Nstc Smart Grid June2011

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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.htm


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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.pdf


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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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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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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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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/


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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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25/108

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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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

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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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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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.pdf


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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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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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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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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

Nstc Smart Grid June2011

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