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J U N E 2 0 1 1
A POLICY FRAMEWORK FOR THE 21st CENTURY GRID:
Enabling Our Secure Energy Future
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EXECUT IVE OFFICE OF THE PRESIDENTNATIONAL SCIENCE AND TECHNOLOGY COUNCIL
WAS HIN GTON, D C. 20502
June 13,2011
Dear Colleagues:We are pleased to transmit the report "A Policy Framework for the 21 s l Century Grid:Enabling Our Secure Energy Future." This report outlines policy recommendations that buildupon the Energy Independence and Security Act of 2007 and the Obama Administration's smartgrid investments to foster long-term investment, job growth, innovation, and help consumerssave money. The report was prepared by the Subcommittee on Smart Grid of the NationalScience and Technology Council, Committee on Technology.A 21 SI century electric system is essential to America's ability to lead the world andcreate jobs in the clean-energy economy of the future. The Administration has madeunprecedented investments in clean-energy technologies and grid modernization. For example,
as part of the Recovery Act, the Nation invested more than $4.5 billion for electricity deliveryand energy reliability modernization. This report highlights further efforts that are needed totake advantage of opportunities made possible by modern information, energy, andcommunications technology. It also provides a policy framework that promotes cost-effectiveinvestment, fosters innovation to spur the development of new products and services, empowersconsumers to make informed decisions with better energy information, and secures the gridagainst cyber attacks.
Facilitating a smarter and more secure grid will require sustained cooperation among theprivate sector, state and local governments, the Federal Government, consumer groups, and otherstakeholders. Such progress is important to ensure that the United States is a world leader in the21 st century economy, is at the forefront of the clean energy revolution, and wins the future byencouraging innovation .
...-Sincerely,
I - - - -Aneesh ChopraCoT Co-chair andChief Technology Officer of theUnited States andAssociate Director for Technology,Office of Science and TechnologyPolicy
Vivek KundraCoT Co-chair andChief Information Officer of theUnited States,Office of Management and Budget
CoT Co-chair andSenior Advisor for Technology andInnovation,National Economic Council
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J U N E 2 0 1 1
A POLICY FRAMEWORK FOR THE 21st CENTURY GRID:
Enabling Our Secure Energy Fuure
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i
able o Conen
List o Acronyms iii
Foreword v
Chapter : Introduction and Overview 1
Chapter : Progress to Date 9
Chapter : The Path to Enabling Cost-Eective Smart Grid Investments 13
Facilitate a Clean Energy Economy 13
Provide Opportunities or Improved Energy Eciency in Grid Operations 16
Supporting Investment in Smart Energy Use by the Utility Sector 17
Align Utility Incentives 19
Research and Development 20
Inormation Sharing 22
Chapter : The Path to Unlocking Innovation in the Electricity Sector 25
Standards 26
Demand Management 30
Preventing Anticompetitive Behavior 34
Chapter : The Path to Empowering Consumers and Enabling Inormed Decision Making 37
Consumer Education 38
Timely Access to Data 40
Device Usability 43
Data Privacy 46
Consumer Protection 47
Chapter : The Path to Secure the Grid 49
Cybersecurity Standards 49
Cybersecurity Culture 50
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ii
Chapter : Continuing Cooperation with States and Other Key Stakeholders 51
Building on Progress 51
Innovative Research and Development 54
Government as a Model User o Demand Response Technology 57 New and Ongoing Opportunities or Cooperation 57
Working with International Partners 60
Chapter : Conclusion 63
Reerences 65
Appendix A: The NSTC Subcommittee on the Smart Grid 87
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iii
Li o Acronym
ADEPT Agile Delivery o Electrical Power Technology
AEP American Electric PowerAMI Advanced Metering Inrastructure
AMR Automatic Meter Reading
APPA American Public Power Association
ARPA-E Advanced Research Projects AgencyEnergy
BGE Baltimore Gas and Electric
BPA Bonneville Power Administration
CSWG Cyber Security Working Group
DERs Distributed Energy Resources
DLC Direct Load Control
DOD Department o Deense
DOE Department o Energy
EEI Edison Electric Institute
EISA Energy Independence and Security Act
EMS Energy Management System
EPRI Electric Power Research Institute
EVs Electric Vehicles
FERC Federal Energy Regulatory Commission
FIPPs Fair Inormation Practice Principles
FY Fiscal Year
GSA General Services Administration
GW Gigawatt
GRIDS Grid-Scale Rampable Intermittent Dispatchable Storage
IEA International Energy Agency
IEC International Electrotechnical Commission
IOUs Investor-Owned Utilities
ISGAN International Smart Grid Action Network
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iv
ITA International Trade Administration
KIUC Kauai Island Utility Cooperative
MDCP Market Development Cooperator Program
MW MegawattMWh Megawatt-Hour
NAFTA North American Free Trade Agreement
NARUC National Association o Regulatory Utility Commissioners
NASPI North American Synchrophasor Initiative
NASUCA National Association o State Utility Consumer Advocates
NEI National Export Initiative
NEMA National Electrical Manuacturers Association
NIST National Institute o Standards and Technology
NRC Nuclear Regulatory Commission
NRECA National Rural Electric Cooperative Association
NREL National Renewable Energy Laboratory
NSF National Science Foundation
NSGI Naperville Smart Grid Initiative
NSTC National Science and Technology Council
OG&E Oklahoma Gas & Electric
PAP 0 Priority Action Plan
RUS Rural Utilities Service
SEGIS Solar Energy Grid Integration Systems
SEGIS-AC Solar Energy Grid Integration Systems-Advanced Concepts
SETP Solar Energy Technologies Program
SGIP Smart Grid Interoperability Panel
SRP Salt River Project
T&D Transmission and Distribution
VAR Volt-Ampere Reactive
WECC Western Electricity Coordinating Council
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v
Foreword
A smarter, modernized, and expanded grid will be pivotal to the United States world leadership in a clean
energy uture This policy ramework ocuses on the deployment o inormation and communications
technologies in the electricity sector As they are developed and deployed, these smart grid technolo-gies and applications will bring new capabilities to utilities and their customers In tandem with the
development and deployment o high-capacity transmission lines, which is a topic beyond the scope
o this report, smart grid technologies will play an important role in supporting the increased use o
clean energy
A st century clean energy economy demands a st century grid Much o the traditional electricity
inrastructure has changed little rom the original design and orm o the electric grid as envisioned
by Thomas Edison and George Westinghouse at the end o the th century (EEI , p ) In a st
century grid, smart grid technologies will help integrate more variable renewable sources o electricity,
including both utility scale generation systems such as large wind turbines and distributed generation
systems such as rootop solar panels, in addition to acilitating the greater use o electric vehicles and
energy storage Moreover, such technologies will help enable utilities to manage stresses on the grid,
such as peak demand, and pass savings on to consumers as a result
The evolution towards a st century grid is already taking place With the Recovery Act investment o
$ billion or electricity delivery and energy reliability modernization eorts, the promise o a smarter
grid is becoming a reality States across the Nation are beneting rom new investments in electricity
inrastructure and in consumer-acing devices that promise to vastly reduce energy waste, increase the
reliability o the electric grid, and provide consumers with opportunities to save money In addition, our
current investments will enable innovation, creating jobs o the uture here in the United States and
giving rise to new export opportunitiesThe Federal Government, building on the policy direction set orth in the Energy Independence and
Security Act o and the Recovery Acts historic investments in innovation, oers this policy rame-
work to chart a path orward on the imperative to modernize the grid to take advantage o opportunities
made possible by modern inormation, energy, and communications technology This ramework is
premised on our pillars:
. Enabling cost-eective smart grid investments
2. Unlocking the potential or innovation in the electric sector
3. Empowering consumers and enabling them to make inormed decisions, and
4. Securing the grid.
Each pillar supports a set o policy recommendations that ocus on how to acilitate a smarter and more
secure grid Progress in all our areas, as part o an overall grid modernization eort, will require sus-
tained cooperation between the private sector, state and local governments, the Federal Government,
consumer groups, and other stakeholders Such progress is important or the United States to lead the
world in the st century economy, be at the oreront o the clean energy revolution, and to win the
uture by encouraging American innovation
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Chaper 1: Inroducion and Oeriew
Each o u ha a par o play in a new uure ha will bene all o u.
A we recover rom hi receion, he raniion o clean energy ha hepoenial o grow our economy and creae million o jobbu only i
we accelerae ha raniion. Only i we eize he momen. And only
i we rally ogeher and ac a one naionworker and enrepreneur;
cieni and ciizen; he public and privae ecor.
