RENEWABLE ANDEFFICIENT ELECTRICPOWER SYSTEMS

RENEWABLE ANDEFFICIENT ELECTRICPOWER SYSTEMS

Second Edition

GILBERT M. MASTERS

Copyright C© 2013 by John Wiley & Sons, Inc. All rights reserved

Published by John Wiley & Sons, Inc., Hoboken, New JerseyPublished simultaneously in Canada

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Library of Congress Cataloging-in-Publication Data:

Masters, Gilbert M.Renewable and efficient electric power systems / Gilbert M. Masters. – Second edition.

pages cm“Published simultaneously in Canada”–Title page verso.Includes bibliographical references.ISBN 978-1-118-14062-8 (cloth)

1. Electric power systems–Energy conservation. 2. Electric power systems–Electric losses.3. Renewable energy sources. 4. Energy consumption. I. Title.

TK1005.M33 2013621.31–dc23

2012048449

Printed in the United States of America

ISBN: 9781118140628

10 9 8 7 6 5 4 3 2 1

To the students who continue to motivate and inspire me

CONTENTS

PREFACE xvii

1 THE U.S. ELECTRIC POWER INDUSTRY 1

1.1 Electromagnetism: The Technology Behind Electric Power 21.2 The Early Battle Between Edison and Westinghouse 31.3 The Regulatory Side of Electric Utilities 5

1.3.1 The Public Utility Holding Company Act of 1935 51.3.2 The Public Utility Regulatory Policies Act of 1978 61.3.3 Utilities and Nonutilities 71.3.4 Opening the Grid to NUGs 81.3.5 The Emergence of Competitive Markets 9

1.4 Electricity Infrastructure: The Grid 121.4.1 The North American Electricity Grid 141.4.2 Balancing Electricity Supply and Demand 161.4.3 Grid Stability 201.4.4 Industry Statistics 21

1.5 Electric Power Infrastructure: Generation 251.5.1 Basic Steam Power Plants 261.5.2 Coal-Fired Steam Power Plants 271.5.3 Gas Turbines 311.5.4 Combined-Cycle Power Plants 32

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viii CONTENTS

1.5.5 Integrated Gasification Combined-Cycle Power Plants 331.5.6 Nuclear Power 35

1.6 Financial Aspects of Conventional Power Plants 381.6.1 Annualized Fixed Costs 381.6.2 The Levelized Cost of Energy 401.6.3 Screening Curves 431.6.4 Load Duration Curves 441.6.5 Including the Impact of Carbon Costs and Other

Externalities 481.7 Summary 49References 50Problems 50

2 BASIC ELECTRIC AND MAGNETIC CIRCUITS 56

2.1 Introduction to Electric Circuits 562.2 Definitions of Key Electrical Quantities 57

2.2.1 Charge 582.2.2 Current 582.2.3 Kirchhoff’s Current Law 602.2.4 Voltage 612.2.5 Kirchhoff’s Voltage Law 632.2.6 Power 632.2.7 Energy 642.2.8 Summary of Principal Electrical Quantities 64

2.3 Idealized Voltage and Current Sources 652.3.1 Ideal Voltage Source 652.3.2 Ideal Current Source 66

2.4 Electrical Resistance 662.4.1 Ohm’s Law 662.4.2 Resistors in Series 682.4.3 Resistors in Parallel 692.4.4 The Voltage Divider 712.4.5 Wire Resistance 73

2.5 Capacitance 782.6 Magnetic Circuits 81

2.6.1 Electromagnetism 812.6.2 Magnetic Circuits 82

CONTENTS ix

2.7 Inductance 852.7.1 Physics of Inductors 862.7.2 Circuit Relationships for Inductors 88

2.8 Transformers 922.8.1 Ideal Transformers 932.8.2 Magnetization Losses 96

Problems 100

3 FUNDAMENTALS OF ELECTRIC POWER 109

3.1 Effective Values of Voltage and Current 1093.2 Idealized Components Subjected to Sinusoidal Voltages 113

3.2.1 Ideal Resistors 1133.2.2 Idealized Capacitors 1153.2.3 Idealized Inductors 1193.2.4 Impedance 121

3.3 Power Factor 1253.3.1 The Power Triangle 1273.3.2 Power Factor Correction 129

3.4 Three-Wire, Single-Phase Residential Wiring 1313.5 Three-Phase Systems 134

3.5.1 Balanced, Wye-Connected Systems 1343.5.2 Delta-Connected, Three-Phase Systems 142

3.6 Synchronous Generators 1433.6.1 The Rotating Magnetic Field 1443.6.2 Phasor Model of a Synchronous Generator 146

3.7 Transmission and Distribution 1483.7.1 Resistive Losses in T&D 1493.7.2 Importance of Reactive Power Q in T&D Systems 1523.7.3 Impacts of P and Q on Line Voltage Drop 154

3.8 Power Quality 1573.8.1 Introduction to Harmonics 1583.8.2 Total Harmonic Distortion 1613.8.3 Harmonics and Overloaded Neutrals 1623.8.4 Harmonics in Transformers 165

