Smart Grid:

Power, regulatory experts examine challenges to upgrading transmission system

Smart grid technologies have been touted as the future of the U.S. transmission system, but with a high price tag and steep regulatory hurdles, will these projects survive the down economy? During E&ETV's Special Report, "Powering the Future: The Road to a Smarter Grid," power and regulatory experts define and debate the critical issues facing the U.S. grid as it transitions to new technologies and increased renewable capacity. Industry experts weigh in on the funding and security challenges of smart grid. Interviews include: John DiStasio, Sacramento Municipal Utility District; Peter Fox-Penner, Brattle Group; Katherine Hamilton, Quinn Gillespie & Associates; Maureen Harris, New York State Public Service Commission; Jim Hoecker, WIRES; Nicolas Loris, Heritage Foundation; Amory Lovins, Rocky Mountain Institute; Robin Lunt, National Association of Regulatory Utility Commissioners; Sue Sheridan, Coalition for Fair Transmission Policy; Matt Wakefield, Electric Power Research Institute; and Chairman Jon Wellinghoff, Federal Energy Regulatory Commission.

Transcript

Katherine Hamilton: When you're in the middle of it you really do think it's the solution to world peace. I mean you really do feel like it's the answer to everything. You know, you become the hammer and everything looks like a nail. In stepping back, you know, I start to see the real benefits of data and communication, but also understand there is a lot more out there that's going on.

Peter Fox-Penner: Smart grid applies to the entire power grid and that means the high-voltage portions of the power grid, which encompass the generation and transmission system, those are the high-voltage, large towers that you see driving down the highway, and it also includes the distribution system or the low voltage part of the industry, which are the small wires on the telephone poles outside your house that lead into your house.

John DiStasio: When we look at smart grid, we would really define it as not just smart meters, it's actually having distribution automation that has both the ability to control end-of-line voltage for energy efficiency, be a way to monitor circuits, the ability to add additional distributed resources, storage and also in the not too distant future, manage electric vehicle loads.

Monica Trauzzi: With Congress looking to trim spending, the 4.5 billion dollars smart grid and clean energy received through the stimulus could be the last federal funding this industry sees.

Maureen Harris: When we have energy efficiency projects, renewable energy projects and other just general infrastructure upgrades and improvements taking priority over smart grids because there are known quantifiable savings and benefits that outweigh the costs, it's going to supersede any smart grid deployment. But if we were to receive, like we have in the past with the ARRA funding, 50 percent of the contribution from the federal government, that puts that priority to the top of the list, the smart grid.

John DiStasio: It's obviously an expensive proposition, but I will say that we think that as soon as we identify the best benefits that we're going to get, we'll probably scale it up. We just won't do it over the span of three years. I would say some of the funding that we got actually helped us accelerate investments we might have done over 15 years.

Robin Lunt: I think a lot of commissions are looking to see what happens with the stimulus funded smart grid investments. There's been a lot of money poured into it at this point and so probably there is a degree to which there's a sense of satisfaction with let's wait and see what those projects find, what are the lessons learned, what are the great things in those projects that we could use to replicate in future projects.

Katherine Hamilton: I have been, in the past, critical of Department of Energy only because I couldn't see the results clearly from what they had been doing. I worked very hard to help them get the funding, the 4 1/2 billion dollars funding. I testified before Senate Energy to convince lawmakers that with this investment we will create jobs. We will strengthen our infrastructure, that it is absolutely critical that we do smart grid. And then there was a time when Department of Energy had to deal with all of this influx of funding that they hadn't had by an order of magnitude in ... you know, ever. They had to figure out where to spend it, come up with-and spend it responsibly and then figure out what the results are. So, the results are coming in.

John DiStasio: I think that hopefully installations like what we're doing at SMUD will provide real data, because I think some of the disconnect is it's theoretical. Even if you ask people to define what is a smart grid, you'll get 10 different answers. And so, for me, I think the work that we're doing will lead the way and really show if there's merits to this expanding or not.

Maureen Harris: The problem is, again in my opinion, that having each state go through these individual results is burdensome, onerous. We just don't have the resources to go through all of these results piece by piece. Having some sort of repository of information or having some organization, preferably NARUC, to gather this information and turn it into data that would be useful to all states would be helpful.

Matt Wakefield: We need to work on the standards activities and get the industry to adopt them. And utilities and the NIST efforts and things of that nature are working together to get industry consensus. And once we get industry consensus on standards, it will enable the free market to innovate and develop products and services.

Katherine Hamilton: But until you can show the data to regulators, many of them are going to be hesitant to approve the projects. And that's the result that going to be so important to get.

Monica Trauzzi: Upgrading the grid also means increasing its exposure to online threats. Cyber security has become a central source of debate in the smart grid discussion.

Peter Fox-Penner: There is no question that our power grid is a target of cyber terrorists and hackers. We see those cyber attacks routinely and in great volume. So far, there has been very, very little penetration of the system and that's great. I kind of feel like we're doing the best that we can, but still preparing for a threat that we don't fully understand.

