ECE 333

Green Electric Energy

Lecture 2
Power Grid History
Professor Andrew Stillwell
Department of Electrical and
Computer Engineering
Slides Credit Prof. Tim O’Connell and George Gross
Announcements
 HW 1 will be posted after class
 Problems are due in-class next Thursday, Jan. 30th
 Supplemental reading will be discussed next Thursday, Jan.
30th
 TA Office Hours: Wednesdays from 12:00-2:00 pm,
Location ECEB 4070
 Today:
 Sections 1.1 – 1.3 in Masters
 Electromagnetism
 AC vs. DC
 Traditional Electric Utilities
 De-regulation
Electromagnetism
 Oersted (1820)  Tesla (1888); first
 Faraday (1831) induction motor and
 Maxwell (1864-1873) polyphase system

Generator action: Motor action:

Mechanical to electrical energy Electrical to mechanical energy
conversion conversion
 Consumption
Evolution of the Main Sources of US Energy

Source: Steve Chu and Arun Majumdar, “Opportunities and

challenges for a sustainable energy future,” Nature, August 2012
US Electric Grid: The Beginnings
 Commercial use of electricity began in the late 1870’s
with the development of arc lamps for street lighting
and lighthouse illumination
 The first complete electric power system, comprising
a generator, cable, fuse, meter and loads, is
considered to be Edison’s Pearl Street Station in New
York in 1882
 DC system with a DC generator supply
 59 customers within a 1 – mile radius area
The “Great White Way”
1882 Edison Poster on Electric Lighting

Check out Courier Café in Urbana!!!

The Beginnings*
 Actually, George Roe had founded in 1879 an electric
company in San Francisco, which later became part of
PG&E
 this was the first entity in the nation to offer central station
electric service to the public
 two brush arc–light dynamos supplied 21 lights to serve
from sundown to midnight – Sundays and holidays
excluded – for $ 10 per lamp per week

*Prof. Gross started his career at PG&E

Edison vs. Westinghouse (Not MCU Phase 4)

General Zod Dr. Strange Beast

Spider-Man!!!

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Major Developments
 Frank Sprague developed electrical motors in 1884;
within a short time, he incorporated them into the
electricity system
 The major limitations of DC systems became
apparent by 1886:
 inability to deliver power over longer distances
 need for high voltages for longer distance transmission so
as to reduce the associated losses but, considerably
lower voltages for generation and consumption
Major Developments
 Gaulard and Gibbs developed the transformer and AC
transmission, the forerunners of the AC transmission
systems in use today
 George Westinghouse immediately bought US rights
to the Gaulard and Gibbs technology
 In 1889, the first AC transmission line in North
America – a single phase 4 kV, 21 km line – was put
into operation to link Willamette Falls to Portland
Major Developments
 A key and important development was Tesla’s
invention of induction motors and polyphase systems
 Westinghouse purchased the rights to Tesla’s
inventions on AC motors, generators,
transformers and transmission systems
 Westinghouse was the key driver of the
construction of the basis of today’s AC grid
Major Developments
 AC won out over DC because
 the ease of transformation of voltage levels thereby
providing the flexibility to use different voltage levels
for generation/transmission and consumption
 the increased simplicity of AC over DC generators
 the increased simplicity and lower costs of AC over DC
motors
 AC replaced DC over a very brief time period
Major Developments
 In 1893, the first three–phase transmission line in
North America went into service; it was a 2.3 kV, 12
km line in Southern California
 Niagara Falls was connected to Buffalo – a 30 km
distance – using AC since DC was not practical
Technological Developments

 The push to transmit larger amounts of power over larger

distances led to higher voltages
 early systems: 12, 44 and 66 kV (RMS line–to– line)
 1922: 165 kV
 1923: 220 kV
 1935: 287 kV
 1953: 330 kV
 1965: 500 kV
 1966: 735 kV (Hydro Quebec)
 1969: 765 kV (American Electric Power)
Technological Developments
 Standardization of voltage levels led to voltage
classifications
 115, 138, 161 and 230 kV are high voltage ( HV )
 345, 500 and 765 kV are extra high voltage ( EHV )
 The development of mercury arc valves in the early
1950’s made HVDC economical in specific cases for
the transmission of larger blocks of power over longer
distances

Image credit T&D World, “https://www.tdworld.com/digital-innovations/hvdc/article/20969945/a-short-history-of-the-mercuryarc-valve”

Technological Developments

 Eventually, the various frequencies in use – 25, 50,

60, 125 and 133 Hz – became standardized to 60 Hz
in North America; there are many parts of the world
where the frequency is 50 Hz today
 DC became economic over AC for distances that
exceed
 500 km for overhead lines
 50 km for underground/submarine cables
110 or 120 Volts? 220, 230, 240-Volts?
 The standard household voltage used in North
America is 120V ±5%, with 240 V ±5% also available.
 Edison originally used a 100 to 110 V dc system while
Westinghouse used a 100 V ac system. The over the years
the “standard” has gradually increased to 120 V.
 It is still quite common to hear the term “110 or 220 V” used,
even by power engineers who should know otherwise.
 The European Union has recently standardized on a
230 V system, with some countries changing from 240
V and others from 220 V.
Worldwide Voltages and Frequencies