3.9 Power Electronics 1663.9.1 AC-to-DC Conversion 1663.9.2 DC-to-DC Conversions 169

x CONTENTS

3.9.3 DC-to-AC Inverters 1753.10 Back-to-Back Voltage-Source Converter 177References 178Problems 178

4 THE SOLAR RESOURCE 186

4.1 The Solar Spectrum 1864.2 The Earth’s Orbit 1904.3 Altitude Angle of the Sun at Solar Noon 1934.4 Solar Position at Any Time of Day 1964.5 Sun Path Diagrams for Shading Analysis 2004.6 Shading Analysis Using Shadow Diagrams 2034.7 Solar Time and Civil (Clock) Time 2064.8 Sunrise and Sunset 2094.9 Clear-Sky Direct-Beam Radiation 2104.10 Total Clear-Sky Insolation on a Collecting Surface 216

4.10.1 Direct Beam Radiation 2164.10.2 Diffuse Radiation 2174.10.3 Reflected Radiation 2204.10.4 Tracking Systems 222

4.11 Monthly Clear-Sky Insolation 2274.12 Solar Radiation Measurements 2334.13 Solar Insolation Under Normal Skies 235

4.13.1 TMY Insolation on a Solar Collector 2364.14 Average Monthly Insolation 238References 246Problems 247

5 PHOTOVOLTAIC MATERIALS AND ELECTRICALCHARACTERISTICS 253

5.1 Introduction 2535.2 Basic Semiconductor Physics 255

5.2.1 The Band-Gap Energy 2565.2.2 Band-Gap Impact on PV Efficiency 2605.2.3 The p–n Junction 2635.2.4 The p–n Junction Diode 2655.2.5 A Generic PV Cell 267

CONTENTS xi

5.3 PV Materials 2675.3.1 Crystalline Silicon 2695.3.2 Amorphous Silicon 2725.3.3 Gallium Arsenide 2745.3.4 Cadmium Telluride 2755.3.5 Copper Indium Gallium Selenide 276

5.4 Equivalent Circuits for PV Cells 2775.4.1 The Simplest Equivalent Circuit 2775.4.2 A More Accurate Equivalent Circuit for a PV Cell 280

5.5 From Cells to Modules to Arrays 2845.5.1 From Cells to a Module 2855.5.2 From Modules to Arrays 287

5.6 The PV I–V Curve Under Standard Test Conditions 2885.7 Impacts of Temperature and Insolation on I–V Curves 2915.8 Shading Impacts on I–V Curves 294

5.8.1 Physics of Shading 2945.8.2 Bypass Diodes and Blocking Diodes for

Shade Mitigation 2995.9 Maximum Power Point Trackers 301

5.9.1 The Buck–Boost Converter 3025.9.2 MPPT Controllers 305

References 309Problems 309

6 PHOTOVOLTAIC SYSTEMS 316

6.1 Introduction 3166.2 Behind-the-Meter Grid-Connected Systems 317

6.2.1 Physical Components in a Grid-Connected System 3176.2.2 Microinverters 3196.2.3 Net Metering and Feed-In Tariffs 321

6.3 Predicting Performance 3226.3.1 Nontemperature-Related PV Power Derating 3236.3.2 Temperature-Related PV Derating 3276.3.3 The “Peak-Hours” Approach to Estimate PV

Performance 3306.3.4 Normalized Energy Production Estimates 333

xii CONTENTS

6.3.5 Capacity Factors for PV Grid-ConnectedSystems 334

6.3.6 Some Practical Design Considerations 3366.4 PV System Economics 338

6.4.1 PV System Costs 3386.4.2 Amortizing Costs 3406.4.3 Cash Flow Analysis 3446.4.4 Residential Rate Structures 3476.4.5 Commercial and Industrial Rate Structures 3496.4.6 Economics of Commercial-Building PV

Systems 3516.4.7 Power Purchase Agreements 3526.4.8 Utility-Scale PVs 353

6.5 Off-Grid PV Systems with Battery Storage 3566.5.1 Stand-alone System Components 3566.5.2 Self-regulating Modules 3586.5.3 Estimating the Load 3606.5.4 Initial Array Sizing Assuming an MPP Tracker 3646.5.5 Batteries 3666.5.6 Basics of Lead–Acid Batteries 3676.5.7 Battery Storage Capacity 3706.5.8 Coulomb Efficiency Instead of Energy Efficiency 3736.5.9 Battery Sizing 3756.5.10 Sizing an Array with No MPP Tracker 3786.5.11 A Simple Design Template 3816.5.12 Stand-alone PV System Costs 384

6.6 PV-Powered Water Pumping 3876.6.1 The Electrical Side of the System 3886.6.2 Hydraulic Pump Curves 3906.6.3 Hydraulic System Curves 3936.6.4 Putting it All Together to Predict Performance 396

References 399Problems 400

7 WIND POWER SYSTEMS 410

7.1 Historical Development of Wind Power 4107.2 Wind Turbine Technology: Rotors 415

CONTENTS xiii

7.3 Wind Turbine Technology: Generators 4187.3.1 Fixed-Speed Synchronous Generators 4187.3.2 The Squirrel-Cage Induction Generator 4197.3.3 The Doubly-Fed Induction Generator 4227.3.4 Variable-Speed Synchronous Generators 423

