The grid: an investment too costly to ignore?
- Posted on March 11, 2012
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Today, let's take a look at a Gridwise Alliance report, "Realizing the Value of an Optimized Electric Grid," released last month, that sought to inject some rational discourse into a chaotic public policy issue.
The Alliance report's purpose was to provide a status report on "the state of grid modernization" and to "quantify the benefits of a modernized electric grid." The content drew on first-person interviews with industry leaders and publicly available information. Guidance came from a diverse set of contributors; the authors and acknowledgements sections are packed with familiar power industry names.
The effort identified six technical domains that include the integration of renewable energy and distributed generation; grid control and optimization; electric transportation; customer applications; workforce effectiveness and communication architecture and integration.
Five categories of value were established, including grid reliability and security; customer energy management; asset and resource optimization; health, safety and environment and productivity and economic growth.
Perhaps more importantly, the report attempted to determine ways to assess benefits from grid modernization, which would assist any number of ongoing, high profile cases or any utility heading to its regulators with hat in hand.
The sponsor states early in the executive summary that "many benefits of a modernized grid can be realized through efficient deployment plans. As with most large-scale investments and policy issues, it is necessary to find the right balance in sharing costs, benefits and risks."
One observation early on caught my eye, one that gets short shrift: "it is imperative to transition grid modernization initiatives into `normal course of business.'" That statement is somewhat deceptive, because it can and probably does call out the regulatory structure and process that needs to accommodate change. But it also means, in the face of remaining uncertainties and challenges, a complete reset of the societal compact for regulated monopolies.
Risks properly apportioned between ratepayers and shareholders today remain a major sticking point in several high profile cases. If the implication is that grid modernization must become "business as usual," then several issues need to be spelled out for stakeholders. One possible implication, based on technology: digital technology and software in the 21st century has a radically shorter lifespan than "big iron" did in the 20th century. For one thing, the industry will make a few honest mistakes—how are those to be dealt with? Secondly, shorter replacement cycles equate to costs. How will those be dealt with? Right now, it would appear that many disgruntled ratepayers cite regulations on power plant emissions and integration of renewable energy as the source of cost increases, rather than the more probable, variable costs of fuel. While the industry as a whole needs to address these issues, each state has a regulatory structure to revise and each utility has a ratepayer constituency to educate.
As the report summarizes the disruptive forces at play and the desired end result: "We will need to address how to build an intelligent and sustainable grid that is both customer-centric and capable of balancing multiple factors (e.g., societal values, customer needs and system operation constraints). Policymakers and regulators are faced with the challenge of reconciling the large and complex investments required to modernize the electrical system and to develop a better way to connect the end customer to the electricity markets in a manner that allocates benefits and risks between customers and providers."
Under the "current state" of the grid, the report tosses around some powerful factoids ("factoids" in my book are facts bandied about in isolation, I don't mean to malign them). In the United States, 142 million customers require 4.2 trillion kilowatt hours annually. That customer base is expected to grow 16 percent by 2032, causing demand to rise to 5.2 trillion kWh annually. Add the possible load of 20 million electric vehicles by 2030 and you have a situation that demands attention, according to the GridWise Alliance.
To address the modernization issue, the report offers case studies of successful implementations, with tangible benefits. It offers a wealth of supporting documentation. One important caveat that surprised me, however, is that those benefits are largely "expected," not demonstrated. A quick peek is worthwhile.
A reduction in overall energy demand has been demonstrated by Oklahoma Gas & Electric (1-2 percent through volt/VAR control and 9 percent through demand response), Pacific Gas & Electric (17 percent through SmartRate program, 20 percent through energy efficiency programs). In outage duration reductions, Southern California Edison has demonstrated a reduction of 33 minutes (47 percent) to average Customer Minutes of Interruption (CMI) per circuit from distribution automation. Another two dozens projects still show "expected" benefits, which suggests that, in due time, many of those will move to the "demonstrated" column.
That will be good news for the discussion around quantifying benefits that the GridWise Alliance promotes.
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