. An analysis of the central structural components, namely the independent system operator (ISO) and the power exchange (PX), is provided and used as a basis for structural classification with a view to the supporting computer application needs.

Public Interest R&D

This paper was just published in Utilities Policy, on a timely subject which is of interest to many of you. The authors will have reprints available, and have supplied me with an electronic copy of the (15 page) manuscript, from which I extracted the following excerpts. The complete paper is 10 pages as published.

Contact: Carl Blumstein, 510-642-9588,

“Public-Interest Research and Development in the Electric and Gas Utility Industries,”
Utilities Policy: Volume 7, Issue 4, 21 April, 1999, pages 191-199
Carl Blumstein, University of California Energy Institute
Stephen Wiel, Lawrence Berkeley National Laboratory

An unintended consequence of the restructuring of the electricity industry in the U.S. has been a sharp decline in expenditures for R&D by investor-owned utilities. This paper examines how the public interest may be damaged by this decline in R&D expenditures and discusses some of the strategies that could be employed to mitigate the damage.

The restructuring of the electricity industry has been accompanied by a sharp decline in R&D expenditures by investor-owned utilities (IOUs), which have fallen by more than 45% between 1993 and 1996. The trend in the U.S. … is consistent with trends in other countries where the electricity industry has been or is being restructured.

A key driver of this trend is competitive pressures to cut costs. “While cuts are occurring across the board, RD&D departments are particularly vulnerable because in most cases research projects are not considered essential to the operation. In addition, the value of RD&D projects are difficult to quantify and often seen as a long-term investment. These trends are particularly prevalent for IOUs positioning themselves to increase profits for shareholders.” (Schilling and Scheer 1997) While, in retrospect, this trend does not seem surprising, it was certainly not an intended consequence of restructuring. Intentions notwithstanding, policy makers are now confronted with the questions: (1) how will this decline affect the public interest and (2) if some of the effects are adverse to the public interest, what mitigating steps, if any, should be taken?

This paper is intended to stimulate discussion on these questions by examining some of the issues in detail. First, we define public-interest R&D and illustrate the definition with some examples. The examples also give some idea of what may be lost if utility R&D expenditures continue to decline. Then we examine some of the issues that would be raised by efforts to mitigate the decline in utility expenditures for public interest R&D. These issues, which we explore using a series of examples, are funding, governance, and scope. Finally, in a brief conclusion, we discuss our concern that public interest R&D is likely to suffer some serious damage if action is not taken. However, we believe that there are likely to be many workable solutions to the problems we pose.

Technological change is an important contributor to economic growth and R&D is an important contributor to technological change. Any sharp decline in R&D expenditures is, at the least, a cause for concern. On the other hand, restructuring is moving the business of electricity generation decisively toward competition. If history is a guide, this competition will be conducive to innovation. New R&D investments may be forthcoming from the competitors or their suppliers. Thus, concern with the current decline in R&D expenditures should focus on the R&D, if any, that will not be adequately provided by the competitive market. Especially at risk are R&D funds for projects that, from a societal perspective, have measurable public benefits but that private markets will probably be unable to support because these public benefits cannot be appropriated by private firms.

In current discussions about utility industry restructuring this type of R&D has come to be known as public-interest R&D. Among the areas where the benefits of public-interest R&D may be important are health, safety, environment, energy efficiency, and “pre-commercial” technical information. Many R&D projects have both private and public benefits.

Strategic options [to provide] post-restructuring R&D support mechanisms [are discussed], with a description of funding, governance and scope, followed by an analysis of pros and cons. The four options offered are – Direct Industry Control, – Industry Directed Not-For-Profit, – Publicly Directed Not-For-Profit, and – Direct Government Control. These four are not mutually exclusive and do not begin to exhaust the possibilities.

We … conclude … that none of the options described above is sufficient by itself to provide for public-interest R&D after restructuring. In the past, public-interest R&D was sustained by a mixture of public and private, regulated and unregulated, and federal and state institutions and support mechanisms. Today, in the midst of restructuring, it is not surprising that some of these arrangements are being disrupted given the profound institutional upheavals now happening in the energy industry. Public-interest R&D is likely to suffer some serious damage if actions are not taken to deal with these disruptions.

The purpose of this paper is to stimulate discussion concerning what actions to take. The situation is complex, but the problems are by no means insoluble. Indeed, we think there are likely to be many workable solutions. Our hope is that discussion will begin to identify some of the better solutions and will contribute to the evolution of a new mixture of public and private, regulated and unregulated, and state and federal institutions and support mechanisms that will enable public-interest R&D to continue providing benefits after restructuring.

CERTS – New DOE Prog in Elec. Reliability

The Consortium for Electric Reliability Technology Solutions (CERTS) has been tasked by DOE to undertake a major new $2.5 million program in electric power system reliability research and technology development. (Congress re-established a budget for Transmission Reliability research in FY 1999, in DOE’s newly renamed “Office of Power Technologies” (OPT), formerly called the Office of Utility Technologies, under Deputy Assistant Secretary, Dan Adamson.)

