How can the United States use smart grid technologies to strengthen the electric grid to avoid outages during severe weather? During today's OnPoint, Paul Molitor, head of communications at the National Electrical Manufacturers Association, discusses new recommendations for managing weather risk more effectively. Molitor also talks about the financial and regulatory challenges facing the industry as it tries to broaden its reach.
Monica Trauzzi: Hello, and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Paul Molitor, head of communications at the National Electrical Manufacturers Association. Paul, thanks for joining me.
Paul Molitor: Well, thank you for having me.
Monica Trauzzi: Paul, NEMA is releasing a report along with Congressman Peter King this week that focuses on ways to improve the strength of the electric grid and improve its resiliency to withstand severe weather. What did Superstorm Sandy teach us about the electric grid?
Paul Molitor: Well, it taught us that, in certain instances, we're really not prepared. There is a lot that we learned in terms of the positioning of equipment in particular that affected the reliability of the electric system up there. When you get an incident like that where there's flooding or even the tornadoes that we recently had in Oklahoma, you know there are certain areas that are going to lose power, but by positioning gears so that it won't be flooded in future events, and by building smartness into the grid so it can identify faults and route power around it, you can actually restore automatically power to the greatest number of people.
Monica Trauzzi: Why do you believe more hasn't been done on this front up until this point?
Paul Molitor: It comes down to being, I think, a financial matter. It takes utility company investment, and of course utility company investment is very closely controlled by the regulators, and so the regulators have to allow the business case to flourish, there have to be rate cases that are made, and the utility company investment has an impact on rates. These are tough economic times and rate cases are kind of tough to absorb.
Monica Trauzzi: You were recently identified as a Smart Grid pioneer ...
Paul Molitor: Yes.
Monica Trauzzi: ... along with Energy Secretary Moniz. How can the U.S. more effectively, then, be engaging these Smart Grid technologies to strengthen the electric grid and to help avoid some of these outages that we saw as a result of Sandy?
Paul Molitor: Yeah, in the United States, we have a very unique challenge. If you take a look at other countries like China, they have a national electric grid, so there's really two electric companies for a billion people. In the United States, we have 300 people and over 3000 electric companies, and so what you need is a forum where we can come together and establish interoperability and identify the problems and the technologies that will solve these problems. The National Institute of Standards and Technologies, they formed a group called the Smart Grid Interoperability Panel, and they've been bringing people together now for four years. I was the original secretary of the SGIP when it was formed. We can come together in this forum, we can talk about architectures that made the grid more resilient, we can discuss the technologies, we can discuss interoperability so that the manufacturer's equipment works together in order to resolve the problems.
Monica Trauzzi: The recommendations that you make this report, are they using existing technologies, or are there still advancements that need to be made?
Paul Molitor: Well, it's both. I mean, there are existing technologies and-for example, the whole idea of communications and sensors, it's something that's been used in other venues and quite successfully, and so we can use more of that in the electric grid. At the same time, there are advances that have to take place and energy storage is a great example. Energy storage could be one of those game changing technologies, but the storage technologies themselves have been a little bit lagging. In some cases, we do need future technology developments, but there are plenty of things today that exist that we can install in the grid and make it better.
Monica Trauzzi: You talked about the expense involved in upgrading to all of these technologies. It's difficult to fund things right now ...
Paul Molitor: Yes. [Laughter]
Monica Trauzzi: ... here in Washington, so how can the private sector be engaged to assist?
Paul Molitor: Yeah. Well, a big boost came out of the stimulus bill three years ago-four years ago now. The other thing, also, is that-I think that there are policies that can be put in place that fortify the business case for the utility companies and make it more attractive to invest. A great example is, a lot of the equipment that's been purchased and installed has a 20 or a 30 year accounting life, even though its service life may be shorter than that. If we can find ways to accelerate the depreciation so that they're motivated to replace that gear faster, then you don't have stranded assets in the grid and we can actually replace things and get the smarter, more resilient gear in place now.
Monica Trauzzi: How long would it take us to get up to speed so that we are more resilient?
Paul Molitor: Well, we've been talking that it's probably going to be about a 30 year time window, and the clock's really started ticking with the Energy and Security Act of 2007.
Monica Trauzzi: So does that mean, for the next 30 years, we face similar outages if another storm like Sandy hits?
Paul Molitor: It could very well be, yes, and you can't do a forklift upgrade of the electric upgrade of the electric grid. We just can't afford it, and you can't gold plate everything, because it's just too expensive. Yeah, it's got to be a stepwise process. We have to play within the accounting rules that the utilities operate under right now, and it's going to take some time for us to move from the grid of the past to the grid of the future.
Monica Trauzzi: We mentioned Secretary Moniz earlier-how can he be most effective in engaging his department on Smart Grid?
Paul Molitor: I think just the fact that he's come out and is talking about it right from the beginning is really a great start, and that's what we're looking for. We're looking for somebody to communicate the objective so that we, as the industry, can come in and meet those objectives. We're hungry for the challenge, just tell us what you want out of the grid, and we're eager to deliver. Then, of course, we'll have to-that's, developing that vision and then delivering on that vision is what's going to have to happen through the regulatory and the legislative process on the back end.
Monica Trauzzi: Always a tough process, for sure. [Laughter]
Paul Molitor: Yes, it is.
Monica Trauzzi: Paul, thank you for coming on the show.
Paul Molitor: All right, thank you.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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