September 12, 2000, 5:15 AM PDT

Electrical Storm Hits New Economy

Faced with energy shortfalls and an aging power grid, Internet Economy companies search for solutions. By Mark Boslet

It was a long, hot summer in the United States. Not only did record heat waves parch much of the nation, but a mini-energy crisis struck both coasts.

In San Diego, utility bills doubled as electricity supplies tightened and the cost of power skyrocketed. During a mid-June heat wave, rolling blackouts hit San Francisco and Silicon Valley. Politicians felt the heat, too, as public anger boiled over. Finally, in early September, California Gov. Gray Davis stepped in to cut San Diegans' electricity rates.

Meanwhile, hot weather in the Northeast pushed New England and New Jersey to the brink of brownouts. Many New Yorkers' summer electricity bills jumped 40 percent; for a few days in early August, New York's Con Edison even cut back service to business customers such as Chase (CMB) Manhattan.

In the Northwest, where cheap hydropower has historically kept utility bills low, anemic river flows this summer have pushed up rates. Many sawmill and mine workers lost their jobs when companies chose to shut down rather than pay rising electric costs.

Now, with natural-gas prices high and heating oil for homes in short supply in the East, energy prices could also soar this winter.

It wasn't supposed to be like this. Energy deregulation promised to lead smoothly to market-driven prices and investments in new plants and technology. Instead, it's resulted in price hikes, blackouts and dwindling reserves. It has also spurred a frantic push for new plants in states that for the past decade have added little new generating capacity.

The Internet Economy is peculiarly vulnerable to shrinking power surpluses. Digital businesses require not only massive quantities of power, but also reliable systems: An interruption in power as instantaneous as one-sixtieth of a second won't cause the lights to flicker  but it will crash a computer.

Already, U.S. companies lose $50 billion in productivity each year due to power interruptions, according to the Electric Power Research Institute, an industry-financed research organization based in Palo Alto, Calif. To ensure power supplies, some companies are considering building their own generating capacity, bypassing regional power grids altogether and evading the chaos that will likely persist for several more years.

The climate for many companies, in short, has grown "very fearful," says California state Sen. Byron Sher, who represents part of Silicon Valley. "This is a new issue for them."

The new-millennium energy crisis in the U.S. can be traced to the effects of deregulation, a lack of new generating capacity in recent years, and an antiquated distribution system  not to mention the unanticipated demands of the Internet Economy. An average office building with a computer on every desk but no significant network facility uses between 4 and 5 watts of electricity per square foot, according to Ed Quiroz, a regulatory analyst at California's Public Utilities Commission. If that building has a server farm and a network operations center, it sucks from 90 watts to 100 watts of energy a square foot or more. Or consider this: According to Mark Mills, an energy researcher with ties to the utilty industry, a Palm handheld device connected wirelessly to the Internet has the appetite of a refrigerator, consuming 1,000 kilowatt hours a year.

But estimates of the Net economy's power requirements vary. The fact is, no one knows for sure how much demand for energy will climb in coming years. Mills and colleague Peter Huber estimate that businesses that rely on digital equipment  personal computers, networking equipment, plants that produce high-tech gear and telecommunications networks  consume 13 percent of U.S. electric power. That figure will rise to between 30 percent and 50 percent of the nation's energy needs by 2020

http://www.thestandard.com/article/display/0,1151,18391,00.html

-- Martin Thompson (mthom1927@aol.com), September 13, 2000