From Washington's perspective, the electricity crisis is, not surprisingly, a national problem demanding national solutions. Vice President Dick Cheney tells us we need one new power plant a week for the next 20 years, each large enough to serve a city of 500,000. The National Energy Plan would give the federal government authority to impose thousands of miles of high-voltage transmission lines on reluctant communities. Last month the Federal Energy Regulatory Commission ordered the states' regulatory authorities to allow centralization of control of the nation's transmission lines into the hands of four new regional enterprises. Policymakers envision the equivalent of an interstate highway system for electricity as a way to dramatically expand long-distance traffic volume.
Yet even as our leaders look for a top-down solution, in the communities they represent a vastly different dynamic is occurring, one in which expanded supply comes not from distant, gigantic power plants but from small, on-site generators. Today about 30 power plants a day are being installed inside or on top of buildings. The growth curve for these small-scale plants is staggering. In 1998 only about a dozen micro-turbines were shipped. This year more than 5,000 may be delivered. They will have a collective capacity only about half the size of one large central power plant. But at the current growth rate, people could, within five years, be installing the equivalent of 200 nuclear power plants each year inside or on top of our buildings.
The demand for solar cells has tripled in the past two years. Data-processing businesses are installing 200-kilowatt fuel cells to guarantee an uninterrupted flow of high-quality electricity. More than 100 residential-sized fuel cells will be installed for testing purposes this year. Next year they will be commercially available.
This emerging decentralized electricity system demands new rules. Many will be developed by local and state governments. Last year, for example, Texas became the first state to adopt uniform interconnection standards for decentralized power plants. Many communities are examining building and land-use ordinances to see whether they can guarantee continued access to sunlight for those with rooftop solar power plants. Thirty-three states have laws that allow some on-site power producers to sell excess electricity to their utilities.
Of course, the federal government does have an important role to play. It will, for example, help determine whether transmission pricing will enable or undermine decentralized power. "Postage stamp" pricing, under which power producers pay one rate regardless of the distance traveled, favors remote power plants. Congestion pricing, by which producers pay a rate largely dependent on how close to the customer they are located, favors on-site power generation.
The federal government also will help determine the way we use natural gas. More than 90 percent of all planned power plants will use natural gas. For the first time, natural gas-fired power plants will compete with residential gas furnaces. Both Democrats and Republicans agree that we have a gas pipeline capacity problem, and many believe we have a long-term gas supply problem as well. One way to deal with these problems is to make sure we are extracting the maximum amount of useful work from each unit of natural gas.
Central power plants convert about 40 percent of the natural gas they burn into electricity delivered to the customer. On-site power plants can capture the waste heat and achieve efficiencies of as much as 90 percent. We should favor heating systems that also generate electricity. From the top down, states and localities are viewed as obstacles to new central power plants and long- distance, high-voltage transmission lines. From the bottom up, states and localities are viewed as partners in designing a new, decentralized electricity system.
Top and bottom can and should work together, but they can do so only if we recognize that the turbulence in our electricity system is to an increasing degree the inevitable pain that accompanies the birth of any new system -- and if Washington agrees to assume the role of midwife.
The writer is vice president of the Institute for Local Self-Reliance. He has been a consultant to the energy agencies of presidents Ford, Carter and Clinton.
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