Grid modernization efforts are a little bit like jenga: a lot of moving parts and needs a skillful hand to guide each piece into place.
The United States’ power sector is evolving, and a remarkable volume of state policy actions are shaping its future. According to the latest quarterly report from the North Carolina Clean Energy Technology Center, there were 181 grid modernization policy and deployment actions in 36 states and the District of Columbia.
The U.S. power sector is evolving and the rules to make tomorrow’s grid work are being shaped by a remarkable volume of state policy actions from New England to Hawaii.
“A lot is happening on grid modernization but it is only the tip of the iceberg,” said Autumn Proudlove, manager of policy research at the Clean Energy Technology Center and lead author. “These are foundational steps that are likely to lead to further policy action and regulatory decisions.”
A variety of states are tackling grid modernization, which ranges from advanced metering infrastructure (AMI) deployment to cost-benefit analysis of distributed energy resources.
For instance, Entergy is not known for leaping at newfangled contraptions, but all five of its subsidiaries (Arkansas, Mississippi, Texas, New Orleans, and Louisiana) have applied for AMI deployments and two (Mississippi and Louisiana) were approved this year. And Nevada, a state mostly known for creating solar policy turmoil, enacted five bills aimed at modernizing the grid in the 2017 session, according to Rebecca Wagner, an energy policy and regulatory consultant and president of Wagner Strategies.
Those bills “set the course for an evolution in grid modernization,” she said. “The Public Utilities Commission has opened or will open rulemaking dockets to modify or adopt regulations for the new policies. The challenge at this point is the sheer volume of regulatory filings.”
Of course, Nevada isn’t the only state tackling a broad range of reforms. Indeed, as renewable energy proliferates and new technologies like energy storage come down in cost, more states and utilities are plotting out grid reforms.
But first, what is grid modernization?
Grid modernization broadly describes many utility undertakings aimed at boosting the resiliency and integrate renewable energy and new technology like energy storage. Some initiatives are even more sweeping — take New York’s Reforming the Energy Vision effort. It’s possibly the most ambitious, holistic initiative to revise the utility business model. Other efforts are more piecemeal, and progress moves slowly over a long span of time, like California.
At a high level, grid modernization is matching policy with technology to support the ongoing power sector “evolution,” Proudlove said. And describes what regulators, utilities and other utilities are doing “to integrate renewables and new technologies like energy storage and smart appliances into the grid and allow customers to engage with a more dynamic system.”
How does it work? It often begins with studies and investigations of new technologies, Proudlove said.
“Many of the Q2 actions relate to information- and data-gathering,” she said. “Many of the studies are of pilot deployments intended to detail the impacts of new technologies on the system.”
The studies also represent a shift away from the historical dependence on utility data, she added. “We are seeing more data being provided or requested by independent and third-party researchers.”
In some grid modernization dockets, commissioners have extended the shift to more balanced proceedings by asking non-utility stakeholders what topics should be included, Proudlove said.
Presented with a more neutral set of data and wider range of evidence, regulators conclude benefits from technologies such as advanced metering and battery energy storage outweigh their costs, she added.
As a result, there is more work on planning and market access, critical to grid modernization, said Proudlove.
Planning, especially of distribution systems, determines many utility investment decisions, Proudlove said. If done transparently, it allows for third-party by identifying viable locations at which they can develop non-wires alternatives (NWAs).
States leading grid modernization, including New York and California, now require utilities to provide public maps of data about their distribution systems. All the states doing this are part of deregulated or restructured markets, she added. “There may be a different dynamic in vertically integrated territories.”
Business model and rate reform is another key trend in grid modernization efforts. For example, 10 actions were related to time-varying rates last quarter, Proudlove noted. Maryland and New Hampshire joined a growing list of states using pilot programs to test customers’ adaptability to these new rate designs.
Other actions taking place include market development, market development, new technology regulation, and adaptation of existing policies, like interconnection standards, to new technologies.
An example is Arizona’s proposed Clean Peak Standard, which would expand on the state's existing renewables mandate, Proudlove said. Energy storage targets also fit as a type of market development policy.
There is increasing work on the data access rules that govern the release of customer usage data, she said. Four states took steps to allow customers or their representatives access usage data as a step “toward an energy savings solution.”
Policymakers use financial incentives, like income and property tax credits, to indicate what technologies they want to encourage, Proudlove said. There is presently less action in that area but it could become controversial.
“Certain types of incentives favor utility investment in new technologies by allowing utilities to earn a return,” she said. “Policies that encourage customer-owned-and-sited technologies do not. It is one of the problems with the traditional utility business model.”
The potential conflict is less likely if the regulatory proceeding “looks at the incentive structure in the context of the traditional utility business model,” Proudlove said.
