Silicon Valley plugs away to cope with region's ongoing power pinch

Don't be too surprised if the Weather Channel overtakes the Financial News Network as the favorite cable outlet for Silicon Valley chipmakers this fall. Many fab managers no doubt are anxiously hoping Northern California's golden autumn passes without any hot spells that could further strain an overtaxed electricity grid in the Valley and surrounding Bay Area.

This past summer, the area suffered through "a total of 19 power emergencies, or alerts, when action needs to be taken" to alleviate power shortages, says Justin Bradley, environmental director for the Silicon Valley Manufacturers' Group (SVMG). Bradley's purview takes in energy issues for the organization. The group represents approximately 180 Valley companies, many of them chipmakers with justifiable concerns about the reliability of the power supplied to their fabs.

Citing Hewlett-Packard estimates, SVMG's Projections 2000 task force notes that "a 20-minute outage at a circuit fabrication plant would result in the loss of a day's production at a cost of $30 million." Three recently established subcommittees of SVMG's environmental committee, which covers energy concerns, are looking into the power issue, Bradley says. The committees will examine load management and efficiency, energy infrastructure policies and projects "to make sure we're keeping pace with infrastructure investment," and "strategic matters that deal with the market and prices."

Two so-called rolling blackouts hit the area on June 14 when the state's Independent System Operator (ISO) requested the actions, says John Roukema, assistant director of the municipal utility department in Santa Clara, CA. The ISO was given responsibility for "the reliability of the electrical grid" when the California legislature deregulated the power industry in 1996, he notes. Pacific Gas & Electric, the giant Bay Area utility, interrupted power June 14 to approximately 100,000 residential and small-business customers in the Bay Area for the first time in its history, according to the SVMG task force.

With similar shortages occurring around the nation, the federal government may take action. The Federal Energy Regulatory Commission (FERC) is weighing whether to place tighter limits on wholesale electricity prices charged by power marketers. FERC chairman James Hoecker told a March meeting of the National Association of State Utility Consumer Advocates in Washington, DC, that the types of blackouts seen in the Bay Area and in other parts of the U.S. could become more common.

Rapid growth in the demand for wholesale power, coupled with uneven industry deregulation, may make power failures the next major energy crisis, according to a Reuters news report of the meeting. The reliability of electricity supplies "may replace gasoline prices on the front pages of newspapers," Hoecker told the group. He then called on Congress to pass legislation that would ensure the reliable delivery of power in a deregulated market.

Deregulation is just one of the reasons for the short supply, says Michele Negley, director of energy solutions for New West Energy, a provider of electric service in the western United States. "The only impact deregulation has had on this [crisis] is that a lot of typical investors who invest in generation plants and transmission facilities may have been hesitant to do so until they knew what the rules of deregulation were going to be." Unfortunately, that lack of investor confidence coincided with surging growth in the Internet economy, Negley points out. "I'm sure that if there was a hold-off on investment and the growth had been forecast, there would have been something done to increase investment in the power grid."

A study by the U.S. Department of Energy says deregulation in 25 states has made it more difficult for system operators to cope with periods of peak demand. California is planning to add 14,000 MW of generation capacity in the next five years, with the first new generating facilities scheduled to come on-line by summer 2002, Negley says. "Between now and 2002, there's going to be additional growth...and roughly the same amount of supply, [so] there's an interest in looking at things you can do to manage that situation."

On peak days California power plants generate 38,000 MW of electricity, and approximately 8400 MW can be imported from elsewhere, for a total of 46,400 MW of energy supply. Negley points out, however, that "on a typical summer day, Californians use about 46,250 MW at peak demand throughout the day." New West Energy has a program in place giving commercial customers an economic incentive to voluntarily curtail loads. Although high-tech companies are not part of the program, Negley says they could benefit if, for example, participating cement manufacturers could offload the grid and reduce the need for required curtailments dictated by ISO that could affect critical fab loads.

Negley took part in a recent energy crisis forum held in San Diego, the epicenter of a revolt by consumers and businesses in a uproar over deregulated electricity prices that have risen by as much as 300%. Other participants included representatives from the California Energy Commission and SVMG.

