Power plants for generating electricity cost billions of dollars, which is very expensive by any standard, and a plant's cost must be borne by the utility that will sell its output. A utility will therefore not build a power plant unless it is needed and will yield an eventual profit. How does a utility decide to build such a plant?

Over the first 70 years of this century, the consumption of electricity grew at a steady rate of 7% per year, doubling every 10 years. In the early 1970s, it was therefore natural for utilities to assume that this trend would continue, so they planned for the construction of new power plants accordingly. Then, suddenly, in the wake of the 1973-74 energy crisis, the growth in electricity consumption slowed down, as conserving energy became the order of the day. The inflation and economic downturns that followed continued to have a depressing effect. Between 1973 and 1982, average growth in electric power consumption was only a little over 1% per year. That meant that the construction programs for new plants were leading to a gross excess of electrical capacity. Utilities scurried to cancel construction projects, both nuclear and coal. But in many cases, cancellation costs were so high that they decided to finish construction. This led to a substantial excess of generating capacity in the early 1980s. Consequently, there have been very few new construction starts since that time.

Beginning in 1982, a long period of economic prosperity developed, causing growth in electricity consumption. It increased at an average rate of 4.5% per year between 1982 and 1988, a total of 27% over the 6-year period. In 1989 it increased by another 2.6%. These increases have eliminated nearly all of the excess capacity and threaten imminent shortages.

With most commodities, production need not follow the ups and downs in consumption because excess production can be stored for later use, but with electricity that is not normally possible. It ordinarily must be generated as it is used. There is an alternative of pumping water into a reservoir high up on a mountain when excess electricity is available, as in the middle of the night, and then have it flow down, producing hydroelectric power as needed. But most proposals of this type have never "gotten off the ground" because of costs and opposition by environmental groups on the basis of land use. Consequently, a utility must have enough generating capacity available to meet peak loads. A hot summer afternoon, when air conditioners are going full blast, is usually the critical time, but cold, dark winter days are also a challenge.

In a crunch, utilities can, to some extent, buy power from one another through interconnecting lines. But the capacity of these interconnections is limited, and there are problems involved in increasing it. A 10-mile interconnecting link around Washington, D.C., has been held up for 13 years by environmental opposition to unsightly power lines and the land they require for rights of way. Furthermore, neighboring utilities may not have excess power to sell, and importing power from far away is both inefficient and expensive.

For a typical utility, an average of 14% of its generating capacity is shut down for maintenance and repair at any given time, but this figure is subject to fluctuations. It is impossible to be sure that a large plant will not have to be shut down unexpectedly. Therefore, a reserve capacity of 20% above normally expected requirements is considered to be reasonable, with anything below 17.5% somewhat precarious for reliable service. Since efficient power plants take at least 4 years to construct, we now can predict how many will be available in 1993. If our use of electricity expands at a rate of only 2.5% per year — recall that it has been expanding at nearly twice that rate since 1982 — much of the East coast will have less than 15% reserve capacity by 1993. Large areas in the East, Southeast, and the Great Lakes region will have less than 17.5%, and the great majority of the nation east of the Rocky Mountains will have less than 20%. The recent trend in construction has been to increase power plant capacity by only about 1% per year, which means that, unless the expansion of electricity consumption slows down dramatically, things will continue to get worse beyond 1993.

The electricity shortage is now most severe in Florida because that state has been growing so rapidly, twice as fast as the national average. On Christmas day of 1989, peak demand reached 33.8 million kW, whereas the amount the utilities could produce was only 24.8 million kW, and the quantity that could be brought in from out of state was only 3.4 million kW, leaving a shortage of 5.6 million kW, or 16%.

What happens when a utility's capacity is exceeded?1 If it is exceeded by only a few percent, the voltage is reduced. This causes lights to dim, and is called a brownout. Appeals to the public to conserve electricity follow. "Nonessential" users are asked to shut down for a day. That raises the disturbing question of which users are nonessential, and who decides. In the hot summer of 1988, New England went through 10 of these brownouts, including one that shut down Harvard University and Boston's City Hall for a day. It was only the third time in its 353-year history that Harvard had closed down. Other brownouts were mentioned in Chapter 1.

