As you read this article, try to think how the power crisis will impact companies like Cisco, Nortel and Lucent.
nwfusion.com
By the way, did you realize that, in the Pacific Nothwest, several species of salmon are endangered or threatened species and their survival would appear to supercede California's need for power.
"California's dark days lie ahead
The state's power crisis is crossing state borderws. Your
company better get ready.
By Mark Boslet and Scott Harris
The Industry Standard, 02/12/01
When a blackout struck Silicon Valley in January,
Sreekanth Ravi thought his company was prepared. It
wasn't. The backup battery that the SonicWall CEO
considered "pretty hefty" failed, taking the Internet
security company's Web site with it, along with a
bank of 500 computers. All told, the company was
offline for three vital hours.
The disruption taught Ravi a lesson. He now plans to
spend $150,000 on a diesel generator and new
batteries. Good thing; the worst of the Golden State's
chronic power shortage may be yet to come.
Get ready for a summer perfumed by diesel smoke in
California and dead salmon in the Pacific Northwest.
Man and nature are conspiring in a debacle that could
idle factories and short-circuit e-commerce as daily
blackouts become a real threat. With a dry winter in
the hydroelectricity-producing northwest, power
plants well past their prime and a spike in natural-gas
prices, electricity supplies could run perilously low as
millions of Californians flip on their air conditioners
come June. Add to the mix a wholesale power market
made dysfunctional by mishandled deregulation, and
the electrons are aligned for a summer of misery that
could reach up the West Coast to the Canadian
border and beyond.
But many California companies remain in denial. The
same appears true elsewhere in the U.S.: New York
and some New England states teeter only a power
surge away from summer shortages and higher prices.
Across the country, a scarcity of natural gas has sent
prices skyward, hurting credit-strapped utilities in
California and prompting New York Sen. Charles
Schumer to draft legislation seeking relief from
spiraling heating costs.
Meanwhile, 11 Western states linked to California's
power grid wait in limbo, wondering just how much
more of the crisis will spill over to them. Already, the
Pacific Northwest has had to drain precious
hydropower reservoirs to help California cope with
four weeks of near blackout conditions this winter,
threatening the viability of its salmon runs. Dick
Watson, an analyst for the Northwest Power Planning
Council, summed up the summer outlook in two
words: "It sucks."
California's Independent System Operator, the
agency that manages three-quarters of California's
electricity market, estimates the 2001 summertime
power shortfall could reach 4,100 megawatts -
enough to power 4.1 million homes - should
temperatures be hotter than normal. But that forecast
hasn't been updated since Nov. 30 - before the dry
winter. Doug Larson, executive director of the
Western Interstate Power Board, says an ISO staffer
recently told him that the projected deficit could be as
high as 6,800 megawatts. An ISO spokeswoman
declined to comment.
California Gov. Gray Davis has embraced the state
energy commission's more optimistic view that an
aggressive campaign of power-plant construction,
conservation and a relaxation of pollution standards
will achieve a cushion of more than 3,000 megawatts
by July 1. At a press conference staged at a
power-plant construction site near Sacramento last
week, Davis declared, "The time has come to take
control of our own energy destiny."
That may be California dreaming. The Golden State
desperately needs electricity from out-of-state
generators to survive the summer. Projections from
Pacific Northwest power producers aren't
encouraging. The Bonneville Power Administration,
which manages 29 hydroelectric dams in Idaho,
Montana, Oregon and Washington, typically ships
more than 1,000 megawatts of power to California on
hot days. But with dramatically lower rainfall and
snowpack this year, reservoirs are so depleted that
the Northwest Power Planning Council projects a
one-third drop in hydroelectric production in the
spring and summer. If that happens, the Northwest
may have to compete with California for power from
gas-fired plants, further driving up the price of natural
gas nationwide. "It's hard to imagine we'll have much
to sell," says Bonneville spokesman Ed Mosey.
Recognizing the mounting crisis, the governors of
Idaho, Montana, Oregon and Washington are trying
to keep power generated in the Northwest from being
sent to California. Utah also plans to curtail its exports
to the state. "Obviously, this is a problem that has not
matured yet," says Utah Gov. Mike Leavitt. "We're
only dealing with the early stages of the dilemma."