The members of CERTS include:
Lawrence Berkeley National Laboratory (LBNL)
Edison Technology Solutions (ETS)
Oak Ridge National Laboratory (ORNL)
Pacific Northwest National Laboratory (PNNL)
Power Systems Engineering Research Center (PSERC)
Sandia National Laboratories (SNL).
The program is an important element in DOE_s response to the recommendations and findings of the SEAB Task Force on Electric System Reliability final report. (See UFTO Note, Oct 8, 1998, or go to:

PSERC is a group of universities that have formed a cross-disciplinary team dedicated to solving the challenges arising from power system restructuring. It’s worth a visit to their website at:

CERTS organizers are committed to a high degree of involvement by stakeholders. In particular, there will be a Technical Advisory Committee (see below), and numerous opportunities to participate in the research itself. A website is in preparation to provide public access to program details and developments.


Joe Eto, LBNL, Program Office Manager for the Consortium, 510-486-7284

Phil Overholt, DOE/OPT, T&D Reliability Program Manager, 202-586-8110

Introduction and Overview–(excerpted from CERTS proposal)

The U.S. electric power system is in transition from one that has been centrally planned and controlled to one that will be increasingly dependent on competitive market forces to determine its operation and expansion. Unique features of electric power, including the need to match supply and demand in real-time, the interconnected networks over which power flows, and the rapid propagation of disturbances throughout the grid pose unique challenges that are likely to be exacerbated in the future. As the physical events of 1996 and the market events of 1998 demonstrate, the reliability of the grid and the integrity of the markets it supports are integral to the economic well-being of the nation.

The Consortium for Electric Reliability Technology Solutions (CERTS) was formed to develop and commercialize new methods, tools, and technologies to protect and enhance the reliability of the U.S. electric power system under the emerging competitive electricity market structure.

CERTS organizes its activities under four major areas: (1) Reliability Technology Issues and Needs Assessment; (2) Real Time System Control; (3) Integration of Distributed Technologies; and (4) Reliability and Markets. The first area encompasses strategic planning; the remaining three areas involve research and technology development. (See individual projects described below).

CERTS Organization

LBNL operates a Program Office for CERTS with day-to-day responsibilities for managing CERTS projects and activities acting under direction from the Management Steering Committee.

ETS operates a Commercialization Office for CERTS with responsibilities for preparing commercialization plans and, when appropriate, implementing commercialization activities for CERTS projects and activities.

CERTS is also working with DOE to create a Technical Advisory Committee, consisting of 10+ industry stakeholders and experts to review the activities of the consortium and provide guidance on research direction.

FY 99 activities for DOE include work in five areas

1. Grid of the Future

The first year of a two year planning study to identify emerging gaps in reliability technology R&D. In the first year, CERTS will lay the groundwork for the development of a federal R&D roadmap by preparing six white papers, which will be the basis for industry-wide stakeholder workshops on: (1) alternative scenarios for the future of the electric power system, including a detailed articulation of the technological assumptions underlying each of these futures; (2) assessment of the technology and control R&D needs for widespread integration of distributed resources; (3) recent reliability issues review, including in-depth analysis of technological and institutional aspects of recent reliability events (e.g., summer 1996 WSCC events; winter 1997 northeast ice storms; winter 1998 San Francisco outage, etc.); (4) review and assessment of the current structure of U.S. bulk power markets and provision of reliability services (including 1998 price spikes in mid-west and west, and absence of meaningful opportunities for demand response); (5) assessment of the technology and control R&D needs for real time system control; (6) assessment of the treatment of uncertainty in planning and operational models.
2. Distributed Technologies Test Bed

The first year of a major multi-year effort to design and ultimately, with industry and other stakeholder partners from industry, operate an in-field distributed technologies test bed. The objective of this work is to develop and demonstrate the technologies and control strategies needed to support widespread integration of distributed resources into the grid.

During the first year, CERTS will: (1) specify the information needed to conduct system simulation studies of distributed technologies, assemble available information, and develop a plan for additional laboratory bench tests to gather missing information; (2) conduct simulation studies of the different scenarios of distributed technology penetration using available data and models to evaluate distribution system reliability impacts and identify micro-grid control issues; and (3) develop a multi-year demonstration plan for a distributed technologies test bed.

3. Reliability Market Monitoring, Design, and Analysis

The first year of a multi-year effort to improve the design and operation of markets for the provision of reliability services in a restructured electricity industry. An integrated set of data development, simulation, and design activities will provide both immediate and longer-term benefits to emerging competitive markets.

During the first year, CERTS will: (1) collect data on ancillary services market compliance for the CA ISO and evaluate alternative user interfaces for using these data; (2) use these and other data to examine the performance of the market and, where warranted, suggest directions for fundamental changes in the design of these markets; (3) use experimental economic methods and other methods to simulate the performance of both current and proposed market designs; and (4) analyze customer-side technical requirements for provision of reliability services

4. Smart VAR Management System

Develop and demonstrate a software tool that will allow system operators to measure, communicate, and process real-time data to perform a VAR analysis of the WSCC grid and provide system operators with voltage profiles and reactive reserve margins at key substations. Had this tool been available, the 1996 outages on the Western grid could have been prevented.

During the first year, CERTS will develop, prototype, and field-test hardware and software that can be integrated with current energy management systems to provide operators with necessary information, contingency simulation, performance tracking, and report generation on voltage and reactive reserve margins.

5. Distributed Control

The first year of a multi-year effort to develop and demonstrate the appropriate role for distributed controls in management of the operations of regional power systems. During the first year, CERTS will initiate a demonstration of the ability and comparative performance of autonomous reasoning agents to maintain power system reliability compared to conventional centralized control methods.