July 3, 2000
Digital Economy's Demand for
Steady Power Strains Utilities
By BARNABY J. FEDER
ead-Rite, an electronic components maker in Milpitas,
Calif., has been in no position to complain whenever
fluctuations in electrical service shut down a vital
computer-controlled milling machine. After all, the local
utility, Pacific Gas and Electric, has lived up to its
contractual obligation to keep the power flowing and to
prevent voltage surges or dips of 10 percent or more.
Unfortunately, the milling machine, which helps Read-Rite
make the tiny devices that read and write information on
computer disk drives, crashes if voltages vary as little as 5
percent. And such flutters have occasionally occurred the
last two years as Pacific Gas, a unit of the PG&E
Corporation, has performed its daily juggling act of matching
power demand and supply in the region. So far, Read-Rite's
solution has been to monitor the incoming power closely and
adjust settings on the milling equipment manually.
"We have to watch it closely because we can lose materials
worth thousands of dollars," said Shahzad Mahmud, director
of facilities.
Read-Rite's milling machine is indicative of a long-running,
but accelerating problem: the nation's electrical power supply
system is not up to the task of meeting the digital economy's
needs. While the utility industry has historically prided itself
on delivering fairly stable power 99.9 percent of the time,
today's computerized economy is demanding even fewer
interruptions and a much steadier current.
That is because electricity is more than just energy for
computers -- it is the medium they use to do their job.
Rapid, minute changes in voltage represent the ones and
zeros that make up digital information.
Those patterns are ultimately translated into a human voice
during a phone call, a calculation during a banking
transaction, a dose of radiation during cancer therapy or a
photo of a new baby e-mailed to scattered relatives. Any
disruption in the power supply that compromises the
processor's ability to manage those voltages can lead to lost
data or system crashes.
Power disturbances around the world cause more than
17,000 computer disruptions every second, from annoying
frozen cursors to serious destruction of equipment, according
to the latest calculations of American Power Conversion of
West Kingston, R.I., which began building backup power
systems for computer users in 1984.
"What we have worked well for an economy that ran on
motors and lights," said Peter Gross, a leading designer of
giant telecommunications hubs, data centers and other
buildings that operate around the clock. "There's a major
disconnect with what's happening in the digital world."
There is also an explosion of interest in technologies and
services that address the new economy's power needs. And
the remedies go well beyond the surge suppressors that most
home PC users employ to protect their computers during
lightning or voltage spikes. The solutions aimed at businesses
include backup generators manufactured by companies like
Caterpillar and smaller power supplies from American
Power Conversion and the Liebert unit of Emerson
Electric. There are innovative fuel cells from start-ups like
FuelCell Energy; new flywheels from Active Power and
Beacon Power and a variety of battery improvements.
Companies like International Rectifier and Ixys are finding
strong demand for new microchips that manage power
equipment.
The computer-driven economy's push to transform the
electricity business adds up to a $500 billion opportunity for
the companies selling into it, according to Mark P. Mills, a
Washington-based consultant who, along with Peter Huber,
a senior fellow at the Manhattan Institute, coined the term
"powercosm" to describe the evolving market. The two men
jointly publish The Digital Power Report for the Gilder
Group.
The message certainly is resonating on Wall Street.
International Rectifier has soared from less than $12 last
summer to more than $55. Ixys, a smaller competitor that
was hovering around $3 in November, reached $69 last
Tuesday. Start-ups like H Power, a fuel-cell maker, and
Active Power are on the runway for public offerings this
summer, hoping to find the same kind of welcome as
Capstone Turbine, which went public on Thursday at $16 a
share and ended the week at $45.0625. Meanwhile, giants
like General Electric and the deregulated arms of numerous
utilities have been pouring venture capital into the field.
The expansion of the digital economy is causing electrical
headaches in two ways. The most straightforward is that it
drives up demand for electricity in regions like the Northeast
where capacity is already strained in the peak summer
months. Last week, on Manhattan's Upper East Side, for
example, Consolidated Edison shut off service to eight
apartment buildings and lowered its voltage in the
neighborhood for several hours on a hot, muggy day.
The rising demand involves much more than
air-conditioning, of course. Consider the transformation of a
16-story building in downtown Newark, which formerly
housed a Macy's department store and consumed roughly 10
watts of power a square foot before the store was shut down
in 1992.
Now, the upper floors have been reopened as a
"telecommunications hotel" where companies like
WorldCom, IDT, Qwest and Level 3 Communications park
rows of data servers, routers and other electronic equipment,
as well as cooling systems, backup power and other devices.
According to Public Service Electric and Gas, the local
utility, such users require 40 to 50 watts a square foot.
One developer looking at another site in North Jersey for the
home of a potential million-square-foot data and
communications center asked Public Service for 100
megawatts of power, according to Patrick Downs, the
utility's vice president for operations support. "That's
one-third of what we give the whole city of Newark," he
said.
