January 29th, 2009

Power failures and the financial meltdown

The wacky winter weather we’ve been having lately has led to the phenomenon of ice storms and resultant power failures in places such as Arkansas and Texas that seldom see them. As readers of this blog are aware, I had a pretty nasty experience recently with a four-day power failure myself, and so I can relate and commiserate.

The power failures caused by ice storms are understandable: the usual mechanism is that heavy ice weighs down the trees, which fall on the wires and collapse them. The damage can be widespread if the storm covers a wide area. But essentially, it’s a local phenomenon.

The great power blackout of 1965 was a very different animal indeed. I recall it quite well; it involved most of the northeast United States, with twenty-five million losing power in a cascade of events stemming from a single failure in an isolated spot in Canada.

Such a thing wasn’t supposed to be able to happen. But it did:

The cause of the failure was human error that happened days before the blackout, when maintenance personnel incorrectly set a protective relay on one of the transmission lines between the Niagara generating station Sir Adam Beck Station No. 2 in Queenston, Ontario and Southern Ontario. Instead of the relay being set to trip and protect the line if the flow of power exceeded the line’s capacity, it was set for a much lower value.

As was common on a cold November evening, power for heating, lighting and cooking was pushing the electrical system to near its peak capacity, and the transmission lines heading into Southern Ontario were heavily loaded. At 5:16 p.m. Eastern Time a small surge of power coming from Lewiston, New York’s Robert Moses generating plant caused the misset relay to trip at far below the line’s rated capacity, disabling a main power line heading into Southern Ontario. Within seconds, the power that was flowing on the tripped line transferred to the other lines, causing them to become overloaded. Their protective relays, which are designed to protect the line if it became overloaded, tripped, isolating Adam Beck from all of Southern Ontario.

With no place else to go, the excess power from Beck then switched direction and headed east over the interconnected lines into New York State, overloading them as well and isolating the power generated in the Niagara region from the rest of the interconnected grid. The Beck and Moses generators, with no outlet for their power, were automatically shut down to prevent damage. Within five minutes the power distribution system in the northeast was in chaos as the effects of overloads and loss of generating capacity cascaded through the network, breaking it up into “islands”. Plant after plant experienced load imbalances and automatically shut down.

In that power failure and other subsequent ones, the problem was caused by a mechanism designed to protect the system: the interconnectedness of its parts. It may be stretching a metaphor almost to the breaking point, but the current financial crisis that began last fall reminds me a bit of those huge power failures.

How? The problems in the mortgage sector were bound up, bundled, derivatived (is that a word?), tranched, and seeded throughout the entire system. This was supposed to reduce the risk by spreading it around. But in the end it only guaranteed that the infection would affect even banks and institutions that were otherwise solvent. And the interconnectedness of the entire financial world guaranteed that the problem would not be kept to one country.

25 Responses to “Power failures and the financial meltdown”

  1. I R A Darth Aggie Says:

    That reminds me of some snark that came out after the 2003 black in the Northeast:

    “I live in New York, and not long ago, the Black Gate of Armonk swung open. The lights went out, my skin crawled, and dogs began to howl. I asked my neighbor what it was and he said, “Those are the nazgûl. Once they were human, now they are IBM’s lawyers.”

  2. Paul Gordon Says:

    That type of failure (from a cascade of seemingly inconsequential events – example: Chernobyl, Three Mile Island, etc) will probably only be more noticeable in the future.

    Ironically, it becomes inevitable BECAUSE of the success of failure anticipation and safety measures taken. As the more common failures are prevented, it takes a more and more improbable series of unlikely events to lead to a disaster.

    This is actually a GOOD thing, as the overall number of disasters goes down; but the ones that DO happen are the type you wouldn’t put in fiction because they would seem ridiculously unlikely.

    (When I first saw Dr Strangelove, at the tender age of 19, I objected to the series of coincidences that made it possible: the Soviets activating a doomsday device a couple of days before their intended announcement and ths SAC Commander picking that tiny window in which to go nuts and launch an attack on them. I had yet to fully understand Murphy’s Law.