Source: http://en.wikipedia.org/wiki/File:Weltkarte_der_Netzspannungen_und_Netzfrequenzen.svg
Regulation and Large Utilities
 Electric usage spread rapidly, particularly in urban
areas. Samuel Insull (originally Edison’s secretary, but
later from Chicago) played a major role in the
development of large electric utilities and their
holding companies
 Insull was also instrumental in start of state regulation in
1890’s
 Public Utilities Holding Company Act (PUHCA) of 1935
essentially broke up inter-state holding companies
 Coincided with the start of the Securities and Exchange
Commission (SEC) (Securities Exchange Act, 1934)
PUHCA (Wheeler-Rayburn Act)
 Enacted in 1935, to facilitate the regulation of electric
utilities
 Limit utility operations to a single state to better regulate
them
 Force divestitures so that each became a single integrated
system serving a limited geographic area
 Part of several “trust-busting” activities by congress in
response to Wall Street Crash of 1929
 Gave rise to electric utilities that only operated in one
state (regulated vertical monopolies)
 Repealed with the Energy Policy Act (EPAct) of 2005
Vertical Monopolies
 For most of the last century electric utilities operated as
regulated vertical monopolies
 Within a particular geographic market, the electric utility had an
exclusive franchise

In return for this exclusive franchise, the

Generation utility had the obligation to serve all
existing and future customers
at rates determined jointly by utility and
Transmission regulators
It was a “cost plus” business:
Distribution • Customer pays the actual production
cost plus a fixed fee for profits.
Customer Service • Little incentive for utility to minimize
costs
Vertical Monopolies
 Within its service territory each utility was the only
game in town
 Neighboring utilities functioned more as colleagues
than competitors
 Utilities gradually interconnected their systems so by
1970 transmission lines crisscrossed North America,
with voltages up to 765 kV
 Economies of scale resulted in decreasing rates, so
most everyone was happy
Interconnected Electric Grid
History, cont’d -- 1970’s
 1970’s brought inflation, increased fossil-fuel prices,
calls for conservation and growing environmental
concerns
 Increasing rates replaced decreasing ones
 As a result, U.S. Congress passed Public Utility
Regulatory Policies Act (PURPA) in 1978, which
mandated utilities must purchase power from
independent generators located in their service
territory (modified 2005)
PURPA and Renewables
 PURPA was meant to promote greater use of domestic
renewable energy
 Forced utilities to buy power from other more efficient
producers, if that cost was less than the utility's own
"avoided cost" rate to the consumer;
 Avoided cost rate: the additional costs that the electric utility
would incur if it generated the required power itself, or if
available, could purchase its demand requirements from
another source
 At the time this was typically the cost to build/operate new
fossil fuel thermal plants
 It was regulated by states, not federally
Qualifying Facilities (QF’s)
• A new class of generating facilities receiving special
rate and regulatory treatment via PURPA
 Small Power Production Facility
 80 MW or less generation
 Primary energy source is renewable (hydro, wind or solar),
biomass, waste, or geothermal resources
 Cogeneration Facility
 Facility that sequentially produces electricity and another
form of useful thermal energy (such as heat or steam) in a
way that is more efficient than the separate production of
both forms of energy.
 No size limitation
PURPA and Renewables
 Through favorable contracts with QF’s, PURPA caused
the growth of a large amount of renewable energy in
the 1980’s (about 12,000 MW of wind, geothermal,
small scale hydro, biomass, and solar thermal)
 California added about 6000 MW of QF capacity during the
1980’s, including 1600 MW of wind, 2700 MW of
geothermal, and 1200 MW of biomass
 Inevitably, avoided costs went down over time. By the 1990’s
the ten-year QFs contracts written at rates of $60/MWh in
1980’s had expired, and they were no longer profitable at the
$30/MWh 1990 values.
 Many QF sites (wind farms, mainly) were retired or
abandoned
Abandoned Wind Farm: South Point in Hawaii

Source: Prof. Sanders

Four Categories of Utilities
 Investor-Owned Utilities (IOUs)
 Privately owned with publicly traded stock (e.g., Ameren in
Illinois; PG&E in California)
 Federally-Owned Utilities
 Run by the federal government on a non-profit basis (e.g.,
Tennessee Valley Authority (TVA), U.S. Army Corps of
Engineers)
 Publicly-Owned Utilities
 Local distribution utilities (more on that definition next
lecture)
 Typically exempt from taxes and non-profit
 Rural co-operatives (co-ops)
Independent Power Producers (IPPs) and
Merchant Power Plants
 IPPs and Merchant Power Plants are not utilities, in
the traditional sense. They are non-utility generators
(NUGs) that sell their power into the grid.
 IPPs sell at pre-negotiated price (Power Purchase
Agreement)
 Merchant Plants sell at wholesale spot market price
 NUGs were granted access to the grid with the National
Energy Policy Act of 1992 (more on this below)
 The introduction of NUGs to the grid required
independent system operators (ISOs) to enforce rules
and try to make a fair system.
Percent of Customers Served by Electricity
Providers
non-utility 0.4 % federal 0.8 %