If the capacity is exceeded by 15% or more, the utility must resort to rolling blackouts, cutting off service to various neighborhoods for a few hours per day. During the cold Christmas season of 1989, there were rolling blackouts in Tampa, Jacksonville, and several other places in Florida, and the first blackout in Texas history hit Houston. Blackouts lead to all sorts of inconveniences, but refrigeration problems are especially severe. Without it, fish and dairy products are the first to spoil, with meat following close behind. In the summer of 1978, the utility serving Key West, Florida, had to resort to 15% rolling blackouts for 26 days to repair equipment, and citizens were throwing spoiled meat through its office windows. The public does not readily accept electricity shortages.

What Types of Plants Should We Build?

It seems obvious from the above discussion that our nation needs lots of new plants for generating electricity. The next issue to be confronted is what type should be built. The most efficient way to produce electricity is with turbines driven by an externally provided fluid, usually steam or water. The turbine itself is a machine which converts the motion of this fluid into the turning of a shaft. This turning shaft is then coupled to the shaft of a generator, somewhat like the generator or alternator in an automobile but enormously larger, which converts its energy into electricity.

The turbine may be driven by falling water, a takeoff on the familiar water wheel but very much larger and more highly engineered so as to convert nearly all of the energy of the falling water into electrical energy. This hydroelectric power is relatively cheap and has been important historically. Large plants harnessing the energy of Niagara Falls, the Tennessee River and its tributaries, the Columbia River and its tributaries, with its showpiece Grand Coulee Dam, and the Colorado River, including Hoover Dam, are familiar to tourists and have played very important roles in the economic development of the surrounding areas. Norway derives most of its electric power from this source, as does the Canadian province of Quebec and several other areas around the world. But sites for generating hydroelectric power must be provided by nature, and in the United States nearly all of the more favorable sites nature has provided are already being used. There have been new projects for harnessing the energy in the flow of rivers, but these give relatively little electric power and cause serious fish kills, which lead to well-justified objections by environmental groups. Hydroelectric power is therefore not an important option for the new plants that are needed.

Turbines can also be driven by wind. There has been a lot of activity in this area (see Chapter 14), but there are lots of problems. Thousands of large windmills, each the height of a 20-story building, would be needed to substitute for a single conventional power plant. There would be serious environmental effects, including noise and interference with birds. But most important, there is the very sticky question of what to do when the wind isn't blowing. Using batteries to store the electricity is far too expensive.

In the great majority of large power plants in the United States and in nearly every other nation, the turbines are driven by the pressure of expanding steam. When the steam is heated to very high temperatures (600°F or higher), it contains a lot of energy, and highly engineered turbine-generators are available for converting a large fraction of this energy into electricity. This steam is produced by boiling water and superheating the vapor, which requires a great deal of heat. The question is how will this heat be provided?

It can be produced by burning any fuel, but since coal is the cheapest fuel, most electricity in the United States is generated by coal burning. We have enough coal in the United States for hundreds of years to come, and it is relatively low in cost. The problems with the use of coal are largely environmental. They will be discussed in the next chapter.

The other major fossil fuels, oil and natural gas, are much more expensive in most parts of our country, but they are used to some extent. However, our second most prevalent way of producing this steam is with nuclear reactors, a technology referred to as nuclear power.

Nuclear power provides a quarter of all electricity in industrialized countries.2 In 1988 it provided 70% of the electricity used in France, 66% in Belgium, 49% in Hungary, 47% in Sweden and Korea, 41% in Taiwan, 37% in Switzerland, 36% in Spain, Finland, and Bulgaria, 34% in West Germany, 28% in Japan (increasing rapidly), 27% in Czechoslovakia, 19% in the United States and United Kingdom, and 16% in Canada. Nuclear power plants are now operating in 27 different countries and are under construction in 5 others. They are clearly a major contender.

