AOL Energy Week In Review

on July 22, 2011 at 4:00 PM

Summer’s heat built across the week and across the country, spiking consumption of electricity as consumers ramped up their electricity and providing the first real test of the year for the aging US transmission grid and utilities’ demand response systems.

Surging power demand strained the transmission grid but as of Friday afternoon but did not break it, as both traditional and innovative programs designed to forecast and reduce usage spikes were put in place.

The ability of the US electricity system to handle extreme heat was proven, but the lack of investment in new transmission capacity in recent years made the response less effective, and the functioning of the system, less guaranteed than most consumers realize.

Pay To Play

Settling the question of how to pay for improvements in the transmission grid has been one of the most thorny issues in the US energy sector for the past decade. Quickly-evolving technology, uncertainty about jurisdictional issues and mixed messages on pollution reduction standards have all contributed to a freeze on large-scale development and renewal of the electricity delivery system in the US.

The Federal Energy Regulatory Commission, the body that regulates transmission and pipelines that cross state borders, has pushed for ways to allocate the costs of new transmission wires that numerous generators have objected to. Regions that benefit from new transmission projects designed to serve renewable electricity generation will be required to pay for those projects on a regional basis, FERC affirmed in a rule this week.

The rule was greeted with enthusiasm by the transmission industry, traditionally a diverse and difficult group to please. Transmission operators say that the new rules could revitalize not only the electricity sector but the American economy, citing the employment boost and the technology advances that could emerge from large-scale investment in the challenged grid.

Fueling Change

Fueling the creation of the power that flows across the grid is a less immediately pressing issue, but as permitting cycles lengthen and investors flail in uncertainty over emissions policy and fuel economics, the cheapest fuel continues to dominate.

Natural gas is the electricity industry’s benchmark today, the fuel so cheaply priced and accessible that all others are measured against it. The very lack of natural gas price volatility in recent years has differentiated it from other generating fuels like coal, and even if the most dire production forecasts are believed there will be enormous amounts of gas to keep prices comparatively low, and comparatively stable.

Summer isn’t over yet, and neither are the challenges the energy sector faces to keep up with spikes in demand from consumers largely oblivious to their electricity usage.

Read More On Breaking Energy:
The Incoming Tide Of Wave Energy
Making Energy Entrepreneurial
Energy Bill Pass House, Moves To Senate