GridWeek Analysis: Smart Grid Losing to EPA

on September 19, 2011 at 6:00 AM

Though its touted for its clean, green efficiency potential, smart grid may be getting sidelined in Washington.

That’s just one of the ways regulation and smart grid development are coming into conflict, according to regulators and utility officials at the GridWeek conference in Washington DC September 12-15.

They said the pending spate of EPA rules tightening sulfur, nitrogen, mercury and particulate emissions, with deadlines hitting coal plants in the next four years, will force investment dollars into abatement projects and away from longer-term efforts like smart grid.

“The EPA bubbles to the top,” said Jon Hawkins of Public Service Company of New Mexico (PNM). “We have to invest hundreds of millions at our coal plant. That elbows out smart grid funding.”

FERC Commissioner John Norris said, given cybersecurity and other national issues, he was struck by the fact that, while utilities talk with FERC officials all the time, smart grid vendors don’t. He “strongly encouraged” them to start.

Incorporating Renewables The Smart Way

Ironically, one of the biggest benefits touted for smart grid is increased ability for grid operators to add variable renewables, especially wind, to their systems. Robin Lunt of the National Association of Regulatory Utility Commissioners (NARUC) said state regulators have been hoping smart grids would help achieve renewable portfolio standards and clean power to meet EPA standards.

Smart grid is benefiting from the stimulus act, which channeled $4.5 billion to help utilities improve transmission and distribution systems with digital sensors and controls.

Only 40% of the stimulus funding is spent, so smart grid vendors and utilities have another year or so before projects finish and they emerge from what speakers called “stimulus fever.” But as they look for the next steps in upgrading the nation’s aging transmission systems, they’re finding competing priorities, difficulty proving to regulators that near-term benefits exceed the costs, and skepticism about investment timing.

State By State

State and federal policies on smart grids remain diverse, and divergent. Patrick Miller of Energy-Sec said the industry has to deal with “51 bar fights,” a different one before every state regulator, as well as conflicts between state and federal policies.

California, for instance, had Federal Energy Regulatory Commission approval for a demand response pilot – until FERC came out with a DR policy that contradicted the pricing method in its earlier approval. California’s program is on hold, awaiting clarification, officials there said.

For The Long Haul

Moreover, while benefits of improved digital controls on transmission and distribution lines are generally found to outweigh costs, consumers’ smart meters do not, said New York Public Utility Commissioner Maureen Finnegan Harris.

“We have competing pressures” such as renewables mandates and emissions, and smart meters lack “quantified benefits,” she said.

Regulators say they expect data from the stimulus-funded projects will help with benefit quantification in the future, but gathering and analyzing all that data is several years down the road.

Ohio Public Utility Commissioner Paul Centolella said regulators need to figure out how to reward innovation to draw in competition that will cut electricity system prices. Ken Wacks of Home & Utility Systems noted that companies in IT, the sector that pioneered smart grid, expect to succeed through failure, while utilities traditionally do not tolerate failure.

Regulators are also struggling with approving IT investment that will be obsolete long before the 20-40 years utilities traditionally expect. Southern California Edison’s Doug Kim said utilities are pursuing strong interoperability standards to ease upgrading and minimize “stranded assets.”

Coordinating Efforts

Regulatory market rules put in place at state and federal levels over the last 20 years to create competition in electricity are also hampering smart grid development, said Jeremy Laundergan of EnerNex. The rules force separation of supply, wholesale transmission, and retail distribution functions. But all those areas need to coordinate to optimize smart grid planning and data usage, he said.

Hawkins and Harris agreed that a groundswell of consumer demand for smart grid and meters would mean more priority. But Kansas State Representative Tom Sloan and Harris cautioned customers expect reliable transmission service as a minimum, and don’t expect to pay extra for it.

David Mohre of the National Rural Electric Cooperative Association (NRECA) advocated “economic regulation,” saying utilities, not regulators, should be choosing the technology to accomplish a goal.

FERC Commissioner John Norris said, given cybersecurity and other national issues, he was struck by the fact that, while utilities talk with FERC officials all the time, smart grid vendors don’t. He “strongly encouraged” them to start.