Leaders Must Act Now to Avoid
by Bruce Agnew and Charles Ganske
Editor's note: The Cascadia Center has written a series of articles examining the state's infrastructure deficit. This is the first of the series, which is being published exclusively by the Puget Sound Business Journal.
Our predecessors understood the links between infrastructure and economic growth. They cut tunnels through the mountains that opened ports, dug a canal that linked Lake Washington and Puget Sound, and built dams that provided electricity and water. How can we recapture that spirit today in a way that promotes commerce and conservation? A series beginning today outlines the Cascadia Center's approach to addressing some of the major infrastructure challenges facing the region.
For decades Washington state has produced some of the nation's cheapest electricity. But with mounting demands from California and Canada, our power grid is spread thin. Washington's power supply is showing the strain of coping with an uncertain market, driven by declining hydropower resources, not enough new power plants and aging transmission lines.
Much of our surplus energy -- just how much fluctuates greatly by the hour -- is sent to California through an agreement signed in the 1970s. Not having built a single new power plant for a decade, Californians in 2001 experienced huge shortfalls in energy production, pushing the Northwest power grid to the brink. At the height of this crisis, Washington had its own problems, with Seattle-area utilities scrambling to meet an unexpected spike in power consumption from energy-hungry computer servers in the booming technology sector. "We came within eight minutes of a blackout," recalls one utility executive.
Washington utilities received some reprieve in 2002 when several aging, multimegawatt-consuming smelters were shut down -- saving their operators millions of dollars in operating losses. That same year, the Portland-based Northwest Power Planning Council, representing the states of Washington, Oregon, Idaho and Montana, warned that such one-time measures would only stave off rising regional demand through 2005. The council's prediction came to pass last summer, when BPA was again sorely tested by a surge in demand from California.
BPA-operated hydroelectric dams -- the foundation of the Northwest power grid -- provide roughly half of the state's electricity production. But after five consecutive years of near-drought conditions and open-ended salmon recovery obligations, that foundation is eroding. In response to environmental litigation, a federal judge in Portland is considering a new order to increase spill and stream-flow requirements in order to aid the salmon population. By reducing water flows through hydroelectric dam turbines, a decision for the plaintiffs would further reduce regional power production.
Power from another renewable energy source, wind, must travel through a bottleneck of aging electric transmission lines in order to get over the Cascades from Eastern Washington's turbine farms. Puget Sound Energy CEO Steve Reynolds recently stressed the need for "solid, reliable energy infrastructure, not wishful thinking," admitting that conservation and wind power alone won't meet the region's demands.
Better infrastructure is not all that's needed. Utilities also need some measure of certainty in an uncertain market. This means stable, long-term power contracts and a streamlined federal and state permitting process for new facilities. In 2000, five gas-fired power plants were submitted for federal and state approval, and today have been cleared for construction. But while the power plant operators were waiting five years for their permits, the price of natural gas quadrupled from $3 to $13 per BTU, making future power from these plants too expensive.
Combined, these plants could have generated roughly enough electricity daily to power Seattle and Bellevue. Instead all five permitted plants are idle construction sites, including two key plants close to the Canadian border. Regional utility contracts with California customers are negotiable, but our power transmission to Canada is governed by the 1961 Columbia River Treaty. To compensate Canada for dams built upstream on the Columbia River in Canadian territory, the United States must return half its downstream benefits in the form of electricity. The location Canada has negotiated for returns to be made (at the Interstate 5 border crossing in Blaine) favors power production west of the Cascades. But both National Energy Systems' Sumas and BP's Cherry Point gas-fired cogeneration projects -- optimally located to help meet our treaty obligations -- remain on hold indefinitely.
Current natural gas prices stymie BP's and Nesco's search for long-term utility contracts, but it will probably not prove financially prudent for the utilities to pass on buying power from them. Regionally and nationwide, utilities consistently find electricity demand surpassing their projections, due to the blistering pace of technological change. Demand from electricity-hungry network servers and plasma TVs will seem like small change in a few years, when fleets of plug-in hybrid vehicles will recharge their batteries nightly from the Northwest power grid.
Clean energy is a laudable long-term goal but a limited one. With wind power, hydroelectricity and high natural gas prices working as wild cards, it's stable energy supplies that we need. We need to act now to avoid an all-out energy crisis. We need to build more power plants and boost our output -- before a blackout lets us know we're too late. Building the permitted gas-fired plants is the near-term solution. Energy producers, policy makers and environmentalists need to come together to find the long-term answer.
Right now, everyone's waiting for someone else to act. It may take blackouts and brownouts before the public demands reform. That won't be pretty, and will prove far more expensive than paying slightly more on our monthly electric bills for gas-fired power.
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