Preiden Obama, June 15, 2010
The National Academy o Engineering named electrication the greatest engineering achievement othe th century (NAE ) To meet Americas energy, environmental, and security needs or the st
century, the United States should continue eorts to upgrade the electric grid To seize the leadership
position in a clean energy revolution, President Obama has set a national goal o generating % o our
electricity rom clean energy sources by and has reiterated his goal o putting one million electric
vehicles on the road by These goals are part o a strategy to develop and deploy innovative energy
technologies and create the energy jobs o tomorrow here in the United States (Oce o Press Secretary
b) As President Obama has outlined, part o a secure energy uture is providing consumers with
choices to reduce costs and save energy (White House b, pp )
In the ace o an aging grid (Chu , p ), investing in the grids inrastructure is crucial Given this
imperative, there is an opportunity to upgrade the grids eciency and eectiveness through invest-ments in smart grid technology Smart grid technologies and applications encompass a diverse array o
modern communications, sensing, control, inormation, and energy technologies that are already being
developed, tested, and deployed throughout the grid In particular, these technologies can be divided
into three basic categories: () advanced inormation and communications technologies (including sen-
sors and automation capabilities) that improve the operation o transmission and distribution systems;
() advanced metering solutions, which improve on or replace legacy metering inrastructure; and ()
technologies, devices, and services that access and leverage energy usage inormation, such as smart
appliances that can use energy data to turn on when energy is cheaper or renewable energy is available
These technologies and applications give rise to three cross-cutting categories o benets:
Facilitating and enabling a clean energy economy with signicant use o renewable energy,
distributed energy resources, electric vehicles, and electric storage;
Creating an electricity inrastructure that saves consumers money through greater energy
eciency, as well as supporting the more reliable delivery o electricity; and
Enabling technological innovation that creates jobs o the uture and new opportunities or
empowering consumers to use energy wisely and reduce their energy bills
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A POLICY FRAMEWORK FOR HE 21st CENURY GRID: ENABLING OUR SECURE ENERGY FUURE
The Energy Independence and Security Act o (EISA) (US Congress ) made it the policy o
the United States to modernize the Nations electricity transmission and distribution system President
Obama underscored that commitment in the Blueprint or a Secure Energy Future (White House b)
To advance that policy, The American Recovery and Reinvestment Act o (Recovery Act) (US
Congress ) accelerated the development o smart grid technologies, investing $ billion or
electricity delivery and energy reliability activities to modernize the electric grid and implement dem-
onstration and deployment programs (as authorized under Title XIII o EISA) To date, the SGIG program
has awarded grants to recipients, including private companies, service providers, manuacturers, and
cities, with total public-private investment amounting to over $ billion (DOE d) As these eorts
are implemented, they will continue to inorm utilities, regulators, and other stakeholders about the
best paths toward a smarter grid
The course and pace o smart grid deployment eorts are naturally varied There are more than ,
electric utilities in the United States (EIA ) with diverse needs, regulatory environments, energy
resources, and legacy systems As a number o industry participants have observed, it is thus highly
unlikely that a single solution will emerge as appropriate, cost-eective, and useul or all electric utilitiesand consumers1 Rather, the nature, pace, and scope o smart grid deployment eorts will vary according
to the needs o dierent parts o the country This diversity is a strength o the US model and explains
why many states and local governments are already taking leadership roles to act on the national
priority to make the grid smarter To date, states have already adopted policies relating to smart grid
technology (NCSL ), resulting in a lot o dierent smart grids (McGranaghan ) While there
is no one-size-ts-all set o smart grid solutions, there are important uniying policy strategies that can
advance US leadership in the st century clean energy economy This report outlines such policies
and details eorts by the Federal Government and others to advance them
The policy ramework set orth in this report was developed by the National Science and Technology
Council (NSTC) Subcommittee on Smart Grid2 To develop this ramework, the Subcommittee conductedan extensive outreach and research process to identiy policies that build on the Administrations smart
grid investments and constitute an important part o the Administrations clean energy strategy Notably,
the policies highlighted in this document are just one part o the overall grid modernization eort In
particular, the Administrations smart grid strategy complements its eorts to spur the planning and sit-
ing o new high voltage transmission lines and to acilitate the integration o variable renewable energy
While these topics are outside the scope o this document, the Administration recognizes that overall
grid modernization eorts are critical to supporting the energy needs o the st century3
RFI comments rom EEI, pp ; APPA, pp ; NRECA, pp (noting the varied speed o implementation likely atdierent rural cooperatives, and noting that a static denition o the Smart Grid would be problematic) Most RFI
comments discussed in this report were submitted in connection with the Request or Inormation on Addressing Policyand Logistical Challenges to Smart Grid Implementation The DOE issued the RFI in September ; the closing datewas November , Comments rom all respondents are collected at the URL: http://wwwoeenergygov/Smart%Grid%Request%or%Inormation%and%Public%Commentshtm For cited RFI comments, readersmay access the main URL, and locate the commentary and page number (agencies and individuals are listed therealphabetically)
See Appendix A or details on the Subcommittees outreach and eorts Advanced inormation and communication technology can also be used to improve the perormance o high-
voltage transmission lines In general, this report ocuses on the use o advanced inormation and communicationtechnologies in the local transmission and distribution sectors In so doing, it complements the Administrations
http://www.oe.energy.gov/Smart%20Grid%20Request%20for%20Information%20and%20Public%20Comments.htmhttp://www.oe.energy.gov/Smart%20Grid%20Request%20for%20Information%20and%20Public%20Comments.htmhttp://www.oe.energy.gov/Smart%20Grid%20Request%20for%20Information%20and%20Public%20Comments.htmhttp://www.oe.energy.gov/Smart%20Grid%20Request%20for%20Information%20and%20Public%20Comments.htm8/3/2019 Nstc Smart Grid June2011
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C H A P E R 1 : I N R O D U C I O N A N D O v E R v I E W
This policy ramework rests on our pillars or a smarter grid() enabling cost-eective smart grid
investments; () unlocking the potential o innovation in the electric sector; () empowering consumers
and enabling inormed decision making; and () securing the grid rom cybersecurity threats These
pillars each support key aspects o the transition to a smarter grid and a clean energy uture
Each pillar has an associated set o key actions:Pillar . Enable Cost-Eective Smart Grid Investments: Smart grid technology can drive improve-
ments in system eciency, resiliency, and reliability, and help enable a clean energy economy through
cost-eective grid investments Many o these technologies promise to pay or themselves in operational
improvements and energy savings The Federal Governments research, development, and demonstra-
tion projects, technical assistance, inormation sharing on technologies and programs, and evaluations
provide valuable guidance or utilities, consumers, and regulators about what approaches are most
cost-eective, thereby paving the way or the eective, ongoing upgrade o the grid
. States and Federal regulators should continue to consider strategies to align market and
utility incentives with the provision o cost-eective investments that improve energy e-
ciency.I utilities do not have a strong incentive to sell less energy and operate more eciently,
they will not see sucient benets rom investing in certain smart grid applications Recognizing
this issue, state commissions are increasingly conronting questions about regulatory reorm
options that change utility business models to, or example, make energy eciency a more
central part o their mission
2. The Federal Government will continue to invest in smart grid research, development, and
demonstration projects.The benets o research and development can be shared across all
utilities I one utility perorms the research by itsel, however, it will bear all o the associated
costs As explained in President ObamasA Strategy or American Innovation (White House b),
the government can address this issue and acilitate innovation by supporting unding or basicresearch, maintaining a high-quality intellectual property rights system that oers incentives to
industry and university partners, and providing pathways to commercialization
3. The Federal Government will continue to support inormation sharing rom smart grid
deployments to promote eective cost-benet investments and remove inormation bar-
riers.Creating centralized public repositories or this inormation can encourage cost-eective
investments and reduce duplicative experimentation
recognition that these technologies also play an important role in the improved perormance o high-voltagetransmission lines For an example o the impact o smart grid technologies on long distance transmission inrastructure,consider that Bonneville Power Administration (BPA) and several leading utilities are partnering with Western ElectricityCoordinating Council (WECC) in the deployment o a wide-area synchronized measurement system to monitor the highvoltage transmission lines that serve many Western States To date, the utilities, BPA, and DOE have invested $ millionto implement this system, which will provide grid operators with actionable inormation that will help improve powersystem reliability, avoid outages, improve use o transmission capacity, manage congestion, and enable reliable windintegration