    A lifetime of working in engineering and IT has since convinced me that that is EXACTLY how it could happen.)
    -

  3. DirtyJobsGuy Says:

    Interconnection helps lower the overall need for supply because you can share resources. The problem is when you neglect to maintain sufficient reserves. This is true in electric power, but it is also true in finance. Zero down mortgages remove some reserves for both the banks and borrowers, highly hedged financial instruments expand financing capabilities but lack robustness.

    You could see the same in spikey oil prices, a little more wells being drilled would have told the speculators that there wasn’t as much upside.

  4. dane Says:

    Well after all his rhetoric about how “we can’t keep our thermostats at 72 and have the rest of the world say okay” apparently Monsieur Obama really cranks up the heat in the white house. Axelrod said “You could grow orchids in there” – Hey that’s what I like – someone who leads by example.

  5. Capn Eddie Ricketyback Says:

    This is not a solution available to everyone, but in 2003 I had an automatic 25 KW generator powered by natural gas installed. When it senses a power failure it waits about 30 seconds to make sure it’s not a transient failure, and then it automatically starts up, disconnects the house from the power grid (very important), and delivers power to the house until the grid comes back on, at which time it reverses the process.

    It wasn’t cheap at about $10,000 installed, and when it runs the gas used during a 24 hour period costs about the same as a hotel room would (if one could be found under those circumstances), but it makes life a whole lot more pleasant during those thankfully infrequent times we need it. And of course now, more than five years later, the cost has been amortized to about $2000/year, not counting the negligible cost of annual maintenance and the natural gas used during the 2 or 3 significant power failures during that time and during the weekly 20-minute automatic test runs. It still seems to be in good shape, and good for at least 5 more years.

    “The Lord helps them what helps themselves.”

  6. Jimmy J. Says:

    Here in the Pacific Northwest we have at least a half dozen wind events every winter – sometimes more. High winds here mean big trees with roots in wet soil get blown over on power lines and houses. Most of us who dwell here expect to lose electricity for two to thirty-six hours at least once a year. Sometimes more. The utilities always have to pay overtime and spend days getting the lines repaired and power restored. I have often asked myself why the utilities don’t begin a program of undergrounding transmission lines. In the long run it would save them money, make service far more reliable, and improve efficiency of businesses in the area. Wouldn’t it be a good use of stimulus money to provide low cost loans to utilities to bury their transmission lines? Maybe I’m wrong but that seems to me a way to improve the infrastructure, create jobs, and eventually get the money back as the loans are repaid.

    The securitized mortgage instruments suffer from a problem that wasn’t foreseen. When they were being assembled and sold throughout the financial system, no one believed that housing market would crumble the way it did. Those MBSs were never meant to be traded a or sold, just bought and tucked away in the vault to collect the stream of income until all the mortgages were paid off. When mrtgage defaults rose beyond anyone’s expectations, it suddenly became apparent that some of the MBSs were not as valuable as their original cost. The problem was, no one knew which ones had “toxic” mortgages in them. The tendency has been, since no one knows with any certainty, to treat them all like they are all but worthless. The value they have been written down to is 22 cents on the dollar. IMO that is an absurd value, but in the absence of any better infromation that is what all these assets have had to be written down to. This destroyed the capital base of banks, insurance companies, pension funds and many others who bought these assets. It is a failure of knowledge that has created chaos and fear in the markets. It could take two years or more to figure out the true values of the assets, but the system does not have that much time to get credit markets unplugged. So far the Treasury has been unable to do much but stick fingers in the leaks in the dike by injecting liquidity into the banks and insurance companies. They must soon come up with a plan to get those assets off the books and recapitalize those institutions so they can lend with confidence again.

    For those of us who are dependent on earning a decent return on our savings, this delay is similar in some ways to waiting for the power to be turned back on. Life as we knew it is suspended until the financial system regains confidence.

  7. Tom Says:

    Distribution of a risk does not reduce it at all; the risk is merely shared.

