As grid modernization accelerates, which states are in the lead, and why?
California, Illinois and Texas are at the top, according to the latest GridWise survey, with Rhode Island, Colorado and Washington showing the biggest improvement over the prior ranking.
Grid modernization is not just a New York-California issue anymore. Committed and proposed expenditures are accelerating into the billions across the country, with no sign of a slowdown in sight.
The grid's vulnerability to increasingly extreme weather and its consequences is apparent to everybody, and it must be strengthened, Centerpoint Energy CEO Scott Prochazka said. "Electricity is about 5% of GDP, but it is the first 5% because reliable energy supports every other aspect of the economy," he noted.
In Texas’s response to recent hurricanes, “other states can see the value of having grid modernization in place before it is needed,” Prochazka said.
“Modernizing the grid to increase customer choice, expand renewables and distributed generation integration, and improve resilience is not an option, it is a requirement,” he said.
Beyond Texas, Illinois utilities plan to invest $3.2 billion to meet obligations of recent legislation. In Massachusetts, a National Grid proposal could cost $1.275 billion over 10 years and an Eversource proposal would invest at least $400 million. In Montana, Northwestern Energy has spent $350 million over the last 7 years and is planning another $30 million in its South Dakota and Nebraska territories.
But which states are at the leading edge of grid modernization across the U.S. today?
Five disparate states ranked highest for state policy, customer engagement strategies, and deployment of advanced operations technologies, according to the newest Grid Modernization Index from the GridWise Alliance. California, Illinois, Texas, Maryland and Oregon are showing the way, but the latest index shows more states are doing better on grid modernization than ever.
Top performing states have more comprehensive approaches that engage a broad spectrum of stakeholders, among other characteristics, GridWise found.
While some states dropped significantly in the rankings, Rhode Island, Colorado and Washington showed the biggest improvement from the prior index. The overall median score also increased as more states became active in grid modernization in the 18 months since the last index.
A pivotal tool
A recent paper by consultant ScottMadden defined grid modernization as innovation that makes the power system “more resilient, responsive, and interactive.”
Defining and deploying grid modernization is becoming pivotal for policymakers. In Q3 2017, there were 184 proposed, pending or enacted legislative or regulatory gird modernization efforts in 33 states and D.C., according to the most recent NC Clean Energy Technology Center (CETC) update. They cover smart grid, advanced metering infrastructure (AMI), utility business model and rate reforms, and ways to expand distributed energy resource (DER) access.
Support for grid modernization is bipartisan. It was made a national priority by the Bush administration's Energy Independence and Security Act of 2007, according to GridWise Alliance Executive Director Steve Hauser. Much of today’s deployed AMI, the foundational grid modernization technology, was funded through the Obama administration’s American Recovery and Reinvestment Act of 2000.
The two pieces of legislation drove a $10 billion-plus taxpayer-ratepayer investment in grid modernization, Hauser reported. Planning initiatives continue at the federal and state levels through the Department of Energy, the National Governors Association, the National Association of Regulatory Utility Commissioners and state regulators.
The new index
The Alliance rated states in three categories: plans and policies that support grid modernization; rate structures, customer outreach, and data collection practices that are grid modernization drivers; and smart technologies like AMI, sensors, controls and analytics.
“The policy is the first thing that improves,” Hauser said. “Implementation follows. New York is a good example. Its Reforming the Energy Vision proceeding provided strong policy two indexes ago, but it just moved up to 8th because it is starting to implement technologies.”
For GridWise, the focus is the distribution system, where utilities’ priorities remain reliability and cost-effectiveness. Objectives of grid modernization are “higher utilization of existing assets, greater system efficiency and resilience, and lower environmental impact,” it reported.
The GridWise index is also important for transmission system operators (TSOs), Hauser said. The bulk system is largely automated, but grid modernization is necessary to give operators real-time visibility at the distribution level.
The index’s highest “policy” rankings went to the more comprehensive approaches. They cover electric vehicles, DER and energy storage integration, resiliency and reliability, cyber and physical security, and new business models and rate structures.
Specific policy work on incentives and mandates for utilities to deploy energy storage, EV infrastructure, and higher levels of renewables is also increasing, according to the index. This work is driving new awareness of the importance and value of grid modernization among policymakers and accelerating policy activity.
The highest “customer engagement” rankings went to “customized energy programs and enhanced service levels” that use AMI and the data it provides. The objective is new value streams from reduced outages, faster recovery, and new communications strategies, the index reports. Successful programs engage the full range of stakeholders.
The highest “grid operations” rankings went to deployments that go beyond AMI. The objective is visibility into the distribution system. Deployment of AMI, sensors, and new IT systems provides data for advanced analysis and enables improved utility performance.
Progress remains incremental, as utilities demonstrate the value of successive levels of technology, the index reports. The most advanced utilities are deploying new software platforms and control systems to automate operations and situational awareness.
And more takeaways
GridWise’s Hauser listed several other key findings from the index. First, grid modernization efforts are accelerating.