"The state as a whole is very concerned about the prices and reliability issues," emphasizes Karen Griffin, manager of the electricity analysis office for the California Energy Commission. "For next summer, there are large programs which are being funded or managed through the Public Utilities Commission (PUC) and some smaller programs through us to fund energy efficiency investment or load shifting that would reduce peak demand."

PUC awards for 2001 total "in the neighborhood of $240 million," Griffin says. In addition, the California legislature has awarded the energy commission $50 million in grant money to invest in peak-demand reduction programs "that can be in place next summer, because we're all extremely concerned about next summer's performance," Griffin says. The energy analyst says the state legislature is moving quickly, signing a bill on September 7 to bring some relief. There are approximately 30 utility companies in California, according to Roukema, including investor-owned firms such as PG&E and Southern California Edison, as well as municipally operated utilities such as Santa Clara's and the Department of Water and Power in Los Angeles.

"[The PUC] will be putting out guidelines very quickly and then awarding money this fall to people who can make investments to save on peak demand," Griffin points out. She adds that the investments are "not for power cleanliness or local voltage support at the site, which I think might interest a chip manufacturer," but for energy efficiency. Efficiency gains could be made in air conditioning, motors, pump upgrades, and the like.

Roukema of the Santa Clara municipal utility department says the department works with chipmakers for voluntary curtailments during stage 1 and stage 2 power alerts--the most extreme emergency being stage 3. ISO issues a stage 1 alert when state power reserves dip below 7%. This emergency announcement requires curtailments such as shutting down office lights and setting air conditioner temperatures at slightly higher settings. A stage 2 emergency occurs when reserves fall below 5%. In addition to the voluntary response, customers with interruptible power supply contracts must curtail their power usage. One of the biggest Santa Clara customers, Roukema says, is a nitrogen supplier with storage capacity that can handle a temporary power shutdown.

At stage 3, when reserves plummet below 1.5%, ISO "would request rolling blackouts or curtailment of firm loads," as the state agency did on June 14. "They'd ask us to shut down X percent of our load or so many megawatts, or would implement our load curtailment program," Roukema says. "That's where we've worked with our customers...to shut down noncritical loads that would allow their fabs to maintain production. They may end up shutting down an R&D building, for example."

Before the program was instituted following the June 14 alert, the only major Santa Clara utility customer that would absolutely not receive a shutdown order was a local hospital. Fabs were on the list of facilities that could have suffered shutdowns. After June 14 "our customers came to us...and said, 'We want some control; we want to protect our fabs. If you let us keep our critical loads, we'll work out a program where you tell us what you're going to shut down.'" Roukema adds: "I think we have a plan in place that will actually let us ride through anything we can foresee through the rest of the year."

Cutting back power loads, however, is only a Band-Aid, indicates Bradley of SVMG. "Our member companies are saying we understand the need to reduce loads at key times to the extent we can without affecting business. It's very tough and very difficult, though. They're geared up to make product, not to reduce load."

He cites a variety of localized solutions that members could use to ensure a steady power supply. "If we can't get it from the grid reliably, we have to make it ourselves. If a company were to buy its own gas-fired turbine, it could make its own power." Other possible alternatives include distributed generation (DG) power, also called micropower, a term Bradley prefers. Photovoltaic cells and hydrogen-based technologies are other alternatives. "Each has its own limitations, of course. Another question is, if you're making your own power and you don't use all of it, can you put it back into the grid?"

Bradley says it's intuitively understood that cooling a building is one of the biggest draws on power. "For your home, your refrigerator is a third of your power. Cooling in general is very energy intensive. It's not just changing the thermostat setting; it's changing the airflow rate...to decrease the energy cost of cooling. If you don't move as much air you save electrons."

SVMG has begun a testing program to find some temporary solutions, or, as Bradley puts it, "things we can do reasonably. We're doing what we do best. We experiment in the garage; we see what we can come up with and, if we see something worthwhile, we try it out."

It may come as some relief that fabs shouldn't have problems with an upsurge in voltage sags, which can occur a dozen or so times throughout the year. "There aren't going to be any more voltage sags than usual because of deregulation," Negley asserts. "I would expect the same number of voltage sags. Power quality is going to be good." A supply shortage is another matter, she acknowledges, adding, "It really depends on the curtailment practices of the various utilities."