  8. jon baker Says:

    The Texas power grid is almost independent of the rest of the country ( with the exception of the panhandle. )We were told about a year ago that the Texas power system would become unstable in about two years if new capacity was not added. Since then various groups have manged to stop new coal plants from coming online. There has been a huge expansion of the wind generation capacity in Texas, but most of it is in the western part of the state- away from the Eastern and Southern parts where much of the demand is. Plus, long distance transmission of electricity through traditional wires causes much of the energy to be lost due to electrical friction. Meanwhile our population continues to swell with the open border, and ongoing white flight from California. I fear we are heading towards being like California with rolling brownouts. One California refugee I talked to summer before last was suprised to see our power staying on all summer during peak demand. I have since thought to myself that is because Texas has not been turned into a second world State- Yet. As far as tying the grids together- I suspect that is like tying sinking ships together.

  9. jon baker Says:

    Actually ” over a year ago”. This summer should be interesting I suspect.

  10. SteveH Says:

    If this financial meltdown is like an electrical grid failure….I’m that lamp up in the attic that never got plugged in anyway.

    By the way. Wasn’t there a sixties song about “Where were you when the lights went out”?

  11. Logern Says:

    “Where were you when the lights when out?”

    Doris Day was the star of the movie, so I’m guessing there was probably a song.

    http://www.imdb.com/title/tt0063801/

  12. goy Says:

    Capn Eddie, how fascinating – I just now emailed Neo regarding my intent to install such a gas generator, to replace my present portable unit. But I have a question: why such a large (25kW!) unit? Seems like most households could get by on 1/3 that much wattage – enough to keep the heating system going (prevent burst pipes) and cook meals. Curious what you use all the extra power for.

    Just some idle thoughts: the problems with sub-primes, FM and FM were known as far back as 2004/5, yes? The flagging housing market was no secret for quite some time, yes? If so, does anyone know the exact mechanism by which the credit meltdown was (arbitrarily?) declared at precisely the instant it could do BHO and the Dems the most good? Bernanke, Paulson and Bush are the folks who presented it to the American People as a crisis of unprecedented proportions, effectively handing BHO the Election. But who/what was it, exactly, that triggered their actions? Anyone know the details?

  13. AFFA Says:

    Cascade failures and unusual peak demands seem to be inevitable characteristics of networks.

    The power grid tries to prevent failures and isolate them so that they do not spread. This reduces the chance of major failures better than I would expect, but I do not believe you can prevent them entirely.

    The internet tries to prevent failures as well, but places more emphasis on redundancy and rapid recovery. So cascade failures are more common, but they tend to be less noticeable. Long-term internet troubles are more likely to be human error than a cascade failure.

    I suspect someone smarter than me who was an expert at how the power grid or internet worked could make some money sharing strategies with the other network.

  14. Beverly Says:

    I can’t believe it’s been five years since the Great Blackout of 2003. That was a corker. I was working on 29th street in Manhattan. At first, we all thought it was our floor, or just our building. Craning out the windows, we saw the street lights weren’t working. Someone remembered that the mailroom guys (dyed hair, mohawks, piercings) had a boombox. We all crowded in there, tuned to good old 1010 WINS, and heard to our astonishment that the power failure extended as far as Toronto! Everyone crowded around Jean. Fat, 60-ish, she was never popular in this trendy Manhattan firm, but this day she was the star: she had the historical memory of being in the earlier great blackouts. And she revelled in the respectful, riveted attention we gave her. She said we’d probably be without juice for a day and a night. Everyone groaned.

    Someone dug out some (forbidden) candles; a smoker got matches and we lit them and placed them on ledges in the stairwell so everyone could see to get out. People who lived in Brooklyn and Queens and the Bronx had grim faces. I was only a 40-minute walk downtown.

    Park Avenue was a flood tide of humanity, all on foot, with the cars paralyzed in their midst. All heading north for Grand Central Station. Some enterprising souls had climbed on overturned garbage cans to try to direct traffic. It looked like a disaster movie, but no one was panicking. I noticed a great many pregnant women: you don’t usually see them in the subway, for some reason, but here they were, hoofing it. I remember wondering why they were heading for the station when all the trains are electric.

    But the Harlem Hudson New Haven lines had hooked up the few diesels they had, and trains jam-packed like Indian commuter lines into Bombay were chuffing northward.

    When I got home, I took inventory. Being a Girl Scout, I naturally keep batteries, matches, candles, flashlights, and a battery-powered radio. Just in case. Bought a styrofoam cooler at the grocery store, and two bags of ice. Kept the freezer shut. Everyone in the building came down and sat on the front stoop, with a candle stuck in wax on the sidewalk.

