New Thinking for Grid Defense

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An 11-hour power outage at the Atlanta airport snarled air traffic around the world. An American territory has been largely without power for months due to extreme weather. Significant wildfires in California have been blamed on power infrastructure. We once again have to question the ability of our electric system to withstand both natural and man-made shocks. Incorporating theories of thought leaders from outside the energy industry would improve our approach to defending the electric power grid, and potentially change how power markets are designed to reward reliability and resilience. The three such thought leaders are Clay Christensen, David Deptula, and Nassim Taleb.

Professor Clay Christensen is a noted academic in the field of business administration and a member of the faculty of the Harvard Business School. Probably best known for his theories of disruptive innovation, his latest work has focused on the “Theory of Jobs to be Done.” In it he suggests that consumers are not buying a product or service, instead, they are “hiring” that product to do a job. This shift in thinking puts the consumer and his or her needs rather than the product at the center of any transaction.

Lt Gen David Deptula (USAF, Ret.) is one of the fathers of a concept in U.S. military doctrine known as the “Effects Based Approach to Operations” or EBAO. EBAO emphasizes the outcome a military force wishes to create, rather than the means by which it is created. Say, for example, a friendly aircraft needs to cross through airspace that is defended by missiles on the ground—one way to prevent the friendly aircraft from being shot down would be to destroy the hostile missile launchers—itself a dangerous and difficult mission. Another option would be to remove the centralized command center for the air defense system, or perhaps just remove the communications link between the command center and the missile launchers. The point being is that there are many ways to skin the cat, and if one looks to second and third order effects of an action it may be possible to create the desired outcome with comparatively less risk.

Nassim Nicholas Taleb is most associated with the concept of Black Swan events—events with low probability but extreme impact. He has, over the course of his Incerto book series, been developing the concept of “anti-fragility.” He argues that systems, when faced with stress and volatility either break easily (the fragile), withstand the volatility to a point (the robust), or gain strength from the volatility (the anti-fragile). He further argues that policymakers are generally predisposed to put in place solutions that only make fragile systems more robust rather than recognizing that volatility cannot be controlled.  He argues we instead should be seeking out ways to become anti-fragile. The classic example is the effort to control forest fires: putting out every fire (developing a more robust system) eventually creates the conditions where there will eventually be a fire that cannot be controlled. Small fires, while destructive, create a more healthy forest system.

What do Jobs to be Done, EBAO, and Anti-fragility have to do with energy infrastructure?

First, it is vital to recognize that electric power is perhaps the ultimate example of a product characterized by a Job to be Done. While access to electricity is foundational to our way of life, human beings have nearly no use for “raw” electricity, even as it permeates our environment, running over our heads, under our feet and in the walls. Until very recently, ensuring energy security meant securing a long supply chain from a fuel source to a generator, through a transmission and distribution system, to the ultimate end user.

This distribution model meant that energy security and grid security were synonymous, and we, therefore, developed regulatory bodies to operate on this model. Recent advancements in distributed generation, energy storage, microgrids, and the controls required to coordinate these new resources are calling into question whether this approach is still appropriate or whether we should move away from thinking about security of the electric grid and instead widen our view to ensuring that electricity can do its most critical jobs.

Secondly, with an EBAO mindset, we can see that while grid security is a major component of ensuring access to power, consumers do not really care about the security of the grid per se, what we care about is that we have access to electricity. That same EBAO mindset reveals that electricity’s long supply chain from fuel source to end user creates a multitude of opportunities for either accidents or adversaries to create effects that interrupt that Job to be Done.

We are left, then, with trying to minimize the potential effects on our power supply chain that interfere with electricity’s job. The first step, and one that’s widely understood, is to make the existing system more robust. Hardening and defending the physical and cyber links along the supply chain is vital. That, while necessary, is not sufficient. We need to rethink the system itself, and perhaps find ways to make it more anti-fragile.

Distributed generation, storage, and microgrids would help shorten the electricity supply chain and therefore reduce the number of potential targets and failure points—but that shorter supply chain comes at a (literal) cost. While those technologies have seen rapid cost reductions, in many markets they are not economically competitive with the status quo grid.

That said, at the state, federal and multi-national levels electricity markets are some of the most regulated in our economy. Those regulations have been and should continue to be shaped to help ensure electricity supply. For example, late last year the Department of Energy proposed rules that would reward electricity generators for keeping a ready supply of fuel on hand—a move aimed at making the system more robust. While that proposal was recently rejected by market regulators, the Energy Department’s leadership has still publically committed to making supply security a priority.

Ultimately, though, given the range of threats and potential sources of volatility we need to try to find ways to make the system anti-fragile. Rather than a system that rewards assured creation of electricity, we need a system that rewards continued availability of electricity to the end user to enable its Job to be Done. Traditional grid security, fuel assurance, and creating economic incentives for sufficient generation capacity would be the majority of this effort, but the balance should rest in rewarding key electricity participants, to include consumers, for being able to assure readiness and operation during what would otherwise have been disruptive events.

For example, key infrastructure like hospitals, airports, or shelters could be rewarded through the electricity tariff structure for keeping the lights on during power disturbances. Many of the United States’ electricity markets already incorporate what is known as “capacity payments” to generation companies. These payments are made to the generator just for being available to run, subject to certain performance standards—and are agnostic toward the technology employed to ensure that performance. This model could be adapted to “micro-capacity” payments for key infrastructure owners who take steps to invest in power supply assurance through resilient systems. This market structure would encourage an ecosystem where the emphasis is on the resilience of power supply at the point of consumption rather than simply bulk generators. This is a situation where an anti-fragile system is grown through the use of market incentives.

Planners in both the public and private sector need to broaden their thinking that the security of generators, wires, and poles ensures a secure electricity supply. They should instead work backward from the consumers of electricity to ensure that power is available to do the job for which it was hired. Following an analysis that seeks out what upstream effects could interrupt that job, investments can be made to best mitigate those threats. Additionally, we should not discount opportunities to modify market conditions to encourage activity that would organically move the power supply system toward a more anti-fragile condition.

Travis Nels works in strategy and finance for a major global power company, with experience in both the active and reserve branches of the United States Air Force. The ideas here are his own and do not represent his employer or any branch of the U.S. government.

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