See also: The Transmission Smart Grid Imperative, September http://wwwnetldoegov/smartgrid/reerenceshel/whitepapers/The%Transmission%Smart%Grid%Imperative___pd
http://www.netl.doe.gov/smartgrid/referenceshelf/whitepapers/The%20Transmission%20Smart%20Grid%20Imperative_2009_09_29.pdfhttp://www.netl.doe.gov/smartgrid/referenceshelf/whitepapers/The%20Transmission%20Smart%20Grid%20Imperative_2009_09_29.pdfhttp://www.netl.doe.gov/smartgrid/referenceshelf/whitepapers/The%20Transmission%20Smart%20Grid%20Imperative_2009_09_29.pdfhttp://www.netl.doe.gov/smartgrid/referenceshelf/whitepapers/The%20Transmission%20Smart%20Grid%20Imperative_2009_09_29.pdfhttp://www.netl.doe.gov/smartgrid/referenceshelf/whitepapers/The%20Transmission%20Smart%20Grid%20Imperative_2009_09_29.pdf8/3/2019 Nstc Smart Grid June2011
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A POLICY FRAMEWORK FOR HE 21st CENURY GRID: ENABLING OUR SECURE ENERGY FUURE
Pillar 2: Unlock the Potential o Innovation in the Electricity Sector: A modernized electric grid
promises to be a powerul platorm or new products and services that improve grid operations and
deliver convenience and savings to energy customers
4. The Federal Government will continue to catalyze the development and adoption o
open standards.The US standards system is private-sector led and bottom-up, with theFederal Government acting as a public-sector partner and a convener The ongoing smart grid
interoperability process, led by the National Institute o Standards and Technology (NIST), is
working towards fexible, uniorm, and technology-neutral standards that can enable innova-
tion, improve consumer choice, and yield economies o scale Robust stakeholder participation
in the standards process, including by utilities, is desirable to create the most eective technical
standards
5. Federal, state, and local ocials should strive to reduce the generation costs associated
with providing power to consumers or wholesale providers during periods o peak
demand and encourage participation in demand management programs.Consumers
generally pay time-invariant rates or electricity Consequently, consumers generally lack theinormation or incentive to shit their consumption away rom times when the costs o providing
electricity are high As a result, utilities spend billions o dollars a year to build, maintain, and
operate peaking plants that are used only rarely, typically driven by extreme temperatures or
unplanned emergencies Studies suggest that using smart grid technologies to better manage
energy use during the highest demand periods, such as a very hot day in the middle o summer,
could save consumers billions o dollars a year4 Smoothing these expensive peaks also promises
to reduce utilities operating costs, resulting in additional savings to consumers and utilities
6. Federal and state ocials should continue to monitor smart grid and smart energy ini-
tiatives to protect consumer options and prevent anticompetitive practices.Facilitating
a robust market or devices, energy management services, and applications that interact withthe electric grid is critical to enabling innovation in smart grid technologies and applications
Pillar 3. Empower Consumers and Enable Inormed Decision Making: The success o smart grid
technologies and applications depends crucially on engaging and empowering both residential and
small business consumers in an eective manner New tools and programs promise to provide consum-
ers personalized inormation and enable them to make inormed energy choices, while ensuring their
energy consumption data is accorded privacy protections
7. State and Federal policymakers and regulators should evaluate the best means o ensur-
ing that consumers receive meaningul inormation and education about smart grid
technologies and options.Many state regulators are already requiring education and com-munication programs as a condition o authorizing smart grid deployments that directly impact
consumers In rolling out such deployments, public-private collaborations, market research, and
See Faruqui et al () and Borenstein () See also: The Brattle Group predicts that energy eciency anddemand response benets enabled by the smart grid will save between $ billion and $ billion rom - byreducing the need to invest in new electricity generation (Brattle )
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C H A P E R 1 : I N R O D U C I O N A N D O v E R v I E W
multichannel messaging can help develop meaningul educational materials that enable con-
sumers to make inormed choices despite their diering needs, preerences, and motivations
8. Building on recent eorts, state policymakers and regulators should continue to consider
how to develop policies and strategies to ensure that consumers receive timely access to,
and have control over, machine-readable inormation about their energy consumptionin a standard ormat.Ensuring that energy usage data are provided switly in predictable,
automation-riendly ormats can maximize consumer access to inormation
9. State and Federal regulators should, in instances where a utility deploys the relevant
inrastructure, consider means o ensuring that consumer-acing devices and applications
make it easier or users to manage energy consumption.When regulators are required to
be involved in decisions regarding in-home devices, they may want to consider to what degree
the proposed smart grid technologies that oer consumers energy usage data and new tools
to manage usage are user-riendly
0. State and Federal regulators should consider, as a starting point, methods to ensure
that consumers detailed energy usage data are protected in a manner consistent with
Fair Inormation Practice Principles (FIPPs) and develop, as appropriate, approaches
to address particular issues unique to energy usage.FIPPs are widely accepted principles
adopted by government agencies and intergovernmental organizations to ensure protection
o personal inormation The Administration supports legislation that would make FIPPs the
baseline or protecting personal data in commercial sectors not currently subject to sector-
specic Federal privacy statutes
. State and Federal policymakers and regulators should consider appropriately updating
and enhancing consumer protections or smart grid technologies.As new issues and
opportunities develop, policymakers may need to update consumer protection policies builtover the last century that ensure adequate notice, the right to dispute bills, and protect health
and saety issues related to disconnects, and aordability
Pillar 4. Secure the Grid: Protecting the electric system rom cyber attacks and ensuring it can recover
when attacked is vital to national security and economic well-being Developing and maintaining threat
awareness and rigorous cybersecurity guidelines and standards are key to a more secure grid
2. The Federal Government will continue to acilitate the development o rigorous, open
standards and guidelines or cybersecurity through public-private cooperation.A critical
part o such an eort is to identiy and prioritize relevant cyber risksincluding malware, com-
promised devices, insider threats, hijacked systems, etcand develop standards and guidelines
that enable the design o eective mitigation plans or managing those risks Consistent with
the Administrations model cybersecurity legislation (Schmidt ), the overall goal o the
eort is to develop policy and regulatory rameworks that ensure that eective and easible
security is appropriately implemented and that all stakeholders contribute to the security and
reliability o the grid as a whole
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A POLICY FRAMEWORK FOR HE 21st CENURY GRID: ENABLING OUR SECURE ENERGY FUURE
3. The Federal Government will work with stakeholders to promote a rigorous, perormance-
based cybersecurity culture, including active risk management, perormance evaluations,
and ongoing monitoring.The grids cybersecurity protections must be tested thoroughly
and regularly to ensure real-time, prioritized protection rom potential threats For this reason,
the Administrations approach to electric grid cybersecurity emphasizes the importance o a
perormance-based culture, including active risk management, perormance evaluations (ie,
exercises and simulations to determine security vulnerabilities), and ongoing monitoring
In addition to setting orth a policy ramework or smart grid eorts, this report highlights several new
or important ongoing initiatives, including:
Updated inormation on the impact o smart grid technology on grid perormance and con-
sumer behavior resulting rom the Recovery Act unded smart grid grants and demonstration
projects, available at wwwSmartGridgov;
A series o regional stakeholder meetings, convened by the Department o Energy (DOE)s Oce
o Electricity Delivery and Energy Reliability, to stimulate high-quality, peer-to-peer dialogue on
smart grid deployments, share lessons learned, and help replicate successes;
Continuing eorts with stakeholder groups and organizations to apply data derived rom
Recovery Act projects to advance knowledge o the costs and benets o smart grid technology;
A commitment by DOE to expand cooperative relationships with the National Association
o Regulatory Utility Commissioners and the National Association o State Utility Consumer
Advocates, to continue providing technical assistance to their members and sharing inormation
on consumer empowerment rom Recovery Act projects;
A Smart Grid Innovation Hub, led by DOE, as proposed in the Presidents Fiscal Year (FY)
Budget request;
New transormational research and design investments or the grid by the Advanced Research
Projects AgencyEnergy (ARPA-E);
New challenges designed to uel innovation and empower customers, including a Home Energy
Education Challenge;
The release o consumer behavior studies unded by the Recovery Act; and
New investments in smart grid technologies by the Department o Agricultures Rural Utilities
Service (RUS)
Building a smarter st century grid is a process that will unold over years and even decades The objec-
tive o this report is not to prescribe particular technologies, specic smart grid deployment schedules,
or even uniorm policy strategies or moving this eort orward Rather, it provides a policy ramework to
enable the United States to seize the opportunities available in this area and to address the challenges