While power plants utilizing steam are the preferred technology in the great majority of situations, they have one serious drawback--they require at least 4 or 5 years to construct and put into operation. If a crunch develops, requiring that new generating capacity be made available quickly, the only real option is internal combustion turbines. In them, the turbine is driven by the hot gases produced by the burning of oil or natural gas, similar to the way in which pistons are driven in an automobile engine.

Internal combustion turbines can be purchased, installed, and put into operation in 2 or 3 years. As a result of the crunch which is developing now, purchases of these machines are escalating sharply. Orders for new internal combustion turbines by U.S. utilities, in millions of kilowatts capacity, were 3.1 in 1987, 4.4 in 1988, and 5.3 in 1989. They are relatively cheap to purchase and install, which makes them attractive to utilities. Their principal drawbacks are that they are inefficient and their fuel--oil and/or natural gas--is expensive. These drawbacks are not a problem for utilities, since they have no difficulty in convincing the public utility commissions which regulate them to pass the fuel charges directly on to consumers. Internal combustion turbines are therefore easy for utilities to accept, but they increase electricity costs to consumers. They also increase our oil imports. In fact, these machines themselves are mostly imported, contributing to our balance-of-payments problems. There are many other important reasons why we should avoid expanding our use of oil.

Why Not Use Oil?

Oil is the principal fuel used in the United States and throughout the world. It is essentially the only fuel that runs our automobiles, trucks, airplanes, and ships, and is the dominant fuel for buses and railroads. Without it, our transportation system would grind to a screeching halt. Natural gas is the principal fuel for heating buildings, but oil also carries an appreciable part of that load.

In addition, oil has many vital uses other than as a fuel. Plastics, organic chemicals, asphalt, waxes, and essentially all lubricants are derived from it. Tremendous adjustments would be required if society had to forego use of almost any one of these items, let alone all of them. For example, nearly all industrial processes depend on organic chemicals, and many medicines, pesticides, paints, and the like, are manufactured from them.

The world's oil supplies are quite limited, hardly enough to get us halfway through the next century if present usage trends continue. In this situation it hardly makes sense to burn oil when other fuels can do the job just as well and less expensively.

But for the near-term future, at least, the distribution of oil throughout the world is a more serious problem than the total world supply. The nations that need it are not the nations that have it. Western Europe has very little and Japan has none. The United States has a reasonable amount, but not nearly enough to satisfy our needs. At the time of the oil crisis in 1974, we were importing 36% of our oil. By 1984, with the help of Alaskan oil and vigorous conservation measures, this was reduced to 29%. For example, in 1974 about 17% of our electricity was generated from oil, but by 1986 this was reduced to 5% by converting oil-burning power plants to coal. Laws required that automobiles be made smaller and more fuel efficient, and the national speed limit was reduced from 65 to 55 miles per hour, giving a substantial fuel saving. Thermostats were lowered in homes. It seemed like the situation was under control.

But in recent years, more and more oil has been used to generate electricity--23 million gallons per day in 1987, 27 in 1988, and 33 in the first half of 1989. A Georgetown University study projects that it will reach 84 million gallons per day by 1995. Other uses of oil have also been expanding. By 1988 we were importing over 40% of our oil, and in 1989 it was 46%; the trend is clearly climbing upward.3 At the same time, U.S. production is falling off; in 1989 it decreased by 5.7%. The prospects for the future look bleak. Alaska is now producing about 9% of our oil, but the Prudhoe Bay reservoir is being depleted and production will soon be falling off sharply. At the same time, our oil consumption is increasing by about 1% per year.

As a result, OPEC's control of the world oil market is being reestablished. The sharp decline in oil prices in the mid-1980s occurred because demand was down to the point where OPEC was producing at only 60-70% of capacity. By 1989 it was up to 80%, as compared to about 85% when oil prices peaked in 1979-80. The honeymoon on oil prices may rapidly draw to a close unless the OPEC countries decide to keep it going, further cementing their strong position by encouraging world oil consumption to continue its rapid growth. That would only postpone the day of reckoning, and worsen its effects.

