TechWatch: Blackouts in the Economy?

We are hearing conflicting messages these days. Anybody notice?

With all of the talk about economic stimulus, we are told we need to get more money in people’s hands so they will get out and spend it, revving the economy and helping small businesses survive. Putting this money in savings would only further compound the problem. A few minutes later we are told that we have become a consumer society addicted to toys and things no one needs, spending beyond our means on credit few can pay back. We need to save more and live within our means.

Which is it, and what does this have to do with technology?

A Connection to Power Systems?

Years ago, early in my technology career, I was working on developing mathematical algorithms for solving real-world problems. One area of application was managing electric power systems. I was surprised to find that a book I edited in 1980 in this area, Electric Power Systems: The Mathematical Challenge, is still available on the web. It’s a real page turner!

One of the problems every electric power utility faces is distributing power from the source (where it is generated) to the users (the homes and businesses in its community). This is not simply a community problem, however. Much of the grid in large sections of the country is connected and as demand shifts from one region to another, the utility must manage the movement of this power from one region to another. These systems are designed in such a way that shifting loads and shifting generation can go on and electricity still gets delivered to those who need it.

Large scale technical models have been in place for many years, and are being regularly refined, to assure understanding of these systems. But since this is the real world, sometimes things don’t go as planned. A “fault” occurs, such as a generator that fails or a line that goes down, and all of a sudden the system is not working as planned. What happens then? The goal of the design of such systems is to have them fail “gracefully,” so that the impact of the failure is localized. The study of what happens after the fault is called transient stability, because the designers are looking at the behavior of a complex system over time to be certain the system will not fail.

A “Fault” in the Economic System

I think we are dealing with a transient stability problem in the economy.

For many years the economy has been in one operating state. It was characterized by high debt, growing consumerism, and rampant spending — all at an unsustainable level. Low savings rates and high-interest credit card debt were indicators of this state. Benjamin Barber, in his book Consumed, discusses this in detail. (This book will be reviewed in Ethix 65.) He argues that today’s version of consumerist capitalism “profits only when it can address those whose essential needs have already been satisfied but who have the means to assuage ‘new’ and invented needs.” Thus marketing plays a key role in developing these new needs and there is never enough.

But the bubble has burst. The “fault” was the unsustainable mortgage debt, fueled by unwise mortgages that were written for customers who could not pay for them. This is the subprime lending problem. Many who had looked at what we were doing (particularly in America) have raised concerns for years. But now with a period of lower incomes and the need to deal with past accumulated debt, there seems to be a broader consensus that we need to rein in the spending and deal with the debt. Savings must increase. This would represent a new operating state for the economy.

This suggests some questions. Is this new state a stable one? How does the economy deal with the transition from one operating state to another? Are we vulnerable to blackouts? What can we learn from the power systems problem that might help us with the economy?

Anjan Bose on Transient Stability

To gain insight from the power systems area, I contacted a long-time colleague, Anjan Bose, who is well known as a technical leader in the power-grid control industry and a researcher in electric- power engineering. He is a member of the U.S. National Academy of Engineering and has served on several National Academy of Engineering/National Research Council committees, is a fellow of the IEEE and is active in several international professional societies. At Washington State University, Dr. Bose holds the endowed Distinguished Professorship in Power Engineering, and is the site director of the National Science Foundation sponsored Power System Engineering Research Center.

“Whenever you have a nonlinear system, a small change can ‘bump’ you from one state to another. If the new state is not stable, then you will get bumped again. Large-scale blackouts occur when these events ‘cascade’ from one state to another, causing rolling blackouts that spread across larger and larger regions. There is no time for intervention, as this all happens rapidly,” Bose said.

In the last large-scale example, an estimated 10 million people in Canada and 40-million people in the Eastern and Midwestern U.S. states were affected by a major blackout that lasted almost a day, starting on August 14, 2003. It started in New York but rapidly rippled through a large region. Unfortunately, research budget cutting for electric utilities often impacts the studies of such systems until the real costs of failures appear.

“Major blackouts is the problem designers work hard to avoid. They build large scale models of such interconnected systems and then create faults. The goal of the design is to localize the impact so that the fault leads to a contained failure, but it is not allowed to extend beyond the local region. Power- systems engineers study each blackout to determine what failures occurred and then they try to add protection for the system for future containment. The difficulty of the problem is the large number of components, from generation capability to transmission lines to substations and relay stations. These are large, complex interconnected problems that must be accurately modeled. Thus while transient stability models have no doubt led to the containment of many widespread blackouts, they don’t stop them all,” Bose explained.

Economic Dynamic Models

By contrast, the economic models would appear to be much less sophisticated. This is true in part because the problem is more complex. The kinds of questions you would like to address in such models would be:

  • If housing prices suddenly dropped, what would be the impact on the rest of the economy?
  • How would a drop in the price of oil (from $150 per barrel to $35 per barrel) affect other sectors of the economy?
  • Or what happens when oil shoots up again just as steeply?
  • How will human reaction to a declining economy affect the economy?

Most of the economic models seem to be more localized, not looking at the cascading affect of one activity into another sphere. Since I am not an expert in economic models, I may be wrong here, and would like to know, but this is my working assumption based on discussion with a few economics professors.

Admittedly, the economic model is much tougher. It is clearly understood that people behavior has a strong influence on the behavior of the economic system. For example, people stop spending money, even if they have it, out of fear in uncertain times. This human action will have a strong influence on the cascading effect in the economy, while the behavior in the power system is dominated by electro-mechanical things (which are much easier to predict and understand!). No electronic control fails to do its intended function because of fear.

A Possibility for Collaboration

In spite of the obvious differences, it would seem like a fruitful avenue to have power systems stability modeling experts have a discussion with economists.

Such multidisciplinary discussions are often difficult because of the “lingo” that grows up in each community inhibiting meaningful communication. In 1997, the National Academy of Sciences put together a discussion between people engaged in military simulation models and researchers developing advanced entertainment systems, searching to see if the two very different communities might be able to learn from each other. The results are published in a book from National Academy Press, Modeling and Simulation: Linking Entertainment and Defense, 1997. One military officer wrote a response to the meeting. The only connection between the military and the entertainment world is that soldiers like to go to movies, and it should stay that way, he said.

In the case of power systems and economics, however, there is some hope. Power-systems engineers have a real and personal interest in the economy, and economists want to keep the lights on.


Al Erisman is executive editor of Ethix, which he co-founded in 1998.
He spent 32 years at The Boeing Company, the last 11 as director of technology.
He was selected as a senior technical fellow of The Boeing Company in 1990,
and received his Ph.D. in applied mathematics from Iowa State University.