Residential and small-business customers in cities such as San Diego have been up in arms over deregulation's effect on their power bills, but the cost of electricity to the fabs "doesn't matter very much," notes Alex McEachern, president of Power Standards Lab. "The total value of the electricity going into a fab is tiny compared with the value of what's produced in it. From that standpoint, cost is not a big deal."

Running out of generation and distribution capacity in California and other regions is a very big deal, McEachern stresses. With power availability disappearing, "we're going to start seeing more rolling brownouts and blackouts."

The ripple effect caused by these alerts could ultimately lead to voltage sag problems, McEachern warns, if fabs have to tap their chief source of backup electricity--diesel-powered generators. The transition from the utility grid's power lines to the diesel backup can cause problems during a blackout. "Then there's a much more difficult transition that occurs at the end of the blackout when the power shifts from the diesel generator back to the utility grid. To make things even more difficult, when a fab is running off a diesel generation source, the source impedance of the power lines is much higher than the source impedance when you're running from a utility.

"When you're using a big motor, big chiller pump, or a big vacuum pump, for example, the voltage sag will be much deeper and longer," he continues. Asked how much deeper and longer, McEachern pauses, then replies, "Twice as deep and twice as long would be a reasonable statement." On the bright side, fabs implementing the recently approved SEMI Standard F47 "are much more likely to survive those transitions than older fabs and older fab equipment that aren't in compliance," asserts McEachern, whose firm specializes in sag testing.

For Kevin Brett, there's an obvious lesson in all this for chipmakers. "The specter of brownouts and blackouts in Silicon Valley is just another warning that you don't put all your eggs in one basket," declares the director of corporate public relations for LSI Logic in Santa Clara. "If you look at an LSI, an Intel, or if you look at an AMD, ask the question: 'Where is the majority of these companies' manufacturing located?' Or ask another question as it applies to LSI Logic: 'Where are the majority of the company's engineers located?' The answer literally is 'around the world.' The vast majority of LSI's manufacturing--I'm saying 90%--is outside the Silicon Valley."

Cost is only one of the reasons that the chipmaker has dispersed itself globally, Brett emphasizes. "The Taiwan earthquake that hit last year served as a major wake-up call for all of the companies, particularly those who are the so-called fabless semiconductor makers." LSI Logic's corporate headquarters and an R&D facility are based in Santa Clara. "What you're looking at is a small percentage of our overall manufacturing output."

Chip-buying clients need to know that they can still get their product if fabs have shortages caused by catastrophes such as earthquakes and power blackouts, Brett points out. "It makes sense and it's a very prudent thing for companies to literally distribute their manufacturing and their engineering in multiple locations around the world, because you can have--I mean, this is also an earthquake zone--you can have a brownout or a blackout. So, yes, you have diesel generation in place. You take the prudent necessary steps in each location."

Brett, McEachern, and Bradley all acknowledge that use of diesel power could have a potential negative impact on the Valley's air quality. Although he had no specific statistics on the number of fabs with diesel-powered generators, Bradley agrees that their use "adds a significantly greater pollution load to the air. We would prefer not to do that." SVMG planned to hold a conference in mid-September to see how many member companies are planning to make their own power.

In the meantime, McEachern and Bradley believe that the worst fears of Valley fab managers could still be realized, either before Thanksgiving Day or sometime next summer. "The worst case is that there will be days, not hours, when electric power isn't available, or it's interrupted a few hours per day," asserts the expert on power sags.

A confluence of three factors could launch this catastrophic scenario, McEachern warns: "First, a lack of generation capacity; second, a lack of distribution capacity--in other words, the wires carrying the power from existing generators to the fabs are not thick enough; and third, a series of unusually hot days. Those three things together would cause power to be taken away from the fab for a few hours per day for several days."

As far as Bradley's concerned, SVMG members will be sweating out the autumn weather forecasts. "It's not over yet. We may have dodged the worst so far, but there's a fair possibility we haven't dodged it all this summer," he warns. "In September and October, we often get a long spike in temperatures."

McEachern's long-term view is not much better. "The problems will occur next year. The headline to this story might be: 'Whew, we survived a close one.' "