Democrats, Republicans and energy industry leaders agree that the electrical grid is the most important engineering achievement of the 20th century. Where there’s some confusion is around how to ensure a more secure, reliable and advanced electricity system for the 21st century.
“The challenges are significant -- much of our grid is outdated; coal-fired generation facilities are shutting down at an alarming rate; reserve margins are inadequate in several regions; intermittent and remote renewable capacity is coming online; and cyberthreats pose a growing concern,” said Rep. Ed Whitfield (R-Ky.), chairman of the House Energy & Commerce Committee, at a hearing this week.
The numbers are stark. More than 50 percent of generating capacity in the United States is more than 30 years old. More than 70 percent of the 280,000 miles of transmission lines are more than 25 years old. More than 50 percent of the 2.2 million miles of distribution lines are more than 30 years old. And it costs $90 billion per year to keep the whole network running.
But Whitfield pointed out there are significant opportunities for grid modernization, too. Abundant fuel resources, advanced power generation technologies, energystorage and tools for distribution management can help to bolster and diversify the nation’s power portfolio, he said. Energy analytics can help components across the system work together more efficiently.
So, lawmakers wanted to know, what next?
“Is there a consensus on where we should go to develop grid reliability?” said Rep. David McKinley (R-W.Va.) asked a panel of power sector business leaders. “Is there a consensus on…where Congress should be putting its first priority in greater reliability and dependability?”
“I think the 800-pound gorilla in the room here is the cybersecurity problem,” said Thomas Siebel, chairman and CEO of C3 Energy. “This is definitely an opportunity where the federal government can play a role.”
“The fact of the matter is that any hostile government, any 10 smart engineers from UC Berkeley, could bring down the grid from Boston to New York in four days,” he said. “This system is entirely exposed.”
Given where the cybersecurity issue currently sits on the list of national priorities, it’s likely to take the equivalent of a 9/11 event for government and private industry to address it, Siebel continued.
Devices that make the grid remotely operable, combined with new information technology to manage the vast amounts of data coming in from the grid, present a huge opportunity for improvements in the reliable, affordable and secure delivery of energy, he said. Consultants estimate the suite of IT services offered by companies like C3 can unlock about $50 billion per year in economic and social benefits.
But this complex, digitized system also creates an opportunity for foul play.
“The only reason we have cybersecurity issues with the grid is because we’re deploying smart technologies,” said Joy Ditto, senior vice president of legislative and political affairs for American Public Power Association (APPA), who attended the hearing. “The federal government can definitely play a role here.”
Congress has a role to play in facilitating information sharing between the federal government, the private sector and local governments, she said. In fact, the Senate is currently considering draft legislation that would encourage companies to voluntarily share data about cyberattacks on the grid.
Privacy advocates have opposed the bill, however, over concerns that greater information sharing would allow for more surveillance of Americans.
Joel Ivy, general manager of Florida’s Lakeland Electric and APPA member, who presented at the hearing, said he was very concerned about customer-level security. Specifically, as a public utility, he’s beholden to public record requests and could have to produce detailed information on customers’ hourly energy use. Ivy argued for keeping certain data private, while ensuring customers could still see their own usage to improve their energy management.
Reps. Paul Tonko (D-New York) and Morgan Griffith (R-Va.) both expressed doubts over the collection of consumer data. “Just because we can, doesn’t mean we should,” said Griffith.
Ultimately, it's all about the state level
Dean Kamen, founder and president of DEKA Research & Development Corporation, said that in order to realize a 21st century grid, there needs to be some kind of federal regulatory or legislative guidance on the integration of grid technologies.
Kamen, who invented the Segway and spent 30 years developing advanced medical equipment, recently deployed 20 of his Beacon 10 distributed generators with NRG Energy. In the domain of medical equipment, the Food and Drug Administration (FDA) sets a standard, businesses build to it, get approval and move forward. Energy equipment has to comply with a complex patchwork of guidelines.
“Not only every state, but almost every city and every town has a different set of rules about how you put these in, what you’re required to do and how you make them become legally part of the grid,” he said. “I think if there was some standard that the feds could put out, so what the FDA does for medical products you could do for energy products, you could encourage innovators to start making stuff because they know what they’ve got to do and they know if they did it it could be used everywhere.”
Michael Atkinson, president of Alstom Grid Inc., said he sees the federal government playing an important role in aligning the public and fostering public-private partnerships around grid modernization. He also noted that the national laboratories play a pivotal role in bringing advanced technologies to market.
“Today, companies like my [own], we’re working with the national labs,” he said. “Creating a more defined framework -- that is a great job for the federal government to do.”
The integration of diverse energy resources, including solar, energy storage, microgrids and controllable loads, will not only improve the performance of the grid, but will also be an enormous job creator, Atkinson added.
As several panelists explained, the main barrier to the widespread adoption of these new technologies is the utility business model. Today, utilities are incentivized to invest in new generation and hard assets, not in software and grid service technologies.
On this issue, the federal role is relatively narrow. Because utilities are highly siloed, apart from raising awareness around the need for business model changes, there isn't much for Congress to do.
“In my view, there needs to be a change on a state-by-state basis to the regulatory compact, insomuch as it relates to how utilities invest in a capitally efficient way rather than just investing in capital,” said Naimish Patel, CEO of Gridco Systems. “Once those incentives are in place, the market and efficiency will naturally drive to an outcome that addresses reliability in cost-effective way.”
Conversations at the state level on how to better align utility revenues with their underlying costs are now emerging across the country. Some have been more incendiary than others.
APPA’s Joel Ivy agreed that the grid of tomorrow will be a combination of advanced technologies. But change isn’t going to happen quickly.
The utility model is to spread the capital costs of new assets across the rate base and pay it off over decades. Right now, Ivy said Lakeland Electric is leveraged at 60 percent debt to assets, he said, which is fairly typical for the utility business.
“We still have to look at long-term payout before we look at a rapid and widespread integration of these different types of technologies,” he said.
“That’s a local issue, and we are talking about it,” said Ivy. “We’re talking about it with our city commission, about the need to start changing our minds about how long we should be amortizing that debt out. So it’s going on, but, unfortunately, it's not happening quickly.”