7.4 Power in the Wind 4247.4.1 Temperature and Altitude Correction for Air Density 4267.4.2 Impact of Tower Height 429

7.5 Wind Turbine Power Curves 4337.5.1 The Betz Limit 4337.5.2 Idealized Wind Turbine Power Curve 4377.5.3 Real Power Curves 4387.5.4 IEC Wind Turbine Classifications 4417.5.5 Measuring the Wind 442

7.6 Average Power in the Wind 4437.6.1 Discrete Wind Histogram 4447.6.2 Wind Power Probability Density Functions 4477.6.3 Weibull and Rayleigh Statistics 4487.6.4 Average Power in the Wind with Rayleigh Statistics 4507.6.5 Wind Power Classifications 452

7.7 Estimating Wind Turbine Energy Production 4547.7.1 Wind Speed Cumulative Distribution Function 4547.7.2 Using Real Power Curves with Weibull Statistics 4587.7.3 A Simple Way to Estimate Capacity Factors 463

7.8 Wind Farms 4687.8.1 Onshore Wind Power Potential 4687.8.2 Offshore Wind Farms 475

7.9 Wind Turbine Economics 4817.9.1 Annualized Cost of Electricity from Wind Turbines 4827.9.2 LCOE with MACRS and PTC 4857.9.3 Debt and Equity Financing of Wind Energy Systems 489

7.10 Environmental Impacts of Wind Turbines 489References 491Problems 492

8 MORE RENEWABLE ENERGY SYSTEMS 498

8.1 Introduction 498

xiv CONTENTS

8.2 Concentrating Solar Power Systems 4988.2.1 Carnot Efficiency for Heat Engines 4998.2.2 Direct Normal Irradiance 5028.2.3 Condenser Cooling for CSP Systems 5048.2.4 Thermal Energy Storage for CSP 5068.2.5 Linear Parabolic Trough Systems 5098.2.6 Solar Central Receiver Systems

(Power Towers) 5118.2.7 Linear Fresnel Reflectors 5138.2.8 Solar Dish Stirling Power Systems 5148.2.9 Summarizing CSP Technologies 518

8.3 Wave Energy Conversion 5218.3.1 The Wave Energy Resource 5218.3.2 Wave Energy Conversion Technology 5268.3.3 Predicting WEC Performance 5278.3.4 A Future for Wave Energy 529

8.4 Tidal Power 5308.4.1 Tidal Current Power 5308.4.2 Origin of the Tides 5318.4.3 Estimating In-Stream Tidal Power 5338.4.4 Estimating Tidal Energy Delivered 537

8.5 Hydroelectric Power 5388.5.1 Hydropower Configurations 5398.5.2 Basic Principles 5418.5.3 Turbines 5438.5.4 Accounting for Losses 5458.5.5 Measuring Flow for a Micro-Hydro System 5478.5.6 Electrical Aspects of Small-Scale Hydro 549

8.6 Pumped-Storage Hydro 5508.7 Biomass for Electricity 5538.8 Geothermal Power 555References 558Problems 559

9 BOTH SIDES OF THE METER 564

9.1 Introduction 5649.2 Smart Grid 565

CONTENTS xv

9.2.1 Automating Distribution Systems 5669.2.2 Volt/VAR Optimization 5669.2.3 Better Control of the Grid 5689.2.4 Advanced Metering Infrastructure 5709.2.5 Demand Response 5719.2.6 Dynamic Dispatch 572

9.3 Electricity Storage 5759.3.1 Stationary Battery Storage 5759.3.2 Electric Vehicles and Mobile Battery Storage 577

9.4 Demand Side Management 5809.4.1 Disincentives Caused by Traditional Ratemaking 5819.4.2 Necessary Conditions for Successful

DSM Programs 5829.4.3 Cost-Effectiveness Measures of DSM 584

9.5 Economics of Energy Efficiency 5859.5.1 Energy Conservation Supply Curves 5869.5.2 Greenhouse Gas Abatement Curves 588

9.6 Combined Heat and Power Systems 5919.6.1 CHP Efficiency Measures 5919.6.2 Economics of Combined Heat and Power 593

9.7 Cogeneration Technologies 5969.7.1 HHV and LHV 5969.7.2 Microturbines 5989.7.3 Reciprocating Internal Combustion Engines 600

9.8 Fuel Cells 6029.8.1 Historical Development 6039.8.2 Basic Operation of Fuel Cells 6049.8.3 Fuel Cell Thermodynamics: Enthalpy 6059.8.4 Entropy and the Theoretical Efficiency of

Fuel Cells 6099.8.5 Gibbs Free Energy and Fuel Cell Efficiency 6129.8.6 Electrical Output of an Ideal Cell 6139.8.7 Electrical Characteristics of Real Fuel Cells 6159.8.8 Types of Fuel Cells 6169.8.9 Hydrogen Production 620

References 623Problems 624

xvi CONTENTS

APPENDIX A ENERGY ECONOMICS TUTORIAL 629

A.1 Simple Payback Period 629A.2 Initial (Simple) Rate of Return 630A.3 The Time Value of Money and Net Present Value 630A.4 Internal Rate of Return 633A.5 Net Present Value with Fuel Escalation 635A.6 IRR with Fuel Escalation 637A.7 Annualizing the Investment 638A.8 Levelized Busbar Costs 639A.9 Cash-Flow Analysis 643