In 1989, the United States spent over $40 billion on imported oil, which represented about 40% of our trade deficit. If the price returns to its 1980 level, this cost will double. In fact most estimates predict that oil imports will be costing us more than $100 billion per year before the end of the century. The impacts this will have on our economy could be severe.

In addition to the economic difficulties, there is good reason to worry about political issues. The fall of the Shah of Iran doubled world oil prices. Many of the OPEC countries are also politically unstable. We are highly vulnerable to cutoff of our oil supplies, or to unreasonably sharp price increases.

There is a real risk that oil politics may lead to war. In 1988 our navy was involved in serious shooting incidents in the Persian Gulf. If Iran and Iraq had not been exhausted by years of war, things could have been much worse. When one thinks about scenarios that could lead to a worldwide conflict, many would involve fighting over Middle East oil.

Oil also has its environmental problems, to be discussed in the next chapter. For all of these reasons, students and practitioners of energy strategies unanimously agree that measures which increase our use of oil must be avoided as much as possible.

Problems with the Use of Natural Gas

The problems with the use of natural gas for generating electricity largely parallel those for oil. Gas also has many other uses for which it is uniquely suited, like heating buildings and furnaces in industry (e.g., melting steel or glass). It can readily be used as a substitute for gasoline to drive automobiles; it is now widely utilized in Canada for that purpose. It is the principal alternative to oil for manufacture of plastics and organic chemicals, and in many cases it is more valuable for that purpose because the required conversion processes are simpler and cheaper.

As in the case of oil, world supplies are hardly sufficient for the next half century if present usage patterns persist. Natural gas has an advantage over oil in being largely of domestic origin (with important contributions from Canada and Mexico), but in most areas it is more expensive than the type of oil used to generate electricity. In many areas, this cost would be prohibitive.

Natural gas is the principal fuel for generating electricity in Texas and surrounding states where it is cheap, but nationally it provides only 9% of our electric power. This situation has been largely controlled by price considerations and uncertainty about availability of future supplies. Gas producers are not willing to sign long-term contracts, and it is not difficult to understand why a utility hesitates to build a billion dollar plant without such a contract.

While natural gas seems like a better choice than oil for future power plants, it is far from ideal. It is limited in supply, very much needed for other purposes, and generally expensive.

Electricity as a Substitute for Oil and Gas

While we have been discussing the problems of using oil or gas to generate electricity, most of those involved in planning energy strategies put more emphasis on the opposite, using electricity generated from plentiful coal and nuclear fuels to substitute for oil and natural gas. This substitution has been going on continuously for some time and has played a key role in reducing our usage of oil and gas. Between 1973 and 1988, our use of electricity increased by 50%, while our use of all other types of energy decreased by 5%. During this period, the percentage of our energy used in the form of electricity increased from 27% to 37%. It is expected to exceed 50% early in the next century.

For most applications, electricity is more convenient than burning fuels. It is cleaner and very much easier to control. A flick of a finger turns it on or off, and a twist of the wrist increases or decreases the flow. It is especially amenable to computer control, since computer inputs and outputs are electrical. It is easier to maintain, more flexible, and generally safer. These are the reasons for its rapid growth, and the reasons for believing the trend will continue.

When gas and oil become scarce and their prices rise, this trend will undoubtedly accelerate. For example, electric cars and railroads can save vast quantities of oil, and electrically driven heat pumps are already displacing natural gas for heating buildings. These shifts will greatly enhance the need for new power plants in the next century.

Coal or Nuclear?

By now, hopefully, the reader is convinced that we are going to need lots of new power plants in the very near future and that most of them should not be burners of oil or gas. The only real alternatives for the great majority of these are coal or nuclear plants. (In some areas remote from coal resources, like New England and most of our Pacific and Atlantic coasts, the only alternatives are oil and nuclear). The two should be roughly cost competitive. But the decision will largely be made on the basis of environmental impacts. That is what the rest of this book is all about.

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