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ENERGYConditionsThe average annual U.S. peak electricity demand growth over the next ten years is projected to be 2 percent, says the North American Electric Reliability Council (NERC). NERC estimates that electric generation capacity over the next decade will exceed demand nationally, but the Council says new generation capacity will be unevenly distributed. "Areas of North America may experience deficiencies even as new generating resources are added elsewhere or if transmission limitations limit the delivery of energy to demand centers," NERC says. Historically, electric utilities have been regarded as natural monopolies requiring regulation at the state and federal levels. The Energy Policy Act of 1992 removed a number of regulatory barriers to electricity generation in an effort to increase supply and introduce competition, but further legislation has been introduced and debated to resolve remaining issues affecting transmission, reliability, and other restructuring concerns. Similarly, the demand for natural gas is growing sharply. Annual U.S. gas consumption could increase by 60% over the next 20 years. The current estimate of the natural gas resource base in the 48 states, based on current technology and economics, is equivalent to at least 65 to 70 years of supply at the current level of consumption, according to the American Gas Association (AGA). TrendsNERC estimates that more than 10,000 megawatts (MW) of capacity nationally will have to be added each year between now and 2008 to keep up with the projected annual growth rate. Since 1990, however, actual annual capacity additions have been averaging only about 7,000 MW, an annual shortfall of 30%. Coal-fired power plants are expected to remain the key source of electricity through 2020. In 1999, coal accounted for 1,880 billion kilowatt-hours or 51% of total generation. Although coal-fired generation is projected to increase to 2,350 billion kilowatt-hours in 2020, increasing gas-fired generation is expected to reduce coal's share to 44%. Concerns about the environmental impacts of coal plants, their relatively long construction lead times, and the availability of economical natural gas make it unlikely that many new coal plants will be built prior to 2005. But slow growth in other generating capacity, the huge investment in existing plants, and increasing utilization of those plants are expected to keep coal in its dominant position. By 2020, it is projected that 11 gigawatts of coal-fired capacity will be retrofitted with scrubbers to meet the requirements of the Clean Air Act Amendments of 1990. The Department of Energy believes that the large investment in existing plants is expected to make nuclear power a growing source of electricity at least through 2000. With substantial recent improvements in the performance of nuclear power plants, nuclear generation was projected to increase until 2000, then decline as older units are retired. In percentage terms, gas-fired generation is projected to show the largest increase, from 16% of the 1999 total to 36% in 2020. As a result, by 2004, natural gas is expected to overtake nuclear power as the nation's second-largest source of electricity. Generation from oil-fired plants is projected to remain fairly small throughout the forecast. Investor-owned electric utilities provide approximately 78% of all power generated in the U.S. and electric service to 75% of the nation's ultimate customers. Municipally-owned electric utilities are those that are owned by the city or municipality in which they operate and are financed through municipal bonds. They are self-regulated. Approximately 11% of the nation's power needs are met by about 2,000 municipally owned systems. The remainder of U.S. power needs is provided by the federal government. Primary energy intensity on a per capita basis is projected to increase by 0.5 percent per year through 2020, with efficiency improvements in many end-use energy applications making it possible to provide higher levels of service without significant increases in total energy use per capita. TransmissionThe North American electric system is comprised of an interconnected network of generating plants, transmission lines, and distribution facilities. Transmission lines link the generators of electricity to the distributors, transporting power to local companies, which deliver it to consumers. These transmission lines are divided into three regional grids: one in the East which connects the Eastern seaboard and the Plains states and Canadian provinces; another in the West, which connects the Pacific coast and the Mountain states and provinces; and another that operates in Texas. These networks provide electric utilities with alternative power paths in emergencies and allow them to buy and sell power from each other and from other power suppliers. As of September 2003, the House and Senate versions of the energy bill currently pending in conference include provisions to create an electric reliability organization, with Federal Energy Regulatory Commission (FERC) oversight, to develop and enforce mandatory reliability rules and