APPENDIX B USEFUL CONVERSION FACTORS 645

APPENDIX C SUN-PATH DIAGRAMS 649

APPENDIX D HOURLY CLEAR-SKY INSOLATION TABLES 653

APPENDIX E MONTHLY CLEAR-SKY INSOLATION TABLES 663

APPENDIX F SHADOW DIAGRAMS 667

APPENDIX G SOLAR INSOLATION TABLES BY CITY 670

INDEX 683

PREFACE

This book provides a solid, quantitative, practical introduction to a wide rangeof renewable energy systems. For each topic, the theoretical background is intro-duced, practical engineering considerations associated with designing systemsand predicting their performance are provided, and methods to evaluate the eco-nomics of these systems are presented. While more attention is paid to the fastestgrowing, most promising, wind and solar technologies, the book also introducestidal and wave power, geothermal, biomass, hydroelectric power, and electric-ity storage technologies. Both supply-side and demand-side technologies areblended in the final chapter, which introduces the coming smart grid.

The book is intended for a mixed audience of engineering and othertechnology-focused individuals. The course I teach at Stanford, for example,has no prerequisites. About half the students are undergraduate and half are grad-uate students. Almost all are from engineering and natural science departments,with a growing number of business students. The book has been designed toencourage self-teaching by providing numerous, completely worked examplesthroughout. Nearly every topic that lends itself to quantitative analysis is illus-trated with such examples. Each chapter ends with a set of problems that provideadded practice for the student, which should also facilitate the preparation ofhomework assignments by the instructor.

This new edition has been completely rewritten, updated and reorganized. Aconsiderable amount of new material is presented, both in the form of new topicsas well as greater depth in some areas. New topics include wave and tidal power,pumped storage, smart grid, and geothermal power. The section on fundamentalsof electric power is strengthened to make this book a much better bridge to

xvii

xviii PREFACE

advanced courses in power in electrical engineering departments. This includesan introduction to phasor notation, more emphasis on reactive power as well asreal power, more on power converter and inverter electronics, and more materialon generator technologies. Renewable energy systems have become mainstreamtechnologies and are now, literally, big business. Throughout this edition, moredepth has been provided on the financial analysis of large-scale conventional andrenewable energy projects.

The book consists of three major sections:

I. Background material on the electric power industry (Chapters 1, 2, 3).II. Focus on photovoltaics (PVs) and wind power systems (Chapters 4, 5, 6, 7).

III. Other renewables, energy efficiency, and the smart grid (Chapters 8 and 9)

I. BACKGROUND (Chapters 1, 2, 3): The context for renewable energy sys-tems is provided by an introduction to the electric power industry (Chapter 1),including conventional power plant technologies, the regulatory and operationalsides of the grid itself, along with financial aspects such as levelized cost ofgeneration. For users who are new to basic electrical components and circuits,or who need a quick review, Chapter 2 provides sufficient coverage to allow anytechnical student to come up to speed quickly on those fundamentals.

While many students already have some electricity background and can skipChapter 2, most have not had a course on electric power, which is the subjectof Chapter 3. In fact, it is my impression that many engineering schools that de-emphasized electric power in the past are experiencing a new surge of interest inthis field. Chapter 3 provides non-electrical-engineering students the backgroundessential for success in more advanced electrical power courses.

II. PHOTOVOLTAICS AND WIND POWER (Chapters 4, 5, 6, 7): Thesechapters are the heart of the book. Chapter 4 covers the solar resource, includ-ing solar angles, shading problems, clear-sky solar intensity, direct and indirectportions of solar irradiation (important distinctions for concentrating solar tech-nologies), and how to work with real hour-by-hour, typical meteorological year(TMY) solar data for a given location.

Chapter 5 introduces photovoltaic (PV) materials and the electrical characteris-tics of cells, modules, and arrays. With this background, students can appreciatethe dramatic impacts of shading on PV performance as well as how modernelectronics can help mitigate those impacts.

Chapter 6 is on PV systems, including sizing, and predicting performance forgrid-connected, utility-scale and net-metered rooftop systems, as well as off-gridstand-alone systems with battery storage. Grid-connected systems dominate themarket today, while off-grid systems, including microgrid systems, are beginningto have significant impacts in emerging economies where electricity is a scarcecommodity. Considerable attention is paid to the economics of all PV systems.

PREFACE xix

Chapter 7 provides an extensive analysis of wind power systems, including sta-tistical characterizations of wind resources, emerging wind power technologies,and combining the two to predict turbine performance. Wind power currentlydominates the renewables market, with billions of dollars of investment moneyflowing into that sector, so considerable attention is paid in this chapter to thefinancial analysis of such investments.

III. OTHER RENEWABLES AND THE SMART GRID (Chapters 8, 9):Chapter 8 introduces concentrating solar power systems, including their poten-tial to include thermal storage to provide truly dispatchable electric power. Twoemerging ocean power technologies are described: tidal power and wave power.These show considerable promise in part because their variable power outputsare somewhat more predictable than those for wind and solar systems. Hydro-electric power, including micro-hydro systems (again for emerging economies),and pumped storage systems to provide backup power for other variable renew-ables are described. Finally, biomass for electricity and geothermal systems areintroduced.