    Night had fallen, and it was getting eerie. There was an air of carnival in the streets: people were out walking and gawking. Only car headlights for illumination. Bars and restaurants were giving away food and liquor. One of our neighbors zoomed up on roller skates to report: “It’s getting a little weird over in Thompkins Square.” (the site of “Panic in Needle Park”) “People are lighting bonfires, doing serious drugs, and getting rowdy.”

    We tensed. Everyone had heard the legends about the bad blackout in the 1970s, when there was rioting and looting in the streets and buildings were burned down. Civilization is a fragile pact in such times.

    I went upstairs, lit some candles, and read. Got out my battery-powered Brookstone fan, opened my cot in the living room (it was 90 farkin’ degrees out at 10 pm), and slept in a state of nature. Woke up early, and there was still no power.

    My neighborhood, the Lower East Side, was blacked out for 26 hours. Other parts of the city, 16 or more, depending. That evening, I joined some friends and we hiked down Broadway to the Staten Island Ferry: we’d heard there was power on the island, so we decided to go to the minor league baseball game. What luxury to buy a cold Coke in St. George terminal! And sit in the ballpark overlooking New York harbor, with a view of downtown, and just enjoy the game.

    We saw lights coming on across the water in sections. Finally, at 9:30, the announcer said, “I just thought you’d like to know that power has just been restored to the last neighborhoods in New York City!” Everyone cheered.

    N.B.: The idiot reporters on CNN screwed up as usual. One bubblehead was standing in front of some major skyscrapers that were showing lights, and she chirped, “We can see that some buildings have had their power restored already!” Dozy bint. They have Generators! yeeesh.

  15. njcommuter Says:

    As far as candles and safety: fluorescent camping lanterns can run for eighteen hours or more on one set of D-cells (if you use just one tube). They won’t work in extreme cold, but once you get them running they should keep going.

    As far as putting power lines underground: for 240-volt lines that’s expensive but workable. At higher voltages, you start to see increased capacitive current, which means increased resistive losses in the wire. Half the power transmitted over arial lines from Niagra Falls to NYC is lost in transmission; if you went to buried lines, it would be three quarters.

    Sometimes there is no choice, especially in a downtown area. The problems can get extreme; before the WTC was destroyed Con Ed was operating a superconducting link in downtown Manhattan with the lines cooled by liquid nitrogen. They were out of conduit space underground, and it was the only way to move enough power. As it is, there are places where excavations are done with garden trowels after the pavement is removed because the utilities are packed so tightly (and because there are a lot of dead pipes and conduits, lines “retired in place”).

  16. sergey Says:

    It seems that US and Europe has a systemic problem here, that is, conceptual and political, not only technical. In Russia, where icestorms and below-zero temperatures are everyday reality, blackouts are extremly rare, and are repaired in hours, not in days. The only big blackout in my memory occured several years ago, it struck area where 20 mln people lived; all Moscow and Moscow region, around the size of Switzerland, was without electricity for 6 hours. But it was promptly repaired, and it included replacement of 150 ton high-power transformer which was destroyed by fire. I heard a rumor about a Soviet electrical engineer who emigrated to US and find a job there, as a leading specialist of a projected high-voltage transmission line somewhere in Nevada. After a hurricane all grid lines here were destroyed, except this one. And, as a rumor goes, he was fired, accused of using excessive structural strength standards: such hurricanes occure there once in 50 years, so additional costs were rendered unacceptable. I heard this in Russian state-monopoly electrical company, translating for them American technical and economical documentation about energy markets in California, so, may be, this was more than just rumor.

  17. sergey Says:

    “Half the power transmitted over arial lines from Niagra Falls to NYC is lost in transmission”
    For me, this is almost unbelievable. Russian standards for high-voltage transmission lines allow only 15% ohmic resistance losses from generator to step-down transformer. This depends, obviously, on cables cross-section, and so weight of cables and strength of tangent towers. These parameters also define reliability of grid and its ability to withstand wind and ice-formation on cables. Now I understand why blackouts are so often in US and Europe.