that will emerge as the Nation transitions to a smarter grid
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C H A P E R 1 : I N R O D U C I O N A N D O v E R v I E W
Within this ramework, the Administration will continue to engage and collaborate with states, industry,
consumer advocates, utilities, and other stakeholders to ensure that the grid meets consumers needs,
operates with improved eciency, security, and resiliency, and is a platorm or innovation To that end,
within six months o the release o this Report, DOE will provide the National Science and Technology
Councils Committee on Technology a status report on its implementation across smart grid topic areas,
including cost-benet analysis, standards development eorts in partnership with NIST, consumer
education, and cybersecurity Similarly, DOE will continue to identiy new policies and technology
recommendations related to smart grid implementation
This report begins by describing where the Nation is today The heart o the report then discusses the
key actions, presenting them within the context o the our overarching policy goals or pillars outlined
above Finally, the report describes the collaboration between various stakeholders and the Federal
Government to advance the relevant opportunities or advancing these policy goals
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Chaper 2: Progre o Dae
The Energy Independence and Security Act o made it the policy o the United States to support
the modernization o the electrical grid (US Congress ) Over the last several years, many states
and utilities have already taken important steps to take advantage o smart grid technologies andprograms to give rise to the potential benets discussed herein Typically, these upgrades enable the
grid to operate more eciently
The Obama Administration has expanded on previous eorts to modernize the grid through the
Recovery Acts $ billion investment or electricity delivery and energy reliability activities to modernize
the electric grid (US Congress ) These unds are being matched by more than $ billion rom
public and private stakeholders to und smart grid grants and cooperative agreements or smart grid
and energy storage technologies across the country, with additional unding going towards workorce
training (Executive Oce o the President a, pp , Energygov b, Energygov c) Moreover,
RUS provided a record $ billion in loans in to support the modernization o the electric inra-
structure serving rural America, including more than $ million or smart meter deployments alone5
Spurred by Recovery Act investments, utilities and state regulators are leading the transition to a
smarter grid In some cases, smart grid technology is being deployed on a broad scale For example,
the Vermont Transco is using Recovery Act unding to institute a statewide meter data management
system and modernize the technology used in the states electricity distribution system (SmartGridgov
) Similarly, in Texas, ollowing legislation to encourage deployment o smart meters (PUCT ),
all major transmission and distribution (T&D) providers have public utility commission (PUC)-approved
plans in place to deploy Advanced Metering Inrastructure (AMI) in their service areas (PUCT , pp )
These T&D service providers have already deployed million meters and will have more than million
in place by (PUCT , pp ) The new smart meters being deployed in Texas enable consumersto access their timely energy usage data online through a web portal, wwwsmartmetertexascom
Consequently, Texans can use the data with third-party devices and services o their choosing to nd
ways to save money and energy (AEP b)
Case Study:
Salt River Project (SRP), Arizona
Since , SRP has installed approximately , smart meters in its service area SRP estimates that this
new equipment has enabled it to remotely respond to more than , customer service requests As a
result, SRP has saved more than , labor hours by avoiding unnecessary service calls, has avoided
million unnecessary driving miles, and has conserved , gallons o uel As a consequence o the energysavings, cost reductions, and operational benets o the smart meters, SRP is now introducing an additional
, meters to its service area with the help o a $ million ARRA Smart Grid Investment Grant
Source: SRP ()
$ billion is ound in the United States Department o Agriculture, FY USDA Budget Summary and AnnualPerormance Plan, http://wwwobpausdagov/budsum/FYbudsumpd, pp The $ million or smart meterdeployments is derived rom an internal USDA Rural Utilities Service Electric Program analysis o lending over the year
http://www.smartmetertexas.com/http://www.obpa.usda.gov/budsum/FY12budsum.pdfhttp://www.obpa.usda.gov/budsum/FY12budsum.pdfhttp://www.smartmetertexas.com/8/3/2019 Nstc Smart Grid June2011
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Case Study:
Tallahassees Smart Grid or Electricity, Gas & Water
Tallahassee, Florida, through its municipal utility, began examining the possibility o a smart grid in , and
received $ million in Smart Grid Investment Grant Recovery Act unds to create a comprehensive demandresponse program Tallahassee is deploying smart grid technologies, including , smart meters, to
improve eciency and allow consumers to remotely control their thermostats and pay lower rates during
o-peak hours The city is using these same smart grid technologies to operate the rst combined smart
electric, water, and gas system in the United States As Tallahassee Mayor Jon Marks said, the Tallahassee
consumer will be able to save energy, save water, and save money because o this system The city alone is
expected to save $ million over years
Source: Nichols ()
Utilities in other states are deploying advanced metering and automation equipment on the distribution
inrastructure across most o their service territory to improve operational eciency,6 reliability, and tohelp provide eedback or consumers In addition to eorts to improve operational energy eciency,
utilities in other states, such as Illinois, have already planned or instituted time-varying rates or rebate
programs to take advantage o smart grid technologies that oer consumers a chance to save money
by consuming less energy when demandand the cost to respond to that demandis at its highest
(Edison Foundation a, pp -; FERC , pp -, B)
The Federal commitment to modernize the grid is spurring the eorts o several Federal agencies
Notably, smart grid research programs are underway at DOE national labs (DOE nd) and Department
o Deense (DOD) military bases (Mabus ) Moreover, Federal unding supports cutting-edge
research, development, and demonstration o innovative smart grid technologies through DOE, the
ARPA-E, the National Science Foundation (NSF), and other organizations Finally, interoperability andcybersecurity standards are being developed with active engagement rom the National Institute o
Standards and Technology (NIST), the Department o Homeland Security, and other departments and
agencies as appropriate
The Administration recognizes that in addition to ongoing Federal action, continued eorts by state
policymakers and regulators are necessary to ensure that our electric system evolves in a cost-eective
ashion, unlocks innovation, empowers consumers, and maintains grid cybersecurity To that end, a
signicant thrust o this report involves areas where the Administration can and will work with state
policymakers and regulators to advance these goals
Operational eciency reers to reductions in cost and wasted energy in the production, transmission, anddelivery o electricity Such reductions can be achieved in many ways, including by employing new technologies thathelp distribute electricity across the grid Sensors can also acilitate reductions in energy waste by allowing utilities toproduce better calibrated amounts o electricity and monitor grid electricity levels in real time to prevent brownouts
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CHAP E R 2 : PROG RE S S O D A E
Advanced (Smart) Metering Technologies
Advanced metering inrastructure (AMI) enables utilities to collect, measure, and analyze [time-stamped]
energy consumption data or grid management, outage notication, and billing purposes via two-way com-
munications (DOE , pp ) AMI architectures can enable additional consumer choice and fexibility inelectricity rates and energy saving programs, increase the availability o inormation consumers can act on,
acilitate distributed energy integration and enhance utilities ability to maintain power quality and respond to
outages aster Since advanced meters can be used to communicate data to consumers as well as to utilities,
consumers can use that inormation to manage their energy consumption Federal grant awards or advanced
metering inrastructure (AMI) deployments under ARRA total $ million to date, with total project values
reaching over $ billion (DOE a) According to the Federal Energy Regulatory Commission (FERC), which
denes AMI as meters that measure and record usage data at hourly intervals or more requently, and provide
usage data to both consumers and energy companies at least once daily, advanced metering penetration
increased % rom to , and urther increases are expected rom Recovery Act grants (FERC
, pp ; FERC a, pp -)
To be sure, there is no one-size-ts-all approach to deploying standards-compliant smart grid technology;
utilities have made dierent inrastructure investments and have dierent generation resources and consumer
needs Accordingly, utilities may make their distribution grids smarter and engage consumers in dierent
ways For example, an alternative to installing AMI is to upgrade existing automatic meter reading (AMR)
Another alternative is to use direct load control (DLC) capabilities Since these systems depend on one-way
communications (unlike AMI), they can be lower cost while still oering basic energy management unctions
Source: DOE (, pp ); NETL (, pp -); FERC (, pp ); FERC (a, pp -) For more inormation, see RFIcomments rom EEI, APPA, and NRECA
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Chaper 3: Te Pah o EnablingCoEfecie Smar Grid Inemen
[E]ven i we reduce our oil dependency, and were producing all hee
grea elecric car, were going o have o have a plan o change he way
we generae elecriciy in America o ha i cleaner and aer and
healhier. We know ha uhering in a clean energy economy ha he
poenial o creaing unold number o new job and new buinee
righ here in he Unied Sae. Bu were going o have o hink abou
how [o] produce elecriciy more efcienly.
