Navigant Research Blog

States to Utilities: Modernize the Grid

Brett Feldman — January 21, 2014

My recent blog discussed California’s roadmap for integrating demand response (DR) and energy efficiency (EE) into its markets.  Around the same time, at the end of 2013, New York and Massachusetts released orders requiring significant structural changes in the way their electric utilities operate and how demand-side resources are incorporated into the wholesale and retail markets.  It’s valuable to look at these developments as a trend rather than isolated cases.

The New York Public Service Commission’s order approving the state’s EE programs for the next year is typically a rubber stamp.  This time, however, it included some strong language about the future role of EE and DR will play as central components in grid planning.  “The Commission and other policy makers can no longer afford to think of energy efficiency and distributed clean energy resources as peripheral elements of the electric system that require continuous government support.  Rather, the time has come to manage the capabilities of these customer based technologies as a core source of value to electric customers.”  The Commission, therefore, will begin “articulating the broad policy based outcomes” for these clean energy resources that “will result in timely decisions regarding changes to our regulatory model, including performance and outcome based incentives, that will be required to achieve our broad policy objectives.”

10-Year Plan

The Massachusetts Department of Public Utilities, meanwhile, released a long-awaited order on its Grid Modernization program that took place over the past year.  This order establishes four grid modernization objectives: reducing the effects of outages, optimizing demand, integrating distributed resources, and improving workforce and asset management.  The department proposes to require each electric distribution company to develop and submit to the department a 10-year strategic grid modernization plan that includes a comprehensive advanced metering plan.  It plans to address three other specific topics in separate proceedings: time varying rates; cyber security, privacy, and access to meter data; and electric vehicles.

Massachusetts is further along on specifics, but the message is clear that both states see the need for drastic changes to their utility regulatory frameworks.  While some people talk about these developments as the death of the utility industry, California, New York, and Massachusetts all seek to include the utilities as part of the future solution.  They don’t expect instant changes, but they will require faster action than the typical utility is used to.

External market forces may push things even faster than that pace, however, so utilities must become nimble, not relying on the regulators to protect them.  Distributed generation in the forms of solar photovoltaic and combined heat and power will continue to proliferate due to economic and environmental drivers.  Businesses and consumers will demand better service, access to data, and flexible pricing options.  The potential for increased storm activity will necessitate more resilient systems.

The states may make the most public news for grid modernization, but utilities will thrive by staying one step ahead of the regulators and helping to craft their own futures.

One response to “States to Utilities: Modernize the Grid”

  1. Bogdan says:

    Interesting indeed. What about a Pareto based approach? … like in this article:

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