Smart Grid Policy Heats Up

Lynne Kiesling

Smart grid policy and activity continue to heat up … I will be attending the NIST-EPRI Smart Grid Interoperability Standards Interim Roadmap Workshop Tuesday and Wednesday in DC, and will be co-chair of a track of sessions on business and policy. The focus of the meeting is “high-level principles” for developing smart grid interoperability standards, and part of my objective is to ensure that in discussing those principles, we maintain our focus on the potential value creation from the transactive capabilities and functionality of an intelligent, information-rich electric power network. Furthermore, we will not realize that value unless we have regulatory institutions and policies that enable us to achieve decentralized coordination instead of imposing centralized control on us.

This is probably a good point to insert links to my 5-part smart grid series from a few weeks ago:

• Smart grid technology, economics, and policy (Part 1 of 5)
• A smart grid is a transactive grid (Part 2 of 5)
• Intelligent end-use devices make a smart grid valuable (Part 3 of 5)
• Smart grid and renewables interconnection (Part 4 of 5)
• Recommendations for smart grid policy (Part 5 of 5)

And I’m not alone in focusing on smart grid; NPR has started a 10-part series called Power Hungry: Reinventing the U.S. Power Grid. Today they aired the first in the series, in which they discussed the aging electro-mechanical infrastructure, and how the absence of digital communication capabilities limits the value of and potential for renewable energy. It was a good overview, but I will be listening to the ensuing 9 parts with great interest to see if they really do highlight the important potential for consumer value creation and decentralized coordination that comes from the transactive capabilities of smart grid technologies and policies. In fact, one of the commenters on the page of the first part of the series stated that

The “smart grid” is all about control – of those who want to use electricity. Those computer cables that “are being laid right next to the power line” will allow someone in a control station to decide who and what gets power, by sending a signal to the devices in your house or business that use electricity (and maybe, eventually, gas, as well).

That’s only true if you view smart grid as an extension of the existing regulated utility business model. I argue for another vision — smart grid technology is, to use the business jargon, a transformative game changer that can move us away from the old control model and into a coordination model. But the technology can’t do that by itself — achieving this information-rich, value-rich coordination outcome requires regulatory change, especially enabling dynamic pricing, but also opening minds up to the feasibility and value of retail choice and retail competition.

Other smart grid-related stories that have caught my attention recently:

• Verizon will add energy management functionality to its FIOS fiber-optic network service offerings. This is a great example of the type of innovative product and service bundling that I envision if our regulatory institutions allowed for more retail competition. And, obviously, if consumers can choose dynamic pricing, Verizon’s router would enable making their thermostats, window blinds, etc. transactive.
• California utilities plug energy-efficient electronics. But, you know what? Consumers would be much more interested in energy-efficient electronics without the utility having to persuade them if consumers faced dynamic pricing. I encourage regulators to stop just treating energy efficiency “programs” as activities to pay the utility for doing, but instead to reduce the barriers facing retail utilities that prevent them from offering dynamic pricing in a menu of retail contracts. Then consumers make the choices instead of paying through their rates for their utility to inveigh them to buy more energy-efficient appliances and devices.