PART 3: A Grand Vision For Smart Grid
By Wanda K. Reder
Extending Smart Grid’s Services and Benefits to all Markets
The 2009 American Recovery and Reinvestment Act (ARRA) was a significant, recent investment in advancing smart grid technologies; however it is only the very beginning of a long journey ahead. The purpose of the ARRA was to start a grid modernization movement by funding smart grid pilot and demonstration projects. The ARRA provided $3.4 billion in federal stimulus monies, which were matched with $4.6 billion in private funding, to support 99 projects that are deploying smart grid technologies, tools, and techniques for electric transmission, distribution, advanced metering, and customer systems.
The ARRA projects and funding have helped the industry expedite the adaptation and usage of smart grid technologies and opened peoples’ minds to the promise of smart grid. In light of the industry’s traditionally conservative character, it has accomplished these very important milestones in much faster fashion than it would have without this impetus.
While these projects represent notable progress, much more must be done to bring smart grid to fruition. The industry’s challenge now is to continue the grid modernization movement by scaling the deployments to more markets and connecting the various components together to fully enable smart and interactive services.
This will require substantial financial investment, because the industry still operates with many infrastructure components and systems that should have been replaced years ago and much of this must be upgraded as the industry moves to smart grid. In fact, the Electric Power Research Institute (EPRI) has suggested that by the year 2030, the electric utility industry in the U.S. will need to invest between $338 and $476 billion to modernize the country’s grid. The Brattle Group has suggested that grid modernization will require transmission and distribution infrastructure investments amounting to $880 billion through 2030.
Regulations Must Adapt to Allow Grid Modernization
While the industry must unleash the needed funding to pave the way for modernization of the grid, the regulatory environment, which was not designed to handle the investment conditions introduced by smart grid, currently stands in the way of this work.
For example, the economic benefits expected from consumers’ adaptation to smart grid technologies and participation are achievable only if market reforms are adopted to empower consumers to benefit from their actions and realize revenue from grid services.
Furthermore, the least-cost framework that has traditionally formed the basis of utility investment regulations is a barrier to many smart grid innovations. As the industry moves to smart grid, least-cost policies will become less relevant and regulations will have to adjust to encapsulate the overall value that technology or services. Elements such as the environmental benefits, loss avoidance, increased system utilization and consumer costs avoided as a result of mitigating outages need to be factored into the analysis to support related electrical system investments.
A Call for Action from All Participants in the Electric Utility Ecosystem
It is time for the industry to find solutions to the modernization issues described in this article and for local governments to adapt their policies accordingly so that motivated utilities can forge ahead with their strategies to realize smart grid’s promise. Local governments must become partners to advance market reform, develop policies that enable grid investments, specify local needs and coordinate infrastructure projects. It is important that consumers, local government officials, entrepreneurs and system operators collaborate to initiate the changes necessary to realize full potential benefits.
The vision of a better performing and environmentally responsible power supply that provides economic benefits to consumers and business is a realistic one and can be achieved if all participants in this new industry and ecosystem work together. By working together to push ahead with electric grid modernization, participants will also play vital roles in helping build a more vibrant and prosperous national economy.##
About the Author
Wanda Reder is Chair of IEEE Smart Grid Taskforce, and Vice President of Power Systems Services, S&C Electric Company, Chicago, where she provides engineering, procurement, project management and field service capabilities to utilities, developers, and industrial customers throughout North America. She is also past President of the IEEE Power & Energy Society, an IEEE Fellow, and has served on the IEEE Women In Engineering Governing Committee. Ms. Reder serves on the DOE Electricity Advisory Committee, and was appointed by Secretary Chu to be Chair of the Smart Grid Sub-Committee. She received a Bachelor of Science degree in Agricultural Engineering from South Dakota State University in 1986 and a Master’s of Business Administration from the College of St. Thomas in 1990.
To read part one of this article, click here.
To read part two of this article, click here.