Jon Wellinghoff: I do still think there needs to be additional legislation with respect to cyber security, especially with respect to known threats and vulnerabilities. And this is an issue that there's been a number of proposed pieces of legislation, none of which have yet to move forward. But I'm hoping that, you know, Congress will undertake this effort to ensure that we do have the tools in place.

Amory Lovins:: ... there's been a lot of argument in the last few years since this vulnerability was discovered about who should fix it and who should pay for it and whose bureaucracy is it in. I don't care. It should have been fixed several years ago and every morning I'm surprised the lights are still on.

Maureen Harris: Right now there are a lot of cooks in the kitchen on the cyber security issue and to have one head chef might provide some clarity for all of us.

Katherine Hamilton: FERC, that has authorization or jurisdiction over the bulk power system, has to focus on cyber security on the bulk power system. The states have to do so on the distribution side. But then Department of Homeland Security really understands cyber threats.

John DiStasio: Well, we actually have expressed a preference for Homeland Security. We tend to not look at FERC as being well-suited to deal with the vulnerabilities, because that's really being done in the stakeholder process.

Jon Wellinghoff: I really don't care which agency. It could be DHS. I think the administration has indicated they'd like to focus it in DHS or it could be us.

Nicolas Loris: I think largely it still should remain with FERC.

Katherine Hamilton: Smart grid poses an interesting situation, where it does kind of crossover and join state and FERC jurisdiction, because of its inherent nature of connecting the distribution side with the transmission and generation side through data. And so, whereas smart grid is seamless, our regulatory process isn't. And I think that this calls for even more communication.

Monica Trauzzi: While debating the lack of clarity on smart grid, utilities and regional planners are also dealing with a new set of challenges posed by FERC's latest transmission rule.

Sue Sheridan: ... we're afraid there's a lot of slippage between the rhetoric and the reality. For instance, we think that this would still allow subsidization of long-distance lines when there might be cheaper, renewable sources closer to home. And all of that would add up to costs that aren't just and reasonable for consumers as the power act requires.

Jon Wellinghoff: There have been sort of pockets of critics, but I think in general people do understand it is an order that's flexible, that allows for a lot of regional diversity and allows for those regions to create those types of planning and cost allocation structures that best meet the needs of the region. So, from that standpoint, we've had a lot of good feedback.

James Hoecker: I think Order 1000 is deliberately not very prescriptive. It leaves an awful lot to stakeholders, to the industry. We don't even know what a region is going to be and so I think the commission could have said quite a bit more.

John DiStasio: They're seeking to get cost allocation, but we are concerned that we don't want our consumers to pay for lines that they may never use, and that's probably our most significant issue with Order 1000.

Peter Fox-Penner: I think it's greatest importance is in its planning requirements. It's the first time a federal regulatory agency has told all utilities not only do they have to plan transmission, but they have to do so regionally. They have to talk to their adjacent regions. They have to take into account state and local energy policy considerations and rules and laws. And they have to take into account even non-transmission alternatives.

Katherine Hamilton: Part of the issue of smart grid has been a how do consumers participate and how do consumers move from being a passive load to being dynamic and really participating as part of the grid? And that hasn't been happening in the way we sort of thought it was going to happen, so it's been a little bit slower. And part of the reason is that you can tell consumers something is going to be great, you can provide them the tools, you can get smart rates in place, but it's like leading the horse to the trough. You can't make them drink. What consumers need to do is to demand this.

Maureen Harris: They understand the potential of apps on an iPad, they understand the potential of the apps on a smart phone, having them translate that into their energy world and having them create a demand for it would be fabulous.

Jon Wellinghoff: If we can enable these types of communications between consumer appliances and the grid, we can give consumers better both those things, better reliability and lower total bills. And so once consumers realize that and it's communicated to them, I think they'll start to fully participate in the smart grid overall.

Nicolas Loris: We think that the maturation of our electricity grid should come through the market process and if it makes sense to upgrade our grid, then those things will happen on their own and we should really look at the regulatory structure, which is immensely complicated when it comes to the utilities.

Peter Fox-Penner: I think government funding will not, at the federal level, will not be terribly essential to making the transition to a smart grid. The technological innovations are really so compelling and, ultimately, cost beneficial to the industry and its customers that this canon I think will be done sort of by the industry and paid for by customers one way or the other, without the kind of direct federal funding you and I think of.

Jon Wellinghoff: I think where it's going to come from next is from private entrepreneurs and venture capitalists who are going to see the opportunity to go in and help consumers lower their total bills and, by doing that, you know, make a tremendous amount of money as private companies inventing new ways for consumers to participate in the grid and lower their costs.

Monica Trauzzi: E&ETV reached out to several members of Congress for their comments on the future of smart grid. Although there was no consensus on how best to move forward on cyber security or funding legislation, Congressman Ed Whitfield's office indicated he plans to look into the issue early next year.

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