Chapter 9 is titled “Both Sides of the Meter” and describes the range ofissues encountered when variable renewables interact with demand-responsiveloads. It begins with the smart grid, including advanced metering infrastructure,technologies that will provide better control of the grid, and interactions withloads that can be controlled to accommodate variations in supply-side resources.The role of electricity storage, including battery storage in electric vehicles,is introduced. Demand-side management, more efficient use of electricity, fuelcells, and other combined heat and power systems are all critical components inbalancing our future supply/demand equation.

Finally, the book includes a number of appendices, including Appendix A,a brief energy-economics tutorial. The others provide assorted useful data forsystem analysis.

This book has been in the making for over four decades, beginning with theimpact that Denis Hayes and Earth Day 1970 had in shifting my career fromsemiconductors and computer logic into environmental engineering. Then it wasAmory Lovins’ groundbreaking paper "The Soft Energy Path: The Road NotTaken?" (Foreign Affairs, 1976) that focused my attention on the relationshipbetween energy and environment and the important roles that renewables andefficiency must play in meeting the coming challenges. The penetrating analysesof Art Rosenfeld at the University of California, Berkeley, and the astute politicalperspectives of Ralph Cavanagh at the Natural Resources Defense Council havebeen constant sources of guidance and inspiration. These and other trailblazershave illuminated the path, but it has been the challenging, committed, enthusiasticstudents in my Stanford classes who have kept me invigorated, excited, andenergized over the years, and I am deeply indebted to them for their stimulationand friendship. Finally, I owe a special debt of gratitude to my long-time friend

xx PREFACE

and colleague, Jane Woodward, for her generosity and support, which enablesme to keep on trucking in this field that I love.

I specifically want to thank a number of individuals who have provided helpwith specific sections of this new edition. Professor Nick Jenkins of CardiffUniversity elevated my understanding of power systems with the courses hetaught at Stanford. Doctoral students (now graduated) Eric Stoutenburg, ElaineHart, and Mike Dvorak gave me helpful insights into wind, tidal, and wave power.Design guidelines provided by Eric Youngren from Solar Nexus Internationalhave helped ground me in the realities of off-grid PV systems. Two students,Robert Conroy and Adam Raudonis, developed the shadow diagram website thatI used for Appendix F. My old friend, now at Sunpower, Bob Redlinger, has beenmy guru for the financial and business aspects of renewables. The sharp eyes ofFred Zeise, who has saved me from numerous embarrassments with his carefulchecking of the manuscript, are greatly appreciated. Finally, I raise my glass, aswe have done almost every evening for four decades, to my wife, Mary, whohelps the sun rise every day of my life.

Gilbert M. Masters

Stanford UniversityApril, 2013

CHAPTER 1

THE U.S. ELECTRICPOWER INDUSTRY

Little more than a century ago, there were no motors, lightbulbs, refrigerators, airconditioners, or any of the other electrical marvels that we think of as being soessential today. Indeed, nearly 2 billion people around the globe still live withoutthe benefits of such basic energy services. The electric power industry has sincegrown to be one of the largest enterprises in the world. It is also one of the mostpolluting of all industries, responsible for three-fourths of U.S. sulfur oxides(SOx) emissions, one-third of our carbon dioxide (CO2) and nitrogen oxides(NOx) emissions, and one-fourth of particulate matter and toxic heavy metals.

The electricity infrastructure providing power to North America includes over275,000 mi of high voltage transmission lines and 950,000 MW of generatingcapacity to serve a customer base of over 300 million people. While its cost hasbeen staggering—over $1 trillion—its value is incalculable. Providing reliableelectricity is a complex technical challenge that requires real-time control andcoordination of thousands of power plants to move electricity across a vast net-work of transmission lines and distribution networks to meet the exact, constantlyvarying, power demands of those customers.

While this book is mostly concerned with the alternatives to large, centralizedpower systems, we need to have some understanding of how these conventionalsystems work. This chapter explores the history of the utility industry, the basicsystems that provide the generation, transmission, and distribution of electric

Renewable and Efficient Electric Power Systems, Second Edition. Gilbert M. Masters.© 2013 John Wiley & Sons, Inc. Published 2013 by John Wiley & Sons, Inc.

1

2 THE U.S. ELECTRIC POWER INDUSTRY

power, and some of the regulatory issues that govern the rules that control thebuying and selling of electric power.

1.1 ELECTROMAGNETISM: THE TECHNOLOGY BEHINDELECTRIC POWER

In the early nineteenth century, scientists such as Hans Christian Oersted, JamesClerk Maxwell, and Michael Faraday began to explore the wonders of electro-magnetism. Their explanations of how electricity and magnetism interact madepossible the development of electrical generators and motors—inventions thathave transformed the world.