Deploying AMI and other smart technologies is an extension of the growing demand for accurate data to support policy changes, Proudlove said.
Top grid modernization state efforts in Q2
But some of the biggest policy developments this quarter focused on energy storage. With stronger policies, energy storage can help utilities avoid renewable energy curtailment and defer expenditures. But, even current storage policies “do not adequately capture the full costs and benefits,” the review noted.
Massachusetts’ energy storage target topped the list for the second quarter, according to the report. It’s only the third state to adopt a storage target, but opened the door for other states to examine the concept, Proudlove said. However, the state is not without its challenges.
Mark LeBel, staff attorney for the Acadia Center, said implementation of the state's grid modernization proceeding initiated by Gov. Deval Patrick, a Democrat, has been delayed by Republican Gov. Charlie Baker.
Nevada is another noteworthy state. Mostly known for its vitriolic fights over solar policies, the state Legislature pushed several bills to boost energy storage deployment and electric vehicles, establish distributed resource planning, and set storage procurement targets. The state also boosted energy efficiency policies.
However, most attention focused on a bill that essentially reversed the controversial changes made in 2015 to the state’s net metering policy. The bill, AB 405, also established consumer rights to self-generation.
But Wagner said implementation may be impeded indefinitely by procedural debates over the bill. An initiative calling for retail competition by 2023 folds another wrinkle into the state’s grid modernization efforts.
“It is still unclear how grid modernization policies could be affected by restructuring,” Wagner said.
Vermont is another state on the cusp of grid modernization, having launched its proceeding earlier this year. The docket will “reexamine the state’s regulatory structure in response to recent transformations in technology, state policy, and more,” the report noted.
Already, the state’s major utilities are performing under a performance-based regulation for the past decade, said Riley Allen, the deputy commissioner for the Public Service Department. The regulatory structure ties rate recover and resets to the cost of service, and includes tracking mechanisms, earning variances, extraordinary event cost recovery and an annual base rate reset, Allen added.
Going forward, we want to learn lessons from other jurisdictions and focus the form of regulation around our ambitions for the sector.”
And in Hawaii, the state’s main utility Hawaiian Electric Companies (HECO) filed a revision of its grid modernization plan, after two iterations were rejected.
The revision proposes a $205 million spend and includes a roadmap of sorts detailing how the utility plans to reach the state mandate of 100% renewables by 2045.
The revision will also help “guide our technical requirements and technology priorities,” said Darren Ishimura, manager of HECO’s Grid Technologies Darren Ishimura. Regulators and stakeholders, however, are still skeptical of HECO’s proposals, say that while they may benefit the system, it could just be more unnecessary spending.
“They are asking which investments are the highest priority and highest value,” Proudlove said.
Of course, California and New York’s ongoing efforts still top the list this quarter.
Sara Baldwin Auck, regulatory program director for the Interstate Renewable Energy Council (IREC) pointed out key orders in New York on the value of DERs and an integrated distribution system plan.
The first represents “a preliminary framework for a transition to an NEM successor tariff more grounded in the state’s Renewing the Energy Vision (REV) work,” Auck said. The second “is a blueprint for a modern grid because it guides the utilities’ distribution plans and how DER will be integrated into those plans.”
“The REV is like a Jenga puzzle, with pieces that are connected and interrelated,” she added. “And California is like doing many Jenga puzzles at the same time.”
California’s grid modernization efforts, however, are likely the oldest, dating back to the early 2000s and piecemealed together through dockets and legislative direction. Recent actions in the state’s Distribution Resource Plan (DRP) have advanced efforts to define the value of DER, Auck said. And recent work by California Public Utilities Commission staff and President Michael Picker imposed some order on the effort.
“But there still is not a policy directive on how to reform the utility business model,” Auck said. “Without that, it will be challenging to get to broader reforms.
A look ahead
The report noted several upcoming actions, as nearly 70 bills remain pending and almost 80 regulatory proceedings are still ongoing at the end of the second quarter.
There are active grid modernization and energy storage bills in California, Massachusetts, New Jersey, and New York. The Public Utilities Commission of Nevada has opened dockets on the last slew of legislation. For example, NV Energy recently outlined how it planned to comply with the net metering bill, and hearings are set for this week.
Ohio, Illinois, Maryland and Rhode Island, and Vermont are conducting studies as well. Large grid modernization deployment proposals have been approved or are pending in Colorado, Pennsylvania, California, Hawaii, Indiana, and Massachusetts.
There are many reasons to pursue grid modernization, Proudlove said. “High renewables penetrations and integrating them into the system, enabling customer choice and using customer-sited resources for grid support, accessing new technologies, improving reliability and resiliency, and reducing ratepayer costs – that’s the beginning of the list.”