Preiden Obama March 30, 2011
Upgrading our nations transmission and distribution inrastructure with greater inormation, communi-
cations, and control systems in a cost-eective manner is vital to realizing the potential o a smarter grid
and acilitating the transition to a clean energy economy: improved reliability and resiliency, increased
eciency, greater consumer empowerment, and more opportunities or innovation The use o real-
time communications, monitoring, and control systems within the grid is a new development (NERC
RFI Attachment, pp , ) New smart grid technologies in the transmission and distribution system
promise to reduce the growing need or new inrastructure investments, increase the productivity and
service lie o existing assets, and reduce the cost o maintaining back-up power or the grid (NYISORFI pp , -) Using digital technology to better manage the fow o power on the local distribution
gridthe wires that deliver power to our homescould provide as much as a -% savings in energy
by avoiding losses o power on the grid (RW Beck , pp E-) This Chapter begins with an introduc-
tion to the role smart grid technology can play in acilitating a clean energy economy and in improving
energy eciency, beore discussing several o the challenges to smart grid deployment
3. Facilitate a Clean Energy Economy
In the State o the Union address, President Obama called or the Nation to build on the clean
energy momentum acilitated by numerous state programs and advanced by the Recovery Act Inparticular, the President set a goal o growing our Nations share o clean electricity generation to %
by (Oce o Press Secretary b) Achieving this goal requires a modernized grid inrastructure
that better enables integration and expansion o clean energy sources (AARP et al , pp )
Variable Renewable Resources: Renewable resources provide a relatively small, but increasing
share o Americas electricity (EIA , pp ; Wiser et al , pp )7 Wind energy has been
For more inormation, see EIA which states that % o American electricity was generated rom coal, %rom natural gas, % rom nuclear, % rom hydroelectric, % rom other renewables, and % rom petroleumand other sources in
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the second-astest growing segment o the United States electricity mix each year or the last
years (Wiser et al , p ) and the use o solar power is also growing quickly Since energy
generated by the wind or sunlight cannot be turned on or o as needed, and the timing o
variable renewable generation and consumer demand does not always match up, smart grid
technology enables utilities to more quickly recognize changes in electric power supply and
access robust demand response programs to quickly adapt to those changes8
Case Study:
Bonneville Power Administration and GridMobility
Working in partnership with Bonneville Power Administration and Mason County Public Utilities District (WA),
technology company GridMobility has designed and is piloting an adaptive system that takes advantage
o variable renewable sources when they are available, synchronizing residential water heaters with wind
generation Ater spending two weeks tracking a homes hot-water usage, the GridMobility solution will
decrease power fow to a homes water heater i no renewable energy is available, but it will do so only i it has
predicted that the amily will not need hot water The water heater will switch back on at a later time, based onreal-time wind-power availability This approach, i proven eective, will allow the utility to take advantage o
clean and cheap renewable energy sources while ensuring that it does not compromise its customers service
Source: Newcomb ()
Distributed Energy Resources (DERs): DERs are typically smaller electricity generation or
storage units located in a community, business, or home They can serve consumers energy
needs locally and can provide support or the grid (NREL b) Distributed generation includes
combined heat and power, solar photovoltaic (PV) systems, and other small generators such as
microturbines and uel cells Distributed storage resources include batteries as well as thermal
storage devices that heat or chill water to provide building services (NREL b) Distributedresources may provide numerous beneits, including: delaying or avoiding investment in
transmission and distribution capacity, responding to state renewable portolio standards,
and reducing exposure to volatile energy prices (DOE , pp -) Enabling DER resources to
provide benets or both utilities and individual consumers, however, will require smart grid
inrastructure that can integrate such systems into the electric grid
Electric Vehicles (EVs): EVs provide an opportunity to meet the Nations transportation uel
needs with domestically generated electricity rather than oil Signicantly, EVs promise to
reduce emissions rom the transportation sector by an amount that is considerably larger than
the emissions increase resulting rom the need or more electricity generation (Sioshansi and
Denholm ) In addition to requiring more electricity to be generated, a signicant proliera-
tion o electric vehicles has the potential to strain the distribution, generation, and transmission
systems i it is not supported by smart grid technologies to acilitate the transition (White House
d) For example, signicant numbers o electric vehicles charging at the same time on the
same distribution line could overload the transormer serving their charging stations
For a discussion o the planning implications o renewable generation uncertainty, see Mills et al ()
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Smart grid technologies oer users and utilities the ability to manage the increased energy
demand that EVs bring to local grids (Accenture a; PNNL )9 In the long run, EVs mayalso be able to oer energy storage and other grid services, such as requency regulation,
through vehicle-to-grid interaces These systems conceivably could reduce the need or extra
generation at times o peak demand and aid the integration o variable renewable resources
by scheduling charging when excess, o-peak renewable energy is available (Letendre et al
, pp ; Kempton and Tomi )
Energy Storage: Energy storage systems have the potential to optimize the operating capabili-
ties o the grid and the use o renewable energy by storing power or later use Such systems
can work more eectively in tandem with smart grid technology (APS , pp -), can
augment demand response resources to reduce and shit peak energy loads, and can improve
power quality and service reliability (APS ) Signicantly, utility-sited energy storage can
be used to avoid or delay investments in new distribution capacity and substation equipment
(AEP , slides -) Today, only about % o US electricity is provided through storage,
although other countries, such as Japan, use storage or up to % o their energy needs (EPRIb, pp -)
In addition to working toward the Presidents goals or a clean energy economy, smart grid technologies
can enable additional energy savings through increased energy eciency
Case Study:
Kauai Island Utility Cooperative (KIUC) Purchases Battery Energy Storage System and
Implements Demand Response to Support Solar Generation
The island o Kauai in Hawaii has no interconnections with other power systems; thereore, all demand
must be met with power generated on the island Currently, more than % o KIUCs electricity comes romdiesel generators To help meet its objective o generating % o its power rom renewable sources by ,
KIUC has planned to construct a -megawatt (MW) solar PV system Because Kauai lacks interconnections,
KIUC aces unique challenges in matching supply and demand Demand response programs, coupled with
energy storage to support variable renewables, are critical to prevent grid disruptions as Kauai moves closer
to achieving its goal To that end, Xtreme Power, a partner in several wind and solar integration projects on
other Hawaiian islands, will provide a battery storage system capable o providing -megawatts o power
fow and storing a total o -megawatt-hour (MWh) o charge This combined solar PV and energy storage
system will help KIUC reduce diesel consumption by millions o gallons every year
Source: Xtreme Power (); KIUC (); Gates ()
See, eg, PNNL (), working on smart charging to help control the timing o EV charging
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A POLICY FRAMEWORK FOR HE 21st CENURY GRID: ENABLING OUR SECURE ENERGY FUURE
3.2 Provide Opportunities or Improved Energy Eciency in Grid Operations
Losses o electricity are intrinsic to the operation o the grid and can vary substantially based on the
age o the equipment, the length o the wires, the weather (which aects system eciency), and other
conditions Typical losses rom electricity transmission and distribution systems are estimated between
% and % (EIA b, pp ), but can occasionally be much higher
Case Study:
Naperville Smart Grid Initiative Improves Reliability and Reduces Costs
In , the Recovery Act Smart Grid Investment Grant Program provided $ million in matching unds or
the Naperville Smart Grid Initiative (NSGI) in Naperville, IL NSGI will implement volt-var control and AMI to
increase system eciency, as well as complementary opt-in customer eciency programs that include online
personalized energy use data and programmable communicating thermostats Additionally, widespread
automation at the distribution and substation level, as well as resource management or their equipment
and workorce, will reduce costs, increase operational eciency, increase reliability and reduce the length o
outages The $ million investment in these programs and technologies is anticipated to provide $
million in benets or Naperville and its residents
Source: Naperville ()
Better measurement and more sophisticated control systems can substantially reduce these losses, supply
electricity to devices more eectively, and prolong equipment lie These technologies include dynamic line
rating (DOE b, pp )10 and volt-var control11 (Schneider et al ) Dynamic line rating devices canbe used to determine the real-time capacity o electrical lines, instead o relying on traditionally estimated
capacities that lead to underutilization o transmission resources (DOE b, pp )
Currently, because many utilities lack real-time data about voltage levels in their distribution networks,they must determine how much power to supply based on estimates o how much voltage will decrease
across lines beore reaching end-users (Schneider et al ) This oten results in surplus voltage, which
increases the amount o power used by loads (Pratt et al , pp ) Using volt-var control, utilities
can monitor and more precisely tailor voltage to meet the needs o end users with less wasted energy
(McKinsey & Co , pp ) A eld study in the Pacic Northwest, or example, ound that a % change
in distribution line voltage provided a % to % change in energy consumption, and that voltages
could be reduced rom % to % without reducing service quality to consumers (RW Beck , pp
