Even as wind power and other nontraditional means of generating electricity grow in importance, we still need the conventional methods. But who should pay to support those older technologies? The question crops up in many situations where new technologies are beginning to replace the old.
Consider recent news on how existing telephone companies in some developing countries face the rapid spread of cellular service even in very poor neighborhoods.
As cellular service gains ever-larger fractions of the market, existing fixed-line companies must spread the costs of maintaining their existing physical system over a shrinking number of users.
If they raise minimum monthly rates, even more people flee to cellular.
Eventually we will face the same situation here. Copper-line telecommunications service will disappear. But unlike their counterparts in some poor countries, U.S. telephone firms have been more successful in transitioning to wireless technologies.
Electricity faces similar challenges. There is no feasible way yet to transmit electricity without wires. However, new technology allows smaller and smaller firms to generate their own power quite cheaply.
If the utility companies lose these firms as customers, the cost of utilities’ expensive infrastructure has to be spread over fewer customers. Rates have to rise. Advances in technology may eventually allow commercial customers as small as a retail mall to generate their own power at competitive rates.
The kicker is that the systems that generate power for these commercial and industrial entities have less redundancy than traditional systems. That carries some risks.
Existing utilities have many sources of power and a web of interconnected distribution lines. If one Xcel plant shuts down for maintenance, other plants can carry the load or the company can buy power from outside its system.
A refinery, paper mill or mall cannot easily build in the same back-up capability. Such operations may want to generate their own electricity on a day-to-day basis, but want back-up access to the existing grid, too. Who is to pay for maintaining that expensive but seldom-used capacity?
Minnesota is agog about the possibilities of wind power, but many enthusiasts ignore the fact that the wind does not always blow. (By way of disclosure, our farm lies in the heart of new wind-power development and we stand to gain financially if it grows.) Wind-generating technology is becoming more mature. More and larger turbines are built, lowering average costs of wind-generated electricity.
But there still are days when the wind does not blow over large areas of the nation. Back-up generating capacity must be maintained for those days.
Someone has to pay for this spare capacity. Power consumers, of course, will eventually foot the bill, but there will be much argument over exactly how that will happen.
© 2005 Edward Lotterman
Chanarambie Consulting, Inc.