Early experiments demonstrated that a voltage (originally called an electro-motive force, or emf) could be created in an electrical conductor by moving itthrough a magnetic field as shown in Figure 1.1a. Clever engineering based onthat phenomenon led to the development of direct current (DC) dynamos and laterto alternating current (AC) generators. The opposite effect was also observed;that is, if current flows through a wire located in a magnetic field, the wire willexperience a force that wants to move the wire as shown in Figure 1.1b. This isthe fundamental principle by which electric motors are able to convert electriccurrent into mechanical power.

Note the inherent symmetry of the two key electromagnetic phenomena. Mov-ing a wire through a magnetic field causes a current to flow, while sending a currentthrough a wire in a magnetic field creates a force that wants to move the wire. Ifthis suggests to you that a single device could be built that could act as a generatorif you applied force to it, or act as a motor if you put current into it, you wouldbe absolutely right. In fact, the electric motor in today’s hybrid electric vehiclesdoes exactly that. In normal operation, the electric motor helps power the car, butwhen the brakes are engaged, the motor acts as a generator, slowing the car by

Voltage

(a) (b)

N

S

+

–

Motion N

S

+

–

Force

Current

Conductor

Magneticf ield

Magneticf ield

FIGURE 1.1 Moving a conductor through a magnetic field creates a voltage (a). Sendingcurrent through a wire located in a magnetic field creates a force (b).

THE EARLY BATTLE BETWEEN EDISON AND WESTINGHOUSE 3

Armature

Commutator

Electromagnet

N

S

i

i

FIGURE 1.2 Gramme’s “electromotor” could operate as a motor or as a generator.

converting the vehicle’s kinetic energy into electrical current that recharges thevehicle’s battery system.

A key to the development of electromechanical machines, such as motors andgenerators, was finding a way to create the required magnetic fields. The firstelectromagnet is credited to a British inventor, William Sturgeon, who, in 1825,demonstrated that a magnetic field could be created by sending current through anumber of turns of wire wrapped around a horseshoe-shaped piece of iron. Withthat, the stage was set for the development of generators and motors.

The first practical DC motor/generator, called a dynamo, was developed by aBelgian, Zenobe Gramme. His device, shown in Figure 1.2, consisted of a ring ofiron (the armature) wrapped with wire, which was set up to spin within a station-ary magnetic field. The magnetic field was based on Sturgeon’s electromagnet.The key to Gramme’s invention was his method of delivering DC current to andfrom the armature using contacts (called a commutator) that rubbed against therotating armature windings. Gramme startled the world with his machines at aVienna Exposition in 1873. Using one dynamo to generate electricity, he wasable to power another, operating as a motor, three-quarters of a mile away. Thepotential to generate power at one location and transmit it through wires to adistant location, where it could do useful work, stimulated imaginations every-where. An enthusiastic American writer, Henry Adams, in a 1900 essay called“The Dynamo and the Virgin” even proclaimed the dynamo as “a moral force”comparable to European cathedrals.

1.2 THE EARLY BATTLE BETWEEN EDISONAND WESTINGHOUSE

While motors and generators quickly found application in factories, the first majorelectric power market developed around the need for illumination. Although manyothers had worked on the concept of electrically heating a filament to create light,it was Thomas Alva Edison who, in 1879, created the first workable incandescent

4 THE U.S. ELECTRIC POWER INDUSTRY

lamp. Simultaneously he launched the Edison Electric Light Company, whichwas a full-service illumination company that provided not only the electricity butalso the lightbulbs themselves. In 1882, his company began distributing powerprimarily for lights, but also for electric motors, from his Pearl Street Station inManhattan. This was to become the first investor-owned utility in the nation.

Edison’s system was based on DC, which he preferred in part because it notonly provided flicker-free light, but also because it enabled easier speed controlof DC motors. The downside of DC, however, was that in those days it was verydifficult to change the voltage from one level to another—something that becamesimple to do in AC after the invention of the transformer in 1883. As we willshow later, power line losses are proportional to the square of the current flowingthrough them, while the power delivered is the product of current and voltage.By doubling the voltage, for example, the same power can be delivered usinghalf the current, which cuts power line losses by a factor of four. Given DC’s lowvoltage transmission constraint, Edison’s customers had to be located within justa mile or two of a generating station.

Meanwhile, George Westinghouse recognized the advantages of AC for trans-mitting power over greater distances and, utilizing AC technologies developed byTesla, launched the Westinghouse Electric Company in 1886. Within just a fewyears, Westinghouse was making significant inroads into Edison’s electricity mar-ket and a bizarre feud developed between these two industry giants. Rather thanhedge his losses by developing a competing AC technology, Edison stuck withDC and launched a campaign to discredit AC by condemning its high voltages asa safety hazard. To make the point, Edison and his assistant, Samuel Insull, begandemonstrating its lethality by coaxing animals, including dogs, cats, calves, andeventually even a horse, onto a metal plate wired to a 1000-V AC generatorand then electrocuting them in front of the local press (Penrose, 1994). Edisonand other proponents of DC continued the campaign by promoting the idea thatcapital punishment by hanging was horrific and could be replaced by a new, morehumane approach based on electrocution. The result was the development of theelectric chair, which claimed its first victim in 1890 in Buffalo, NY (also homeof the nation’s first commercially successful AC transmission system).