, ) Building on this experience, a preliminary study ound that widespread investment in advanced
voltage control could reduce system-wide electricity demand by up to % (RW Beck , pp )
Oncor Electric Delivery Company, LLC, or example, received $ million in ARRA unds to demonstratedynamic line rating technology
Power systems may experience both over-voltage and under-voltage violations that can be overcome byvolt-var control (Kundur ) Through controlling the production and fow o reactive power at all levels in the system,volt-var control can maintain the voltage prole within a smaller range and reduce transmission losses
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Case Study:
American Electric Power (AEP) Ohios Integrated Volt-Var Control
Reduces Distribution System Energy Waste
AEP Ohio is testing an integrated volt-var control system at six substations in its service territory The benetso this system include more ecient distribution o power, better use o its assets, and increased reliability
during peak periods Preliminary results support the utilitys hypothesis that it can reduce system demand
by % to %, and the energy needed to serve existing customer loads by % to % AEP Ohio customers will
benet rom reduced power consumption and increased longevity o their consumer electronics
Source: AEP (a); ARRA Smart Grid Demonstration Program
Understanding the opportunities presented by smart grid technologies is only the oundation o grid
modernization eorts With such opportunities in mind, policymakers will increasingly conront a set
o important issues related to upgrading the grid
3.3 Supporting Investment in Smart Energy Use by the Utility Sector
A series o cross-cutting issues and needs compete or attention rom utility executives On balance, i
utilities do not have a strong incentive to sell less energy and operate more eciently, they may not see
sucient benets to invest in technologies or grid applications that could cause them to produce, use,
and sell less electricity (Pecan Street Project ) The issue o incentives is most apparent in the case
o some investor-owned utilities (IOUs), rom which roughly % o consumers receive electricity%
receive electricity rom publicly owned utilities, including municipal utilities, % rom customer-owned
rural cooperatives, while % o the Nations energy is marketed by other organizations (EIA a)
Under traditional rate-o-return regulation, it is more protable or utilities to invest more in inrastruc-ture (including smart grid investments) and sell more electricity (Phillips ; Action Plan , pp
-)than to help their customers become signicantly more energy ecient12 To be sure, over thelast ew decades, regulators have continued to modiy regulation with an eye toward promoting greater
energy eciency (IEE ; Action Plan ) As such, state commissions are increasingly conronting
questions about regulatory reorm options that change utility business models to, or example, make
energy eciency a more central part o their mission
It merits emphasis that a number o IOUs are leaders in deploying smart grid technologies and that
other IOUs are holding o deploying such technologies or important reasons For cases in which utilities
conront powerul incentives to accommodate variable sources o electric power or to avoid building
new peaking plants, demand response technologies (including those enabled by smart grid systems)
See also Pecan Street Project (, pp ), calling or a undamental shit to an alternative business modelthat better accommodates markedly more end-use eciency and signicant amounts o new distributed generationthat is o paramount importance i the utility is to thrive in a uture electricity market that will have many newtechnologies, more customer control, and carbon constraints
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A POLICY FRAMEWORK FOR HE 21st CENURY GRID: ENABLING OUR SECURE ENERGY FUURE
may be particularly attractive investments13 In other cases, where the incentive to sell more power is
dominant, smart grid technologies that enable increased energy eciency may be viewed less avorably
For these and other reasons, approaches to a smarter grid vary considerably among states and utilities
(FERC , App B; ACEEE ; APPA )14
Case Study:
The Pacic Northwest Smart Grid Demonstration Project Business Case
Bonneville Power Administration, in partnership with Battelle and in consultation with national experts, is
validating the value o smart grid technologies in the Pacic Northwest through the creation o a regional
business case Assessing the costs and benets o smart grid technologies is one o the our goals o the
regional demonstration project The business case is being built on methods to quantiy the costs and benets
o smart grid investments or wholesale power providers, transmission providers, distribution utilities, and
consumers The business case will be shared throughout the ve-state region to inorm investment decision
makers on the technologies tested and can potentially serve as a model or other parts o the country
Source: Smartgridgov (); ARRA Smart Grid Demonstration Program
Due to their ownership, governance, and consumer orientation, municipally-owned utilities and rural
cooperatives may have direct incentives to pursue cost-eective energy eciency opportunities For
example, cooperative members directly benet when energy is procured at lower prices (NRECA RFI,
pp -) Accordingly, in their low-density service areas, cooperatives have signicant penetrations o
demand response initiatives and load control programs aimed at reducing their exposure to price volatil-
ity during peak times, and signicant investment in advanced metering to save costs (FERC d, pp
, ; NRECA RFI, pp -, )
New learning rom experience as to what constitutes a cost-eective investment will guide the transitionto a smarter grid For utilities, state utility commissions, and consumers alike, rapidly changing technolo-
gies can lead to concerns about stranded assets (AARP , pp ) Notably, because technology is
changing switly throughout the smart grid ecosystem, utilities may be understandably reluctant to
invest in inrastructure that may soon be out o date Similarly, regulators and ratepayers may be justi-
ably reluctant to compensate them or it
The ollowing sections discuss the challenges acing utilities and Federal and state regulators in the
context o key actions intended to acilitate the transition to a smarter grid
Baltimore Gas and Electric (BGE), or example, has taken an aggressive posture on demand response Beoreits eort to invest in smart grid technologies (which can enable more eective demand response), it has had successsmoothing expensive demand peaks through a Peak Rewards Program, that used smart thermostats In exchange orthe right to cycle a home or business air conditioning compressor o and onat levels the utility suggests consumerswill not even noticeBGE gives consumers varying levels o incentive credits on their summer bills (BGE nd) Theprogram has been so successul that BGE used it as a substitute or the equivalent o a power plants worth o newgeneration (Maryland PSC , pp )
See Edison Foundation () or a State-by-State summary o provisions; see APPA () or a compendiumo public power programs
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Case Study:
Bluebonnet Electric Cooperatives Cost-Eective Upgraded AMR
In , Bluebonnet Electric Cooperative, headquartered in Bastrop, Texas, invested in AMR equipment
More than , AMR meters were deployed over Bluebonnets large service territory At the time, AMRwas the most technologically advanced choice, and it removed the need to drive along the ,-miles o
line to check meter readings in person In , with the benet o advanced technology, Bluebonnet chose
to deploy cost-eective upgrades to their existing AMR technology This upgraded AMR technology allows
Bluebonnet Cooperatives members to log on to the Cooperatives web portal and access previous-day updates
on their accounts, day-by-day energy consumption, patterns o consumption, current billing cycle costs, and
a projected bill based on current usage
Source: Johnson ()
3.4 Align Utility Incentives
The Administration is committed to supporting state eorts to improve incentives or deploying cost-
eective energy eciency and harnessing the technologies that enable utilities and consumers to
decrease energy waste and save money As previously described, smart grid technologies and applica-
tions can enable additional energy eciency through a variety o ways, including empowering consum-
ers to take action based on timely access to their energy usage data To ocus on ways to save energy
through energy eciency, the National Action Plan or Energy Eciency (Action Plan) brought
together more than diverse organizations and developed a plan to pursue cost-eective energy
eciency (Action Plan , pp ES-, ES-) The Administration is continuing to work to achieve the
Action Plan goals through the State Energy Eciency Action Network (SEE Action), which is a joint DOE-
Environmental Protection Agency eort to help the nation achieve all cost-eective energy eciency by
through assisting state and local governments in their implementation o energy eciency policies
and programs (energygov ) Similarly, in the National Action Plan on Demand Response, the
FERC sta recommended the ormation o a public-private coalition to help states, localities and regions
develop and deploy successul and cost-eective electric demand response programs FERC sta are
currently working with DOE and developing an implementation proposal or the Plan
Key
Action
. States and ederal regulators should continue to consider strategies to align
market and utility incentives with the provision o cost-eective investments
that improve energy eciency.
States will need to, as they have on their own and pursuant to EISA, continue to pursue policies to betteralign utility incentives to sell less energy and implement cost-eective energy eciency investments
that t the needs o their consumers (ACEEE , pp ; McKinsey & Co , pp ; Action Plan
, pp ; Verizon RFI, pp -) For example, utilities in several states, including Arizona, Florida,
Caliornia, Texas, and New York have already planned or instituted programs that strengthen incentives
to use less energy and are utilizing new technologies to improve energy and operational eciency
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(Edison Foundation )15 In that respect, the development o new regulatory strategies surrounding
utility incentives, coupled with measures that hold utilities accountable or implementing actions to
spur energy eciency, is a promising development To support that eort, the Federal Government will
continue to work with states to ensure that the strategies are in place to cost-eectively utilize smart
grid technologies to improve the energy and operational eciency o the electric system and to help
consumers save money16
[E]very iniuion and every houehold ha o ar hinking abou
how are we reducing he amoun o energy ha were uing and doing i
in more efcien way.
