1. Karl Stahlkopf Vice President, Power Delivery, EPRI University of Wisconsin October20, 2000 EPRI’s ISO Membership Package EPRI’s ISO Membership Package Power for a Digital Society Power for a Digital Society

2. KES 2 The Reliability Challenge Process becoming more complex Increasing bulk power transactions strain grid capacity Grid expansion is not keeping up with growth Incentives for expansion are lacking Infrastructure needs to be upgraded

3. KES 3 TVA Interchange Transactions Transactions Increasing Exponentially

4. KES 4 Grid Expansion Not Keeping Up Transmission expansion is less than half of demand growth and getting worse Distribution construction has fallen 10% in real terms over last decade %

5. KES 5 U.S. Transmission 10-Yr Plans* Miles Added Year

6. KES 6 Background: Problems Increasing 1965 – November: Northeast blackout 1977 – July: New York City blackout 1994 – January: WSCC breakup (Northridge earthquake) – December: WSCC breakup 1996– July 2: WSCC cascading outage – August 10: WSCC cascading outage 1998– June: MAPP breakup – July: Chicago (100,000 customers) – July: Midwest price spikes to $10,000 MWh – December: San Francisco tripoff 1999– July: New York City (200,000 customers) – July: Chicago (100,000 customers) – July: Midwest price spikes to $6,000 MWh – August: Chicago (“Loop” business district) 2000 – May: PJM power voltage reductions and curtailments – May: New England price spikes to $6000 MWh – June: California outages and price increases

7. KES 7 Rise of the Digital Economy Phase 1 -- Computers Phase 2 -- Embedded processors –Now 30 times as many stand-alone chips as in computers Phase 3 -- Networks –One million Web sites –200 million computers worldwide –E-commerce = 2% of American GDP

8. KES 8 Challenges for Electric Power Quantity –IT alone accounts for 10-13% U.S. electricity consumption –80% energy growth is being met by electricity Quality –Grid delivers 3-nines reliability (99.9% reliable) –Microprocessors require 9-nines reliability (99.9999999%) –Even brief outages can cost a company $ millions

9. KES 9 Rise of the Digital Economy 13% 50% Digital Power Analog Power 4 2 TkWh 198020002020 Demand for “digital quality” power is growing rapidly

10. KES 10 Two Reliability Goals Increase transmission capacity and enhance reliability to support a stable wholesale power market Upgrade distribution infrastructure to support integration of low-cost power from transmission system with new DR options Don’t try to Gold-Plate the Grid

11. KES 11 The Effect in Silicon Valley “The impact of momentary interruptions of power is extremely costly in terms of lost productivity and potentially damaged equipment at Oracle….Whether the electricity was free or cost three times as much would have absolutely no effect on the cost of our product.” –Mike Wallach “What is self-sufficiency worth to us [Oracle]? Millions of dollars per hour.” –Jeff Byron “Sun Microsystems has estimated that a blackout costs up to $1 million per minute” –Larry Owens, Silicon Valley Power

12. KES 12 Consumer Response: Market for Backup Power Takes Off Source: Bechtel Units OrderedOutput GW 98765432109876543210 32% Growth Rate Annually Units Ordered Total Output 1 MW Gen-Sets

13. KES 13 EPRI’s Response Short Term: Form the “Reliability Initiative” Long Term: Form the “Consortium for Electrical Infrastructure to Support a Digital Society” (CEIDS)

14. KES 14 Reliability Initiative Approximately $5.7 million raised so far 40 utilities have signed agreements 4 more are pending Further interest expected as word gets out

15. KES 15 Transmission System Assessments Grid complexity requires new analytical approach Probability Risk Assessment (PRA) effective for analyzing multiple factors in complex systems PRA beta-test led to modifications Grid reliability study of two of three Interconnections –In close cooperation with NERC-RAS

16. KES 16 Distribution System Assessments Systems differ greatly in architecture, equipment, and operations; therefore representative systems will be analyzed using deterministic methods –Urban radial, largely underground (ComEd) –Urban network, largely underground (ConEd) –Urban/suburban radial, largely overhead (DQE) –Suburban, combined overhead & underground (Duke)

17. KES 17 Digital Society Initiative Form a “Consortium for Electrical Infrastructure to Support a Digital Society” (CEIDS) Structure of Initiative based on broad industry participation –Users of “Digital Electricity” –Equipment Suppliers/Vendors –Electric Utilities

18. KES 18 CEIDS Initiative Form Consortium early in 2001 Goals –Raise $20 Million from Private Sector –Seek matching Public Sector Funding –Initiate a research program to insure that “digital quality” electricity can be made available at a reasonable cost

19. KES 19 Meeting the Reliability Challenge A combination of technologies will be required 9-nines 6-nines 3-nines Power reliability (Logarithmic Scale) To the Chip To the Plug To Customer Premises UPS under desk Capacitor on circuit board UPS Substation PQ Park On-Site DR Grid Technologies

20. KES 20 Conclusion Grid reliability is being challenged by the needs of a digital society Industry is responding aggressively EPRI’s Reliability and CEIDS initiatives focus developing a national response