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US drought impacts on power grid


07-19-2012 11:47 BJT

The intense heat and drought across the American Midwest is not only taking its toll on agriculture. The region’s cities, and their utility companies, are straining as people try to stay cool by using loads of electricity.

 Clifford Haefke, Energy Resources Center, University of Illinois-Chicago, said, "Normally power generators are running at ‘baseload,’ which means using coal and nuclear. When it comes to these heat waves, they need to move into more expensive assets."

Aging infrastructure adds more stress to power systems. An estimated 70 percent of U.S. power transformers and transmission lines are at least 25 years old, according to the NERC, an association of grid operators. Heat waves can often cause brownouts of other types of power failures, though this year electricity companies have generally been able to meet demand.

Clifford Haefke, Energy Resources Center, University of Illinois-Chicago, said, "This has been an extremely hot summer, I’d say if we weren’t in a recession, with companies not operating at full capacity, I think we would hit our peak demand, even though we’ve been quite close. "

The extreme weather has sent prices soaring in certain financial markets, including weather-based derivatives and commodities. Statistical measurements show unusual volatility in recent weeks.

Jeff Hodgson, Chicago Weather Brokerage, said, "What you’re seeing are in some cases two, three, and sometimes four standard deviation moves, you’re seeing that in the temperature market. It’s also being reflected in many of the commodities and also natural gas, which is up about 50 percent since mid-April."

Even taking weather out of the picture completely, U.S. electricity costs are expected to climb significantly over the next few years due to a mixture of regulation, aging infrastructure and supply trends. According to one estimate from the nonprofit American Council for an Energy Efficient Economy, the cost of power is projected to rise 20 percent in many parts of the U.S.

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