Preiden Obama, March 20, 2011
3.5 Research and DevelopmentWhile better aligning utility incentives with the deployment and use o cost-eective smart grid
investments will help consumers save money through the prolieration o energy eciency programs,
ongoing innovation in smart grid technologies can create additional value or consumers and utilities
The benets o research and development can be shared across all utilities, but i one utility perorms
the research by itsel, it will bear all o the associated costs For this reason, and because electric utilities
typically cannot charge premium prices or recruit new customers when they improve their services,
individual utilities oten under-invest in research and development or grid operations and communica-
tions To be sure, some investments along these lines are being made, such as those led by the Electric
Power Research Institute and the Cooperative Research Network Nonetheless, private sector equipment
vendors and technology rms sometimes cannot or will not research creative out-o-the-box transor-mational energy technologies that pose high risk but could provide dramatic benets or the nation
Federal support can be particularly important to developing and evaluating new technologies, particu-
larly in cases o transormational opportunities requiring a long-term horizon (CenterPoint RFI, pp ;
EEI RFI, pp ) As explained in President ObamasA Strategy or American Innovation (), the Federal
Government can address this need and acilitate innovation by supporting unding or basic research,
maintaining a high-quality intellectual property rights system that oers appropriate incentives to
Inormation about these programs is available at: Docket RE-C--, Beore the Arizona CorporationCommission, March , , http://imagesedocketazccgov/docketpd/pd(Arizona); SeparatingMeans and Ends: Reorienting Energy Eciency Programs and Policy Toward Reducing Energy Consumption in
Caliornia http://wwwcpuccagov/NR/rdonlyres/DCFADF-AEC--BD-DBDAC//EDWhitePaper_MeansAndEnds_pd(Caliornia); Report to the Legislature on Utility Revenue Decoupling http://wwwpscstatefus/publications/pd/electricgas/DecouplingReport_To_Legislaturepd(Florida); Energy Eciency Accomplishmentso Texas Investor Owned Utilities, Calendar Year http://wwwtexaseciencycom/media/les/eummot%results%summary%pd(Texas); -M-: Energy Eciency Portolio Standard http://wwwdpsstatenyus/W/PSCWebns/All/FFEEBDAEFAF?OpenDocument(New York)
For example, the willingness and ability o demand response providers to participate in the energy market isaected by the level o compensation provided to those resources FERC acted recently to ensure that demand responseresources participating in the organized wholesale energy markets are appropriately compensated or the service theyprovide, at the market price or energy (FERC , pp , , )
http://images.edocket.azcc.gov/docketpdf/0000116125.pdfhttp://%20http//www.cpuc.ca.gov/NR/rdonlyres/D5CFAD3F-A4EC-4721-BD79-D4BD6AC72257/0/EDWhitePaper_MeansAndEnds_090402.pdfhttp://%20http//www.cpuc.ca.gov/NR/rdonlyres/D5CFAD3F-A4EC-4721-BD79-D4BD6AC72257/0/EDWhitePaper_MeansAndEnds_090402.pdfhttp://%20http//www.cpuc.ca.gov/NR/rdonlyres/D5CFAD3F-A4EC-4721-BD79-D4BD6AC72257/0/EDWhitePaper_MeansAndEnds_090402.pdfhttp://www.psc.state.fl.us/publications/pdf/electricgas/DecouplingReport_To_Legislature.pdfhttp://www.psc.state.fl.us/publications/pdf/electricgas/DecouplingReport_To_Legislature.pdfhttp://www.texasefficiency.com/media/files/eummot%20results%20summary%202009.pdfhttp://www.texasefficiency.com/media/files/eummot%20results%20summary%202009.pdfhttp://www3.dps.state.ny.us/W/PSCWeb.nsf/All/06F2FEE55575BD8A852576E4006F9AF7?OpenDocumenthttp://www3.dps.state.ny.us/W/PSCWeb.nsf/All/06F2FEE55575BD8A852576E4006F9AF7?OpenDocumenthttp://www3.dps.state.ny.us/W/PSCWeb.nsf/All/06F2FEE55575BD8A852576E4006F9AF7?OpenDocumenthttp://www3.dps.state.ny.us/W/PSCWeb.nsf/All/06F2FEE55575BD8A852576E4006F9AF7?OpenDocumenthttp://www3.dps.state.ny.us/W/PSCWeb.nsf/All/06F2FEE55575BD8A852576E4006F9AF7?OpenDocumenthttp://www.texasefficiency.com/media/files/eummot%20results%20summary%202009.pdfhttp://www.texasefficiency.com/media/files/eummot%20results%20summary%202009.pdfhttp://www.psc.state.fl.us/publications/pdf/electricgas/DecouplingReport_To_Legislature.pdfhttp://www.psc.state.fl.us/publications/pdf/electricgas/DecouplingReport_To_Legislature.pdfhttp://%20http//www.cpuc.ca.gov/NR/rdonlyres/D5CFAD3F-A4EC-4721-BD79-D4BD6AC72257/0/EDWhitePaper_MeansAndEnds_090402.pdfhttp://%20http//www.cpuc.ca.gov/NR/rdonlyres/D5CFAD3F-A4EC-4721-BD79-D4BD6AC72257/0/EDWhitePaper_MeansAndEnds_090402.pdfhttp://images.edocket.azcc.gov/docketpdf/0000116125.pdf8/3/2019 Nstc Smart Grid June2011
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industry and university partners, and providing pathways to commercialization and markets or new
technologies As refected in the Presidents Budget, the Administration is committed to continue to
support the research, development, and deployment o new smart grid technologies
KeyAction
2. The Federal Government will continue to invest in smart grid research, devel-
opment, and demonstration projects. Federal unding can drive innovative
technologies to commercialization.
The Administration has catalyzed a wide range o investments in research and design or smart grid
technologies In particular, the Recovery Act invested $ million in smart grid regional and energy
storage demonstration projects and was matched by more than $ billion rom utilities and industry
(DOE OE d) DOEs Oice o Electricity Delivery and Energy Reliability conducts research and
development that accelerates discovery and innovation o smart grid technologies and creates next
generation devices, sotware, tools and techniques to help modernize the electric grid Priorities include
renewable and distributed systems integration, energy storage and power electronics, advanced system
monitoring and visualization, and development o control systems The Oce also conducts analysis othe structure and makeup o the electricity sector and related issues, and provides technical assistance
to States and regions DOEs ARPA-E ocuses specically on transormational technologies in the early
stages o development Finally, the Presidents Budget calls or an Energy Innovation Hub ocused
on smart grid technology, and DOD is investing in smart grid research and development with a particular
ocus on micro-grid applications (US ACE ; Lopez )
The Recovery Acts ability to catalyze the rollout o new demonstration projects is important or three
main reasons In short, Recovery Act investments are:
Enabling the development o new technologies that have not yet been ully proven out;
Providing direct benets to our electricity grid today; and
Demonstrating how new smart grid technologies can be applied to benet the electric system,
spurring a growing market or these technologies17
Current investments in smart grid technologies and programs are helping to illustrate which smart
grid technologies are cost-eective in dierent situations, and to drive innovation in new technologies
Signicantly, American investment in smart grid technology innovation promises to create new jobs o
the uture here in the US, benet US consumers, and allow US businesses to export their innovations
to oreign markets (National Export Initiative ; US Trade and Development Agency ) Although
these demonstration projects and investments have inherent value widely, to ensure the country cap-
tures their ull value, the lessons learned rom them must be analyzed and shared
GridWise Alliance RFI, pp , notes that Recovery Act spending, in addition to creating jobs, can help share thelessons o smart grid deployments
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A POLICY FRAMEWORK FOR HE 21st CENURY GRID: ENABLING OUR SECURE ENERGY FUURE
Case Study:
DOD Pilots Smart Micro-Grid Technology
DOD is piloting micro-grid technology at the Marine Corps Twentynine Palms installation in Caliornia, a base
in the Mojave Desert serving a population o more than , military and civilian personnel The micro-gridis a power distribution system that both manages and optimizes the fow o electricity around the base It
also allows the military base to improve energy security by managing backup power operation or critical
loads in the event the micro-grid is disconnected rom the utility grid The technology promises to improve
the bases control over power quality and reliability Deploying the technology in the real-world test bed o
Twentynine Palms will allow DOD to assess the true costs, benets, and security o the system to determine
i the Department should use the micro-grid technology at other DOD installations
Source: DOD (, pp )
3.6 Inormation Sharing
Although many recent studies concerning smart grid technologies are encouraging (RW Beck ;
EPRI b), more research and analysis could help inorm industry, regulators, utilities, and consumers
about what technologies and approaches are most eective in dierent contexts18 Overseeing utility
investments and operations is primarily a state responsibility, and states will continue to make critical
decisions about smart grid investments The lack o inormation about successes and lessons learned
can create a challenge or utilities as they develop business cases or smart grid deployments and or
regulators as they weigh the proposed costs and benets19 Accordingly, there is an opportunity to
better catalog and share best practices and inormation about the benets o smart grid technologies
Key
Action
3. The Federal Government will continue to support inormation sharing rom
smart grid deployments to promote eective cost-benet investments and
remove inormation barriers. Creating centralized public repositories or this
inormation can encourage cost-eective investments and reduce duplicative
experimentation.