standards that are binding on all electric companies and market participants. Currently, the North American Electric Reliability Council (NERC) develops standards, guidelines, and criteria for assuring transmission system security and reliability. Electric company compliance with NERC standards, however, is voluntary and is not subject to government oversight. The issue of the system's capacity remains unsettled. According to EEI, the uncertainties associated with an industry that is partly regulated and partly competitive make it difficult to invest in needed infrastructure, particularly transmission. The Energy Policy Act (EPACT) of 1992 states that when transmission capacity is limited, an electric utility must offer to enlarge its transmission capacity, if necessary, to provide transmission services. But obtaining approval to site and build new electricity transmission capacity is becoming more difficult due to environmental concerns, the perceived health effects of electric and magnetic fields (EMFs), interest groups' concerns, and the concern that property values would decline along transmission line routes. Electric utility generating plants are major contributors to health and environmental problems such as urban and rural ozone pollution (smog), acid rain, visibility impairment, fine particulate pollution (soot), nitrogen deposition (eutrophication of lakes and streams), climate change and toxic air pollutants. In 1998, the industry spent $2.5 billion to construct new transmission lines in the United States. Currently, 10,126 line miles of new transmission additions are planned for the U.S., Canada, and the northern portion of Baja California, Mexico, through 2004. Since it costs approximately $1.5 million to build each mile of transmission line, the planned expansion could cost more than $15 billion. Many of these proposed lines may be delayed for many years or may never be constructed. The reliability of the U.S. energy transmission infrastructure, which currently depends on older technology, is a subject of concern. The U.S. Energy Department will spend $8.9 million on transmission reliability research in Fiscal Year 2001, an increase of more than 200% over FY 2000. ritical to the program is the "Transmission Reliability Initiative," which coordinates efforts to develop technologies to improve the reliability of the U.S. power grid under the new utility structuring efforts. Among the technologies under study are advanced control systems and "distributed generation." The introduction of retail competition and advanced environmentally friendly distributed power technologies, such as microturbines, fuel cells, and photovoltaics, has sparked strong interest in on-site generation, which could radically transform the electric power system. This could lead to a system in which many consumers will choose to generate their own electricity. Widespread use of on-site generation, spurred by the changing regulatory environment and these new technologies, will likely result in an intelligent "digital grid" that interacts in real time with every key part of the electricity system. Hydroelectric PowerHydroelectric power produces enough electricity to supply 4.64 million homes with electricity and returns $533 million in revenues to the federal Treasury. The U.S. system consists of 75 multipurpose hydropower projects with federal hydroelectric power facilities, accounting for approximately three percent of total electric power capacity in the United States, and up to 70% of the total power capacity in the Pacific Northwest. Hydropower plants and equipment have approximately $1 billion of construction backlogs for major rehabilitation work. In addition, hydropower facilities have a backlog of critical maintenance items of $31 million in FY 2001, according to the U.S. Army Corps of Engineers. Hydropower is an important source of clean electric power, particularly in the western United States. The energy produced at Corps hydropower sites each year is the equivalent of nearly 125 million barrels of oil, and represents an avoidance of the release of some 19 million tons of carbon into the atmosphere. Failure to provide adequate funding for critical maintenance and major rehabilitation to hydropower facilities means a greater likelihood of equipment outages and delay improvements that can result in significant electric power generation efficiencies. Nuclear PowerThe U.S. nuclear power industry comprises 103 licensed reactors at 65 plant sites in 31 states. The industry, currently generating about 20% of the nation's electricity, faces an uncertain future. No nuclear plants have been ordered since 1978 and more than 100 reactors have been canceled, including all ordered after 1973. No units are currently under active construction; the Tennessee Valley Authority's Watts Bar 1 reactor, ordered in 1970 and licensed to operate in 1996, was the last U.S. nuclear unit to be completed. The nuclear power industry's troubles include high nuclear power plant construction costs, relatively low costs for competing fuels, public concern about nuclear safety and waste disposal, and regulatory compliance costs. High construction costs