The economic fallout of continual blackouts in the
world's sixth-largest economy could be devastating.
Federal Reserve Chairman Alan Greenspan warned
last month that prolonged energy troubles could
jeopardize the nation's economic health. Two days of
blackouts in January alone cost California businesses
$1.9 billion in lost productivity, according to the
Electric Power Research Institute, an energy industry
group. Washington Gov. Gary Locke complains that
soaring energy prices have forced businesses and
schools in Washington to lay off workers while
transferring $1.5 billion in wealth to power generators.
Even minor outages will hobble production, and
catastrophic blackouts would ripple throughout the
nation's economy. Sunnyvale, Calif.-based SonicWall,
for example, provides Internet security to more than
117,000 computer systems that serve businesses,
doctors, lawyers, schools and libraries nationwide.
Engineers patch the system against a daily assault of
viruses, hacks and other attacks. "If our site can't be
modified because our systems are down, it's only as
good as yesterday's hacks," says CEO Ravi.
Hundreds of companies would find themselves in
similar straits. "It is entirely possible to drive the
economy off a cliff by not dealing with this problem,"
warns Severin Borenstein, director of the University
of California at Berkeley Energy Institute. "Right now,
the summer is looking very, very bad."
Despite that prognosis, many executives are taking a
"what, me worry?" stance, at least publicly. Some
California companies appear to be shrugging off the
dire forecasts, suggesting backup generators will
suffice. "It's not material for us, as far as our results
are concerned," says a Hewlett-Packard spokesman,
echoing a view held by others.
That may be so much whistling in the dark. Execs
relying on diesel generators to get them through
extended blackouts may be in for a rude surprise. In
the San Francisco Bay Area, for instance, regulators
limit the operation of larger diesel generators to 200
hours or less a year, depending on the amount of
pollution produced. The specter of the Bay Area's
3,000 diesel generators blanketing the region in a
sooty, carcinogenic haze already has environmental
officials "extremely concerned" about the energy crisis'
toll on human health. "High temperatures in the
summer will put a drain on the power grid at precisely
the time we have high smog levels," says Will Taylor,
a spokesman for the Bay Area Air Quality
Management District.
Carl Guardino, president of the Silicon Valley
Manufacturing Group, thinks CEOs are loath to alarm
investors and shareholders, but privately see a major
crisis. They have good reason to be worried.
Fifty-five percent of California's power plants are
more than 30 years old. As plants age, unexpected
breakdowns occur, especially when the facilities are
pushed to keep up with demand, as many have been
lately.
What's to be done? Some experts say extensive
blackouts could be averted this summer through a
program of aggressive conservation and higher
electric prices to dampen consumption. Most of that
hardship will fall on businesses, which account for 57
percent of the demand for electricity. Davis has
threatened to fine companies $1,000 a day if they fail
to curb outdoor lighting. Even so, the ambitious
conservation programs called for by Davis may be
difficult to achieve by the start of the summer.
Behind the state's power imbalance is a decade in
which California built no new power plants. During
that time, summer electrical demand grew 2.3 percent
annually, spurred by a high-tech boom. Summertime
electricity usage in Silicon Valley soared 32 percent
from 1994 to 2000 and will grow an additional 5
percent this year. Although new power plants are due
to come online, the additions could prove too little too
late.
That's because companies such as ONI Systems need
the power now. The Silicon Valley optical networking
firm is planning its next expansion in North Carolina in
part because of the energy crisis. "It's definitely the
proverbial straw that broke the camel's back," CEO
Hugh Martin says.
Ravi, meanwhile, is grateful that SonicWall recently
acquired a Salt Lake City company. "We'll be
regionalizing at a much faster pace."
It still seems a little surreal, Ravi says, that Silicon
Valley, of all places, would find itself in such a
predicament. Back in his hometown of Hyderabad,
India, Ravi notes, the power is shut down for two
hours each day, like clockwork. Given all the
uncertainty in California, he says, Hyderabad's
underpowered grid seems oddly reliable.
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