The advantages of high voltage transmission, however, were overwhelmingand Edison’s insistence on DC eventually led to the disintegration of his electricutility enterprise. Through buyouts and mergers, Edison’s various electricityinterests were incorporated in 1892 into the General Electric Company, whichshifted the focus from being a utility to manufacturing electrical equipment andend-use devices for utilities and their customers.

One of the first demonstrations of the ability to use AC to deliver powerover large distances occurred in 1891 when a 106 mi, 30,000 -V transmissionline began to carry 75 kW of power between Lauffen and Frankfurt, Germany.The first transmission line in the United States went into operation in 1890using 3.3 kV lines to connect a hydroelectric station on the Willamette River

THE REGULATORY SIDE OF ELECTRIC UTILITIES 5

in Oregon to the city of Portland, 13 mi away. Meanwhile, the flicker problemfor incandescent lamps with AC was resolved by trial and error with variousfrequencies until it was no longer a noticeable problem. Surprisingly, it was notuntil the 1930s that 60 Hz finally became the standard in the United States. Somecountries had by then settled on 50 Hz, and even today, some countries, such asJapan, use both.

1.3 THE REGULATORY SIDE OF ELECTRIC UTILITIES

Edison and Westinghouse launched the electric power industry in the UnitedStates, but it was Samuel Insull who shaped what has become the modern electricutility by bringing the concepts of regulated utilities with monopoly franchisesinto being. It was his realization that the key to making money was to findways to spread the high fixed costs of facilities over as many customers aspossible. One way to do that was to aggressively market the advantages of electricpower, especially, for use during the daytime to complement what was then thedominant nighttime lighting load. In previous practices, separate generators wereused for industrial facilities, street lighting, street cars, and residential loads, butInsull’s idea was to integrate the loads so that he could use the same expensivegeneration and transmission equipment on a more continuous basis to satisfy themall. Since operating costs were minimal, amortizing high fixed costs over morekilowatt-hour sales results in lower prices, which creates more demand. Withcontrollable transmission line losses and attention to financing, Insull promotedrural electrification, further extending his customer base.

With more customers, more evenly balanced loads, and modest transmissionlosses, it made sense to build bigger power stations to take advantage of economiesof scale, which also contributed to decreasing electricity prices and increasingprofits. Large, centralized facilities with long transmission lines required tremen-dous capital investments; to raise such large sums, Insull introduced the idea ofselling utility common stock to the public.

Insull also recognized the inefficiencies associated with multiple power com-panies competing for the same customers, with each building its own power plantsand stringing its own wires up and down the streets. The risk of the monopoly al-ternative, of course, was that without customer choice, utilities could charge what-ever they could get away with. To counter that criticism, he helped establish theconcept of regulated monopolies with established franchise territories and pricescontrolled by public utility commissions (PUCs). The era of regulation had begun.

1.3.1 The Public Utility Holding Company Act of 1935

In the early part of the twentieth century, as enormous amounts of moneywere being made, utility companies began to merge and grow into larger

6 THE U.S. ELECTRIC POWER INDUSTRY

conglomerates. A popular corporate form emerged, called a utility holding com-pany. A holding company is a financial shell that exercises management controlof one or more companies through ownership of their stock. Holding companiesbegan to purchase each other and by 1929, 16 holding companies controlled 80%of the U.S. electricity market, with just three of them owning 45% of the total.

With so few entities having so much control, it should have come as no surprisethat financial abuses would emerge. Holding companies formed pyramids withother holding companies, each owning stocks in subsequent layers of holdingcompanies. An actual operating utility at the bottom found itself directed bylayers of holding companies above it, with each layer demanding its own profits.At one point, these pyramids were sometimes ten layers thick. When the stockmarket crashed in 1929, the resulting depression drove many holding companiesinto bankruptcy causing investors to lose fortunes. Insull became somewhat of ascapegoat for the whole financial fiasco associated with holding companies andhe fled the country amidst charges of mail fraud, embezzlement, and bankruptcyviolations, charges for which he was later cleared.

In response to these abuses, Congress created the Public Utility Holding Com-pany Act of 1935 (PUHCA) to regulate the gas and electric industries and preventholding company excesses from reoccurring. Many holding companies were dis-solved, their geographic size was limited, and the remaining ones came undercontrol of the newly created Securities and Exchange Commission (SEC).

While PUHCA had been an effective deterrent to the previous holding com-pany financial abuses, recent changes in utility regulatory structures, with theirgoal of increasing competition, led many to say it had outlived its usefulness andit was repealed as part of the Energy Policy Act of 2005.

1.3.2 The Public Utility Regulatory Policies Act of 1978

With the country in shock from the oil crisis of 1973 and with the economiesof scale associated with ever larger power plants having pretty much played out,the country was drawn toward energy efficiency, renewable energy systems, andnew, small, inexpensive gas turbines (GTs). To encourage these systems, PresidentCarter signed the Public Utility Regulatory Policies Act of 1978 (PURPA).

There were two key provisions of PURPA, both relating to allowing indepen-dent power producers (IPPs), under certain restricted conditions, to connect theirfacilities to the utility-owned grid. For one, PURPA allows certain industrial facil-ities and other customers to build and operate their own, small, on-site generatorswhile remaining connected to the utility grid. Prior to PURPA, utilities couldrefuse service to such customers, which meant self-generators had to provide allof their own power, all of the time, including their own redundant, backup powersystems. That virtually eliminated the possibility of using efficient, economicalon-site power production to provide just a portion of a customer’s needs.