Second, extreme weather, cybersecurity and physical security threats are putting more attention on resilience, Hauser said.
Another finding is that some states have just begun grid modernization efforts. The Northwestern Energy Montana, South Dakota and Nebraska territories are ranked at the bottom of the index. But spokesperson Butch Larcombe said grid modernization is very much on the utility’s agenda. A large-scale AMI rollout will follow completion of the 7-year, $350 million Montana distribution system buildout.
Northwestern Energy's focus will remain on “automation initiatives” because it has “seen great value” from investments in reliability that it anticipates will deliver “long-term financial dividends,” Larcombe added.
Furthermore, progress in some advanced states is slowing because making grid modernization work at the operational level takes time.
Finally, two demand-side issues are setting utility priorities. One is private sector demand. The other is demand driven by voluntary procurements to meet city, state, corporate and institutional renewables and sustainability goals.
Ron Pernick, cofounder/managing director of renewables consultant Clean Edge and lead author of the Gridwise Index, said the key driver behind that demand is declining cost. Wind and solar are now the lowest-cost energy options and costs for energy storage, electric vehicles, emerging DER technologies, and automation technologies are following the same downward cost-curve, he reported.
Why some states moved up
Rhode Island’s 25 place jump in the grid modernization rankings was the result of the governor’s support of new strategic energy goals and clean energy measures. Washington’s 12 place jump was due to grid improvements paid for by its Clean Energy Fund. Colorado’s 17 place rise and New York’s 8 place jump were from “upgraded forecasting techniques, clean energy analytics, and new offerings to customers,” the index reports.
Massachusetts moved up 8 spots, into the top ten, because of improved planning policy. Mississippi moved up 7 places because of incentives to drive customer price responsiveness. Nevada moved up 5 spots, into the top ten, by developing strong policy and deploying smart technologies.
Ben Farrow, Puget Sound Energy (PSE) Electric Development Manager, emailed that Washington’s big jump in the rankings followed new regulatory “clarity for utilities around planning and investing.” He cited the state commission’s recent storage and integrated resource plan directives as examples. Incentives in the legislatively-mandated Clean Energy Fund are also important grid modernization drivers, he added.
According to Farrow, three initiatives will further PSE’s ongoing efforts to better understand DER: its planned system-wide AMI rollout will produce valuable data; a recently deployed utility-scale battery storage pilot will test potential value streams; and a study of managed EV charging as grid support and demand response could drive future deployments.
Other states, such as Texas and IIlinois, ranked high in the previous index and remained high in the latest version.
Centerpoint’s Prochazka, who also chairs the GridWise Alliance, told Utility Dive there were two key drivers for Texas grid modernization. One is the deregulated market, “which allows the market to drive distribution system innovation by retail electricity providers.
The other is widespread AMI and distribution automation, deployed in 2010 with $200 million in American Recovery and Reinvestment Act funding. To allow retail electricity providers an open market for innovative products to meet customer demand, they needed to understand customer usage patterns and customers needed to understand their usage and how to manage it, Prochazka said. AMI and automation met those needs.
According to the index, Illinois "began aggressively planning in early 2017 for the utility of the future by initiating the NextGrid initiative."
Joe Svachula, technology and smart grid VP with Commonwealth Edison (ComEd), said the initiative has two key objectives — improved reliability and a smart distribution system that allows greater renewables and DER integration.
“We are at over 90% AMI deployment, Svachula said. “We went from about 4 million data points per month to over 1 billion data points per month. We can now see the distribution system in nearly real time, and that is preparing us for what will become a two-way grid.”
ComEd is using that visibility to reduce costs, especially during outages caused by extreme weather. Over the last five years, ComEd avoided 7.6 million outages, which produced $1.4 billion in societal savings. “In 2016, our reliability was the best on record and the best among comparable major utilities, and we are on pace to do better this year.”
Texas, Illinois and other states have taken important steps on their paths to grid modernization, but broadly, speaking, what are some of the best practices?
Hauser said utilities need to invest in both AMI and distribution system automation. Which should come first is utility-specific. Automated distribution is more important to utilities and TSOs, he said. AMI is more important for customer engagement and integrating and leveraging DER.
“Every state has different concerns,” Hauser said. “Utilities are different, governors and mayors are different, commissions are different, and that local color impacts decisions about what grid modernization gets deployed.”
PSE’s Farrow agreed there is no single best practice.
Duke Energy spokesperson Meredith Archie agreed each utility faces different challenges and needs. But “reliability, hardening and resiliency, and increased customer communications, monitoring and control capabilities are key components across successful grid modernization plans.”
ComEd’s Svachula said grid modernization is, first, “about hard work in the policy space to get policy right up front.” A key “best practice” may have been that the enabling legislation in Illinois “did not just fund grid modernization but established return-on-equity metrics and required that progressively demanding targets be hit,” he said. “That gives utilities ‘skin in the game.’”