Still, even the most extravagant estimates of the new
economy's impact on sheer demand put the level at less than
10 percent of the total capacity of traditional utilities. To
energy managers, engineers like Mr. Gross and, more
recently, Wall Street, the volume of demand for power is
less noteworthy than the higher quality of electricity that
digital users are insisting upon.
"Three nines is great for the grid," Mr. Mills said, referring
to
99.9 percent reliability, or roughly eight hours of power
losses a year. Indeed, it is hard to imagine this figure
becoming much better, given the vulnerability of power
supply grids to bad weather, animals shorting out
transformers and other equipment and drunken drivers
hitting utility poles.
But even "three nines," Mr. Mills said, is "trash for a
computer."
Mr. Mills's prescription for microprocessor-friendly power
quality is 10 nines, or 99.99999999 percent reliability -- a
mere 32 seconds of power loss a year -- plus equipment to
protect against those gaps and the sags, spikes and surges in
between.
So great is the cost of computer disruptions to the economy
that the sale of services or equipment to prevent such
problems is starting to be seen as a can't-miss proposition for
those with the right technology.
"When the Model T was introduced, people didn't worry
about the grade of gasoline," said Larry R. Wilson, director
of strategic planning for the electric power unit of
Caterpillar.
The invention of high-performance cars changed that, Mr.
Wilson said, and now the same thing is happening on a much
broader scale with electricity.
"Where people have a power quality need, price is not an
issue," Mr. Wilson said. He predicts strong growth for
Caterpillar's generator sales to a "premium" market of users
for whom price is no object when it comes to reliable backup
energy. Such users are willing to pay the equivalent of $20 a
kilowatt for backup supplies, compared with about 7 cents a
kilowatt, on average, for electricity drawn directly from the
utility grid.
Although it varies by state around the nation, utility
regulators generally define a momentary power loss as one
lasting one to five minutes. Such interruptions can cause
havoc in stock-trading systems, automated paper mills and
other computer-driven processes unless there are backup
power generators and equipment to switch to them
seamlessly.
But in many cases, trouble does not wait for an outright
power loss. A voltage dip of just 10 percent, with no
interruption, can cause problems for some systems in a sixth
of a second, according to Marek Samotyj, who manages
power quality programs for the Electric Power Research
Institute, a Palo Alto, Calif. research group owned by utility
companies. And some sensors in medical equipment fail if
current is cut off completely for as little as four
milliseconds,
he said.
Even as the crowd of suppliers that offer remedies swells,
the question of who will pay for better power is very much
unsettled.
Last year, American Electric Power, a large utility based in
Columbus, Ohio, and the equipment maker Siemens Power
Transmission and Distribution began studying what
combination of monitoring equipment and system
improvements would be required to supply premium-quality
power to an industrial park in Delaware, Ohio. American
Electric's goals included learning whether premium power
could command premium prices, according to Harry
Vollkommer, one of the project managers for the utility.
But James Osteen, senior industrial engineer at the Nippert
Company, a wire manufacturer that is one of the major
utility customers in the park, does not see a more stable
power supply as a premium product. He said all companies
were expected to improve quality continually these days, and
the utility should be no exception. "Our expectation is that
we won't pay more for premium power," he said.
A similar attitude prevails in Detroit. In order to keep
business from the Big Three auto companies, Detroit
Edison is currently supplying power under a contract that
penalizes it if it fails to steadily reduce the number of power
losses and fluctuations. The number of power losses at
General Motors has been reduced by two-thirds since the
contract began in 1995, and Detroit Edison has improved
enough to avoid any penalties so far for power sags,
according to John C. Anderson, director of energy services
for G.M.
Addressing the new economy's power needs, however, is not
simply a matter of improving the utility grid. Studies show
that 70 percent of disruptions originate from electrical
problems at customer sites, according to Richard P.
Bingham, a manager at Dranetz-BMI, a power quality
products and consulting company, in Edison, N.J.
"Laser printers often take out computers when the heater
comes on," said Mr. Bingham, citing but one example.
Electronic ballasts in overhead lighting and compressors in
soda machines also cause unexpected loads. And electronic
devices, like drives that adjust speeds on motors to save
energy, generate electrical interference on the lines that
power them. The interference, known as harmonic signals,
can trip up other equipment unless it is canceled by filtering
devices. And many schools, he said, are creating problems
for themselves by overloading their electrical systems with
new electronic equipment.
The variety of problems and the public's dwindling patience
with disruptions means that trouble-shooters like
Dranetz-BMI can no longer restrict themselves to the
utility-dominated world, where the person on the other end
of the phone is generally an engineer. "There are a lot more
people with less and less knowledge of electricity calling me
with questions," Mr. Bingham said.
--
Michael Perelman
Economics Department
California State University
[EMAIL PROTECTED]
Chico, CA 95929
530-898-5321
fax 530-898-5901
