Eight electric utilities announced that they have signed a memorandum of understanding to pursue the development of Grid Assurance, a limited liability company. The company is being developed to offer subscribers cost-effective solutions for enhancing grid resiliency and protecting customers from prolonged transmission outages.
The consortium includes American Electric PowerAEP , Duke EnergyDUK , Edison InternationalEIX , Eversource EnergyES , Exelon CorporationEXC , Great Plains EnergyGXP , Southern CompanySO and Berkshire Hathaway Energy.
Waste of Electricity and Outage
A dated EIA report has estimated that over the 1990-2012 time frame an average of 6% of electricity was lost annually in the transmission and distribution network. The loss of electricity undoubtedly increases operating costs of the electric utilities and subsequently leads to higher unit charges.
A wide range of factors affects the proper functioning of grids and transmission infrastructure in a country as huge as the U.S. Despite continuous investment in maintenance and upgrades of distribution and transmission infrastructure, the country is still vulnerable to physical attacks, electromagnetic pulses, solar storms, cyberattacks, earthquakes and severe weather events like hurricanes.
Role of Grid Assurance
Electricity, an innovation of science, has made day to day life easier. Uncountable activities go on smoothly powered by these invisible electrons. Grids and transmission lines come into play after electricity is generated in the production units. Any interruption in the performance of grids and transmission lines can result in prolonged supply blackouts.
Restoration of the transmission grid can be delayed due to long lead times required to design, build and deliver critical replacement equipment including large transformers, circuit breakers and other specialized electrical equipment. The proposed Grid Assurance will be more cost-effective than companies independently securing emergency spare equipment for high-impact, low-frequency events due to economies of scale, diversification and improved logistics.
How Will Grid Assurance Operate?
Grid Assurance filed a petition with the Federal Energy Regulatory Commission (FERC) seeking confirmation to be part of a transmission-owning entity's strategy to effectively address grid resiliency. Grid Assurance will not be FERC regulated, but plans to charge cost-based subscription fees, similar to FERC-regulated transmission formula rates.
Grid Assurance has plans to own and maintain equipment at secure, strategically located warehouses so that damaged equipment is being replaced at a much faster pace than traditionally possible.
Advantage for Providers and End Users
Grid Assurance's service will help electricity suppliers to substantially lower lead time for critical repair of infrastructural assets. Lower supply outages and effective services will help to boost performance. Customers will enjoy the benefits of faster repair of supply lines and will be saved from prolonged power outages.
American Electric Power, Duke Energy, Edison International, Eversource Energy, Exelon, and Great Plains Energy currently carry a Zacks Rank #3 (Hold), while Southern Company is better placed with a Zacks Rank #2 (Buy).
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