  18. sergey Says:

    Reliability of power transmission is inherently coupled with reserve capacity of generators. If you have enough reserves, especially rotating reserves (generators already switched on to the grid and so synchronized with it, but not injecting eletricity to the grid) you can satisfy peak demands in minutes opening gas valves to the turbines. This allow avoid overloading of local lines by re-routing supply from other localities, if there is enough by-passes from neighbors. And here is a problem in US, since each state or a group of several states has its own grid poorly connected to other grids. (Connections are few, and their transmission capacity is low.)

  19. sergey Says:

    Interconnectedness of the grid makes it more, not less reliable. In case of overloading, there are automatic switches to isolate troubled area, and in most cases this enough for prevention of cascade failures (domino effect). Only in case of a major failure, such as catastrophic fire on a major node without enough by-passes, cascade failures occured, as was the case in Moscow blackout I described above. And this was only once in 50 years. After this node was repaired, all supply was restored, it took only switching on these isolating switches (by hand). If there was another reserve node in the grid with enough capacity, even this cascade failure would not happened.

  20. sergey Says:

    Nevertheless, this analogy of financial crisis with cascade failures of the grid is valid, but the cause of the former was not interconnectedness, which generally reduces the risk, but lack of reserves in each of the troubled banks. They gambled on their ability to borrow and so drastically lowered norms of liquidity. This became a bad habit of all banks, since it allowed more profits on the same capital. In good weather it worked, but weather is not always good, and when global economy began to slump, this arrangement proved to be too risky.

  21. Capn Eddie Ricketyback Says:

    Re: goy: January 29th, 2009 at 11:35 pm
    Simple, goy. We want to be able to continue life as normally as possible if the electric grid goes out. Actually, according to the Generator Sizing tool on the Generac site:
    http://www.generac.com/Products/Information/SizingResults.aspx?kw=29,38
    We need a 29 kW- 38 kW one. We bought this one 5 years ago for our previous home, about 1000 sq. ft. smaller, and moved it to this one when we built it a couple of years ago. So we’ll have to monitor our electrical usage somewhat in this house, but not as extremely as we would with a 14 KW unit. Although the 25 KW costs about twice as much as the 14 KW (which the Generac site shows as the minimum for essential circuits in this house), when amortized over the 10 yr. life of the unit it’s worth the small annual difference of around $500 (if I’ve done the math right) to us.

  22. soupcon Says:

    Queenston is hardly an isolated spot in Canada.It’s just up the river from Niagara Falls.

  23. david foster Says:

    Funny…I was just thinking today about something that happened after the blackout was over.

    To restart the generators and the system, power had to be supplied to the field coils of the generators. The source from which the field current was taken was the grid…apparently, no one had considered the possibility of the entire grid being down at once, just individual power stations..and, of course, no such power was available. Eventually, large mobile generators had to be brought in to restart each plant.

    I was thinking about this in the context of the loss of cultural knowledge and values, and wondering what form the appropriate “mobile generators” might take…

  24. njcommuter Says:

    And those mobile generators have field coils which are initially energized (‘excited’) by either batteries or the alternators on their prime movers (diesel engines), whose field windings are themselves initially excited by the storage batteries in the trucks’ electrical systems.

    If the batteries were dead and the trucks were air-started trucks, the residual magnetic field on the alternators’ mechanical structure might provide just enough voltage to the regulator that it could feed in a weak field current, which would in turn raise the armature voltage, letting the regulator provide more field current, until the system came back into normal operation.

  25. njcommuter Says:

    Note to Sergey: If you want to reduce the power losses on overhead lines, it is not enough to put more aluminum in them. You also have reactive current because of the capacitance between the wires. To reduce that, you must either move the wires further apart (and further from the earth), go to lower voltage (increasing the transmission current, and thus the ohmic loss), or reduce the transmission frequency. The ultimate reduction in transmission frequency is achieved by going to DC, which has been feasible for about fifteen years using high-power semiconductors along with capacitors and transformer-like devices to convert high-voltage AC to DC and back at each end. Semiconductor devices are likely to be destroyed by a nuclear-induced EMP, of course, but they have been deployed and more are being deployed.

    TANSTAAFL.

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