TELEWatch February 7, 2001

Power Shortage Could Be Worse—And Likely Will

The spreading power shortage is a particularly cruel blow to the telecommunications industry. And it figures to become worse before it improves because in California, the eye of the present storm, electricity use reaches a peak in the summer, with widespread use of air conditioning.

With demand far outstripping supply, prices are soaring. WorldCom's UUNet, for example, used to pay 6, 7 or 8 cents per kilowatt-hour. "In many cases we're now paying 100 times that," reports Lloyd Howison, senior manager of construction and engineering.

Carriers and their suppliers have begun to dust off conservation plans. Many are bolstering in-house resources to reduce dependence on the public-utility grid. At least one carrier, Verizon Communications, is stepping up research into new sources of energy. But most appear to be in a state of shock.

An important new element in some regions is the rapid growth of server farms at data centers, which host facilities for online commerce. With load characteristics of 10 to 30 megawatts, a server farm consumes energy at rates comparable with those of a steel mill or a semiconductor-chip plant. And a server farm can be installed and in business within 30 days, whereas a steel plant may take several years, allowing ample time for energy planning.

As a farm grows, it gobbles up energy at a rate fast approaching 60 Mw. "The going phrase in the [utility] industry is, 'How can we power 60 Mw in 60 days?' " reports William Smith, manager of market-driven load management at the Electric Power Research Institute (EPRI) in Palo Alto, Calif. And any solution may be good for only 60 months, because server technology becomes obsolete in three to five years.

Telecom carriers and their suppliers are particularly vulnerable to the vagaries of electricity supply. Built on five nines of reliability and a once-seemingly healthy stockpile of backup generators, they enjoyed a false sense of security for years. Last month, power suddenly became scarce in California, prices shot through the roof, and the limitations of those backup generators became frighteningly evident.

Electric reserves down, fuel prices up

An energy crunch is measured, literally, in stages. On Jan. 11, the California Independent System Operator (ISO) declared a highly unusual Stage 3 emergency when electricity reserves dipped to just 1.5% of generating capacity. The warning has been repeated and continued. Normal operating capacity on a national average is roughly 15%, according to EPRI. A Stage 1 emergency is 7% and a Stage 2 is 5%. Stage 3 is extremely rare.

One problem is low water levels at hydropower generators in the Pacific Northwest, the source of much of California's electricity imports; in normal times, California imports 20% of its electricity. Another problem is the skyrocketing price of natural gas, up 200% to 300% this year. A third is irregular deregulation, which allows increases in the wholesale prices that utilities pay, but keeps a lid on the prices they can charge consumers. Pacific Gas & Electric (PG&E), for example, paid 40 cents per kilowatt-hour for electricity in December, but wasn't allowed to charge its customers more than about 5 cents.

"The financial implications of what's happening on the West Coast are enormous," says Howison. UUNet is fortunate to be part of a large organization, he continues, "because we're appropriately financed to deal with this. If we were one of the smaller players or a regional player, we could be in serious trouble."

The company has backup generators in place, buried fuel tanks, and refueling agreements. "In theory we can run those things indefinitely," Howison reports. "That really isn't the case for most data centers." UUNet operates 17 data centers in its worldwide network, seven of them in the United States.

Most of the generators currently deployed, however, aren't intended for around-the-clock usage. "Unless a carrier has generators designed for continuous operation—and I know of none of our competitors that have—they aren't able to run continuously for an indeterminate period," Howison continues.

Telecom industry's vulnerability

Suddenly stripped of long-term contracts with suppliers of electricity and fuel, California's utilities and the communications companies they serve find themselves vulnerable. And other regions of the U.S. are far from immune. Last week, governers of 11 western states held an emergency meeting to consider ways to cope with the spreading crisis. Less than two years ago, in the summer of 1999, the East Coast endured brownouts and rolling blackouts as results of a shortage of generation capacity at Conective Energy, a utility based in Wilmington, Del. Last summer two other eastern utilities, ISO New England and the Electricity Companies of New England, issued power-watch advisories.

As shortages become more severe, the consequences mount. When California's electricity supplies shrank last June, limited availability of natural gas and hydroelectric power to fuel power plants led to voltage drops. "Certain types of loads draw the same power no matter what the voltage level is," notes Smith at EPRI. "When the voltage goes down the current goes up, and that causes heating. Within seconds, that heating burned out 500 utility transformers in Silicon Valley."

The valley's supply shortage stems from what Smith calls "a transmission-corridor problem." Only 10% of the power the used in the valley is generated locally. The rest has to be imported from elsewhere in the state.

Chip makers lose productivity

Chip manufacturers that serve the telecom industry lost productivity and will most likely pass the resulting cost on to their customers. A lack of available power could even shift the geographic alignment of corporations by drying up some of the cash flow from Silicon Valley investors to local enterprises.

Hit especially hard despite extensive preventive measures were makes of semiconductor chips for telecom, because some manufacturing processes, with as many as 300 steps, are sensitive to even one millisecond of outage. Many chip manufacturers that serve the industry lost productivity and will most likely pass the resulting cost on to their customers. Some fear that a lack of available power could even shift the geographic alignment of corporations by drying up some of the cash flow from Silicon Valley investors to local enterprises.

At SDL, despite extensive prevention measures, the lights went out for eight hours last June. Backup generation covered less than 20% of the company's operation, but it did protect critical loads and safety loads. The local utility told the customer that it would be as long as 32 hours before the transformer was replaced. "The fuel capacity on their generator read 10 hours," Smith recalls. After eight hours of topping off the generator with diesel fuel, PG&E turned up the new transformer.

Verizon's countermeasures

Carriers are adopting new levels of measures to reduce their dependence on the grid. Verizon, formerly Bell Atlantic, appears to be at the forefront of such efforts. It operates what it claims is the industry's most sophisticated data-management system to track energy use and cost, and to forecast consumption. The system, managed by EDM Pro.Com, a division of Florida Power & Light Energy Services, is thought to be the only one of its kind used by a telecom company.

EDM assesses Verizon's energy consumption from bills issued by the 30,000 power companies that serve the carrier. From the data, 90 templates extract a picture of performance on a building-by-building basis. Building managers can access the Web-based system at any time to see how their environment measures up in energy used and in other respects.

"We've also run 562 of our buildings through a complicated matrix that we've taken from this system to assign energy-efficiency ratings," reports Betty Anderson, communications manager for the company's Team Energy. The ratings determine the first buildings to undergo an energy audit or receive an investment in energy-saving equipment.

Research in alternate energy

Verizon takes its energy initiative a step further by conducting research and development on energy alternatives, such as fuel cells. "Our strategy is to test them now and be ready for possible widescale use in the future, when the cost comes down," Anderson says.

"We have a sophisticated standby power generation system throughout our central offices, so if commercial power fails, we have backup upon backup. However, that's one of the ways that fuel-cell technology will help us going forward. If commercial power does push us to the point where we're having to use generators more and more, which is an environmental concern, fuel cells are a much cleaner way to provide power."

If utilities can't supply power reliably at reasonable cost, it appears, some carriers will do part of the job themselves.

http://www.rhk.com/telewatch/ShowStory.asp?id=169

-- Martin Thompson (mthom1927@aol.com), February 12, 2001