The Federal Government will support and coordinate improved inormation sharing eorts through
SmartGridgov and the Smart Grid Inormation Clearinghouse20 These sites will help regulators, utilities,
and policymakers make inormed decisions concerning smart grid technologies21 In particular, these
eorts will ocus on gathering and making available to the public accurate, veriable metrics that will
help regulators and utilities determine the cost-eectiveness o smart grid deployments
NRECA RFI, pp , suggests that it is premature to suggest that cost-eectiveness studies have discovered thesecret sauce o smart grid technologies
EPRI (b, pp -) states: What is critical today is reliable data on benets rom smart grid demonstrationsSee also WEF (, pp ); EEI RFI, pp , NRECA RFI, pp , and New York State Smart Grid Consortium RFI, pp
See RFI comments rom NARUC, pp , suggesting that a clearinghouse could be helpul; NRECA, pp ,noting that decisions about smart grid technologies and demand response are too important to be made in a vacuum;and Oregon PUC, pp , noting that an inormation clearinghouse on smart grid activities is an important role theFederal Government can play
See APPA RFI, pp ; BGE RFI, pp ; and Demand Response & Smart Grid Coalition RFI, pp
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CHAP E R 3 : HE PA H O E NABL ING COS -E FFE C Iv E S MAR G RID INv E S ME N S
Opportunities to Share Inormation rom Recovery Act Investments
Utilities are making new smart grid investments across the Country, and their experiences can help build a
repository o best practices as others move to make cost-eective investments in the smart grid Such lessons
may come rom smart grid inrastructure unded by the Recovery Act Smart Grid Investment Grant Program,including:
By the end o , Cobb Electric Membership Corporation, in Georgia, will have installed more than ,
smart meters, paired with , in home displays, and , direct load control devices or customers who
choose to authorize Cobb to cycle their air conditioning units during peak periods
Florida Power and Light Company is installing million smart meters, deploying phasor measurement
units on transmission lines, and upgrading sensors on substations to improve service, oer time-varying
rates, and support the integration o renewable and distributed resources
By the end o , the Western Electricity Coordinating Council will have deployed to phasor
measurement units and phasor data concentrators to allow previously unavailable levels o monitoring,
visualization, and control o the Western bulk electricity system The Western Electricity Coordinating Council
spans several states, including Arizona, Caliornia, Colorado, Idaho, Montana, New Mexico, Nevada, Oregon,
South Dakota, Utah, and Washington
The acilitation o cost-eective smart grid investments is only the rst step As the next Chapter
explains, states and the Federal Government can also play important roles to catalyze innovation in
the electricity sector
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Chaper 4: Te Pah o UnlockingInnoaion in he Elecriciy Secor
There is signicant potential or innovation and the use o advanced inormation and communicationtechnologies within the electric grid (EnerNOC RFI, pp ; EEI RFI, pp ) Many o the smart grid tech-
nologies being deployed today are ocused on improving sensing and measurement capabilities, and
providing grid operators with better system awareness and access to operational eciency gains These
technologies are necessaryor example, better sensors could have helped avert the Northeast
Blackout (Chu , slide )but are only the beginning o the opportunities or improvement cre-
ated by a smarter grid Continuing research and development can thus improve existing technologies
and unlock new opportunities in smart grid development Much like the telephone network evolved
very slowly or most o the th century and then changed rapidly in recent decades, the grid has the
potential to experience slow evolutionary improvements and periods o aster transormation22
Case Study:
Averting Widespread Power Failures Using Smart Grid Technology
Managing the stability o the electric grid is a constant challenge This is especially true in the West, where
population centers and generation sources are oten ar apart and thus small power oscillations are requent
Severe oscillations can cause potentially damaging voltages or power fows that trigger automatic shutdown
systems to protect equipment These oscillations are typically managed by a variety o monitoring and auto-
matic response systems Despite these measures, in the summer o , a combination o disabled monitoring
and control systems, power lines short-circuited by trees, inappropriate emergency procedures, and insucient
regional oversight twice led to uncontrolled system instability and blackouts, aecting million and million
customers The problem spread across several Western states because grid operators, who at the time had littleawareness o conditions beyond their control areas, learned o the problem too late to take action to prevent
blackouts in their regions Similar root causes, including lack o wide area situational awareness, contributed
to the August , northeastern blackout that aected million people
Current transmission network monitoring systems gather measurements every our seconds, which is too slow
to observe the aorementioned oscillations Thus, operators set limits on transmission lines conservatively to
allow a margin o saety Time-synchronized phasor measurement units (PMUs) can measure power system
parameters much aster, allowing grid operators to better observe, model, and manage system stability
Such measurements allow operators to move more energy on existing transmission lines and, as a result, tap
low-cost and renewable power that might otherwise be inaccessible because o transmission constraints
The sharing o PMU data makes grid operators aware o wide-area conditions throughout their transmission
interconnection, enabling them to respond more quickly to stability problems Smart grid technologies that
can selectively reduce demand, such as controls on water heaters or air conditioners, give grid operators
another tool to respond to problems identied by PMU data, reducing the need or rolling blackouts during
emergencies ARRA unded the deployment o phasor measurement units (PMUs), expanding the prior
nationwide network o by more than percent (Overholt )
Source: NERC (); NERC (); WECC (); EPRI (); Hart et al (); US Canada Power System Outage Task Force ()
See EEI RFI, pp , noting that smart grid technologies are evolving and will continue to evolve rapidly
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A POLICY FRAMEWORK FOR HE 21st CENURY GRID: ENABLING OUR SECURE ENERGY FUURE
History has shown that the states and Federal Government have important roles in catalyzing innovation
In the electricity sector, this role can include acilitating the creation and use o standards, developing
new energy eciency programs, investigating the impact o dierent consumer incentive programs,
and monitoring markets to prevent anticompetitive behavior
[O]ur be opporuniie o enhance our energy ecuriy can be oundin our own backyard becaue we boa one criical, renewable reource
ha he re o he world can mach: American ingenuiy.
Preiden Obama, March 20, 2011
4. Standards
Recognizing that standards play a critical role in enabling a st century grid, EISA called or NIST and FERC
to acilitate the development and adoption o interoperability standards (US Congress ) The ongoingsmart grid interoperability process, led by NIST, promises to lead to fexible, uniorm, and technology-
neutral standards that can enable innovation, improve consumer choice, and yield economies o scale
In the smart grid arena, the Federal Government is operating in the tradition it has ollowed previously in
promoting the development o standards in a wide array o elds, including public health (NIST a),
national security (NIST b), and the environment (NIST a) Interoperability standards23standards
that ensure equipment or sotware rom dierent vendors [can] work together or communicate and allow
new, innovative creations to work with older, established services (PCAST , pp )serve to support
the development and deployment o emerging technologies like the smart grid
KeyAction
4. The Federal Government will continue to catalyze the development andadoption o open standards.
The benets o smart grid interoperability standards include:
Standards help ensure that todays investments will still be valuable in the uture. Because
smart grid technology is changing switly, utilities and vendors may be reluctant to invest in
inrastructure that may soon be out o date, and regulators and ratepayers may be justiably
reluctant to compensate them or it Standards can ensure that smart grid investments made
today will be compatible with advancing technology (Arnold , pp ; Honeywell RFI, pp
)24 Likewise, standards can ensure that smart grid devices installed today are installed withproper consideration o the security required to enable and protect the grid o tomorrow
(Arnold , pp )
Standards he