coop 11.5 %

Source: Table 9 at http://www.eia.gov/electricity/state/unitedstates/

IOUs
57.3 % other 15.0 %

public 15.0 %
History, cont’d – 1990’s & 2000’s
 Major opening of industry to competition occurred as
a result of National Energy Policy Act of 1992
 This act mandated that utilities provide “non-
discriminatory” access to the high voltage
transmission
 Goal was to set up true competition in generation
 Result over the last few years has been a dramatic
restructuring of electric utility industry (for better or
worse!)
 Energy Policy Act (EPAct) of 2005 repealed PUHCA;
modified PURPA
State Variation in Electric Rates
Deregulation’s Goal: Customer Choice
De-Regulation in California in the 1990’s
 California’s rates were really high
 Assembly Bill 1890
 Pacific Gas & Electric (PG&E), Southern California Edison
(SCE), and San Diego Gas & Electric (SDG&E) forced to sell of
their generation assets to NUGs
 NUGS would compete to sell power, lowering prices
 Customers get choice of electricity supplier
 Utilities would buy power from the competitive market
cheaply, and would sell it at guaranteed (high) rates for years
(1996-2000)
 Energy auctions were set up to find the lowest price
The Result for California in 2000/1

OFF

OFF
Enron and the California energy crisis
 “Burn baby burn”
 Forest fire shut down a major transmission line into
California, cutting power supplies and raising prices; Enron
energy traders celebrated
 “Stick it to Grandma Millie”
 Enron (and other company) traders manipulated the
California market by turning off generators to raise rates
 Rates rose to $1.50/kWh in some cases (in Illinois they are
roughly $0.12/kWh)
The Enron disaster
 Enron: The Smartest Guys in the Room
 2003 book, 2005 documentary movie about the Enron
Scandal
 Examines the 2001 collapse of Enron (Houston-based energy,
services and commodities company), which resulted in
criminal trials for several of the company's top executives
 Shows the involvement of the Enron traders in the California
energy crisis
 Enron went bankrupt in 2001, largely due to bad business
moves hidden by accounting fraud
 Enron traders partially to blame for California energy crisis by
gaming the power grid to raise rates and make more money
The California-Enron Effect

WA
MT ND VT ME
MN
OR NH
ID SD WI NY MA
WY MI RI

IA PA CT
NV NE NJ
IN OH DE
UT IL W MD
DC
CO VA VA
CA KS MO KY
AZ TN NC
OK
NM AR SC
MS AL GA
TX
LA
AK
FL
HI

electricity delayed suspended

no activity
restructuring restructuring restructuring
Source : http://www.eia.doe.gov/cneaf/electricity/chg_str/regmap.html
August 14th, 2003 Blackout
Electricity Market De-Regulation
 De-Regulation: The electricity market is open to
competition rather than being controlled by utilities
with monopolies
 Goal is to introduce competition into the market, which
should reduce prices and give consumers more choice
 However, only applies to the supplier; the utility is still in
charge of maintenance and delivery (the infrastructure)
 CA, CT, DC, DE, IL, MA, MD, ME, MI, MT, NH, NJ, NY,
OH, PA, RI, and TX are all de-regulated
 None are in the top 10 states with the cheapest energy
rates, but several are in the top 10 most expensive
 Expensive states tend to de-regulate

From: https://www.electricchoice.com/blog/ultimate-guide-illinois-electricity/
https://www.publicpower.org/
De-Regulation in Illinois
 1997: The Illinois Electric Service Customer Choice and
The Rate Relief Law
 Enacted to combat Illinois’ extremely high electricity rates
 Rates were dramatically lowered by 20% and locked in for 10
years
 Too low for competitors to emerge, though, so it backfired a
little bit.
 1999: Lawmakers began to remove supply-related
services from the major utilities
 2002: Commercial entities could select their energy
provider
2007 Illinois Electricity Crisis
 The two main electric utilities in Illinois are ComEd and
Ameren
 A restructuring law from 1997 had frozen electricity
prices for ten years, with rate decreases for many.
 Prices rose on January 1, 2007 as price freeze ended;
price increases were especially high for electric
heating customers who had previously enjoyed rates
as low as 2.5 cents/kWh
 Illinois General Assembly had to intervene with the
Illinois Power Agency Act
 One billion dollars in rate relief to residential and commercial
customers over 4 years
Average Residential Electricity Rates (October 2018)
 Cheapest:
 Louisiana, 9.11 cents/kWh
 Most Expensive:
 Hawaii, 32.46 cents/kWh
 Alaska, 22.51 cents/kWh
 Close to home:
 Illinois, 13.23 cents/kWh (31st cheapest)
 Indiana, 12.39 cents/kWh (25th cheapest)
 Missouri, 10.71 cents/kWh (7th cheapest)
Wrap-up
 AC vs DC
 Public Utilities Holding Company Act (PUHCA) 1935
 Public Utility Regulatory Policies Act (PURPA) 1978

Next week:
 The Grid and Generation Technologies

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