THE REGULATORY SIDE OF ELECTRIC UTILITIES 7

PURPA not only allowed grid interconnection but it also required utilitiesto purchase electricity from certain qualifying facilities (QFs) at a “just andreasonable price.” The purchase price of QF electricity was to be based on whatit would have cost the utility to generate the power itself or to purchase it onthe open market (referred to as the avoided cost). This provision stimulated theconstruction of numerous renewable energy facilities, especially in California,since PURPA guaranteed a market, at a good price, for any electricity generated.

PURPA, as implemented by the Federal Energy Regulatory Commission(FERC), allowed interconnection to the grid by Qualifying Small Power Pro-ducers or Qualifying Cogeneration Facilities, both are referred to as QFs. Smallpower producers were less than 80 MW in size that used at least 75% wind, solar,geothermal, hydroelectric, or municipal waste as energy sources. Cogeneratorswere defined as facilities that produced both electricity and useful thermal energyin a sequential process from a single source of fuel, which may be entirely oil ornatural gas.

PURPA not only gave birth to the electric side of the renewable energy industry,it also enabled clear evidence to accrue which demonstrated that small, on-sitegeneration could deliver power at considerably lower cost than the retail ratescharged by utilities. Competition had begun.

1.3.3 Utilities and Nonutilities

Electric utilities traditionally have been given a monopoly franchise over a fixedgeographical area. In exchange for that franchise, they have been subject to regula-tion by State and Federal agencies. Most large utilities were vertically integrated;that is, they owned generation, transmission, and distribution infrastructure. Af-ter PURPA along with subsequent efforts to create more competition in the grid,most utilities now are just distribution utilities that purchase wholesale power,which they sell to their retail customers using their monopoly distribution system.

The roughly 3200 utilities in the United States can be subdivided into one offour categories of ownership—investor-owned utilities, federally owned, otherpublicly owned, and cooperatively owned.

Investor-owned utilities (IOUs) are privately owned with stock that is publiclytraded. They are regulated and authorized to receive an allowed rate of return ontheir investments. IOUs may sell power at wholesale rates to other utilities orthey may sell directly to retail customers.

Federally owned utilities produce power at facilities run by entities such asthe Tennessee Valley Authority (TVA), the U.S. Army Corps of Engineers, andthe Bureau of Reclamation. The Bonneville Power Administration, the West-ern, Southeastern, and Southwestern Area Power Administrations, and the TVA,market and sell power on a nonprofit basis mostly to Federal facilities, publiclyowned utilities and cooperatives, and certain large industrial customers.

8 THE U.S. ELECTRIC POWER INDUSTRY

Publicly owned utilities are state and local government agencies that maygenerate some power, but which are usually just distribution utilities. They gen-erally sell power at a lower cost than IOUs because they are nonprofit and areoften exempt from certain taxes. While two-thirds of the U.S. utilities fall intothis category, they sell only a few percent of the total electricity.

Rural electric cooperatives were originally established and financed by theRural Electric Administration in areas not served by other utilities. They areowned by groups of residents in rural areas and provide services primarily totheir own members.

Independent Power Producers (IPPs) and Merchant Power Plants areprivately owned entities that generate power for their own use and/or for saleto utilities and others. They are distinct in that they do not operate transmissionor distribution systems and are subject to different regulatory constraints thantraditional utilities. In earlier times, these nonutility generators (NUGs) had beenindustrial facilities generating on-site power for their own use, but they reallygot going during the utility restructuring efforts of the 1990s when some utilitieswere required to sell off some of their power plants.

Privately owned power plants that sell power onto the grid can be categorizedas IPPs or merchant plants. IPPs have pre-negotiated contracts with customersin which the financial conditions for the sale of electricity are specified bypower purchase agreements (PPAs). Merchant plants, on the other hand, haveno predefined customers and instead sell power directly to the wholesale spotmarket. Their investors take the risks and reap the rewards. By 2010, some 40%of the U.S. electricity was generated by IPPs and merchant power plants.

1.3.4 Opening the Grid to NUGs

After PURPA, the Energy Policy Act of 1992 (EPAct) created additional compe-tition in the electricity generation market by opening the grid to more than justthe QFs identified in PURPA. A new category of access was granted to exemptwholesale generators (EWGs), which can be of any size, using any fuel, andany generation technology, without the restrictions and ownership constraintsthat PURPA and PUHCA imposed. EPAct allows EWGs to generate electricityin one location and sell it anywhere else in the country using someone else’stransmission system to wheel their power from one location to another.

While the 1992 EPAct allowed IPPs and merchant plants to gain access tothe transmission grid, problems arose during periods when the transmissionlines were being used to near capacity. In these and other circumstances, theIOUs that owned the lines favored their own generators, and NUGs were oftendenied access. In addition, the regulatory process administered by the FERC wasinitially cumbersome and inefficient. To eliminate such deterrents, the FERCissued Order 888 in 1996, which had as a principal goal the elimination of