are the most serious obstacle to nuclear power expansion. Construction costs for reactors completed since the mid-1980s ranged from $2 billion to $6 billion, averaging about $3,000 per kilowatt of electric generating capacity. The nuclear industry predicts that new plant designs could be built for about half that amount, but their total generating costs would still exceed currently projected costs for new coal- and gas-fired plants. Natural GasAnnual U.S. gas consumption could increase by 60% over the next 20 years. Gas demand gas will increase from 22 quadrillion Btus (about 21.4 trillion cubic feet) today to 35 "quads" (almost 34 trillion cubic feet) in 2020, the AGA predicts. According to the Natural Gas Supply Association, the U.S. has 1,466 trillion cubic feet of natural gas reserves remaining, with another 313 trillion cubic feet in Alaska. Total recoverable North American reserves are estimated at more than 2,400 trillion cubic feet -- enough to last for more than 100 years at current rates of consumption, the NGSA estimates. With the growing need for natural gas, some industry experts fear that the nation's pipeline capacity cannot meet consumer demand. The assets of the natural gas industry total more than $250 billion, including a 1.3 million-mile transmission and distribution system valued at nearly $150 billion. Of the 1.3 million-mile total, nearly one million miles is accounted for by distribution main. The system also includes more than 400 storage facilities. Transmission and distribution line mileage must increase by about 30% at a cost of more than $150 billion, according to the industry. The distribution segment additions will cost nearly twice as much as those of the pipeline additions. Because the drilling "fleet" has aged, a significant investment also will be required for facility upgrades. Capital expenditures in the $40 billion per year range may be necessary, according to industry sources. The pipeline system safety record is improving. Pipelines carry more hazardous materials in the United States than any other form of transportation. Annually, almost 600 billion ton-miles are carried in 177,000 miles of pipe, and more than 21 billion cubic feet of natural gas are delivered through 1.2 million miles of pipe. The National Transportation Safety Board (NTSB) says the number of pipeline accidents fell 23% and injuries ten percent between 1984 and 1996. NTSB recommendations in the pipeline mode have addressed problems in safety standards, excavation damage prevention, pipeline failure detection, and service line shutoff. Infrastructure SecurityEnergy is the lifeblood of the interdependent network of systems that underpin safety, economic and national security. The energy infrastructure today is in the midst of significant change and is increasingly under stress. Operations and business practices now rely on automated systems and the Internet. At the same time, reliability is being impacted by restructuring, deregulation, downsizing, inadequate and aging systems, regulatory constraints, a fall-off in research and development, and lack of incentives to make necessary infrastructure upgrades. These weaknesses and the increasing interdependencies within and among the nation's infrastructures mean that even small physical or cyber disruptions have the potential to cascade into regional outages with significant adverse consequences on public and private sector critical assets and services. These disruptions can be a result of deliberate acts (terrorism, hackers, insiders), human error, systems failures or natural disasters. While infrastructure owners and operators may have sound plans and procedures to prevent, mitigate and recover from isolated incidents, they are not well prepared for handling threats or disruptions that have regional impacts. There is limited awareness particularly of cyber vulnerabilities and of security practices to protect against cyber attacks. Likewise, there is limited appreciation of interdependencies and of the need to understand these interdependencies and to coordinate response and recovery with other affected infrastructures, state and local government agencies. Compounding the problem is that companies are disinclined for proprietary and competitive reasons to share necessary information about threats and vulnerabilities, best practices, and lessons learned. Companies also avoid sharing information with government agencies because of Freedom of Information Act (FOIA) concerns. Policy OptionsThe current energy crisis in California, combined with the rising costs of oil and natural gas have made energy transmission and generation an important issue at all levels of government. Policy makers will be looking at a host of ideas in the coming months to deal with the crisis including increased exploration for energy sources, new conservation techniques, and more emphasis on renewable energy sources. Yet, even with solutions to some of these problems there has been, little discussion regarding the nation's aging transmission infrastructure - the backbone of the system. Specific recommendations supported by ASCE:
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