US Power Sector Desperate For Change

The Bipartisan Policy Center, in its new report, “Capitalizing on the Evolving Power Sector,” makes recommendations on how to improve the US electricity grid.
Published: Wed 10 Apr 2013

For the US power grid to improve its effectiveness over the next decade, the power sector will need to make some major changes. The opportunity must be taken now in order to re-shape policies and institutional structures which will help the grid adapt to ever-changing market conditions, policies and technology. The result will be a modernized grid, offering enhanced reliability and cost-effectiveness. This is according to the Bipartisan Policy Center’s (BPC) Electric Grid Initiative which aims to develop policy recommendations that help to improve the US grid’s efficiency and reliability. 

The BPC’s recommendations are as follows:

Encourage efficient transmission and distribution investment

To improve efficiency and reliability of the system, significant investments must be made in the transmission and distribution infrastructure over the next 10 years. Some regions will need extra transmission facilities, including lines crossing state boundaries and federal areas so that new renewable generation sources can be brought on-line. There is a major push for renewables, thanks to stringent state renewable portfolio standards and federal incentives. The upgrade of distribution systems, incorporating smart grid technology, will be essential in realizing the full potential of energy storage, distributed generation, energy efficiency, and demand response. 

Complex decisions must be made about the location of new facilities and the costs involved. It has been found that state law governing siting and an emphasis on state-specific interests may act as an obstacle for the efficient construction of long distance high-voltage interstate transmission lines that offer broad regional benefits. This siting challenge may be particularly pronounced for high-voltage direct current (HVDC) lines, which may not connect to the grid in intermediate states through which they pass. It is therefore recommended that Congress put in place a new, targeted backstop siting authority that allows the Federal Energy Regulatory Commission (FERC) to issue a federal permit to approve multistate HVDC or 765+ kV AC transmission projects if: 

• a state siting authority has rejected a project without offering an alternative route, or has not issued a decision within 18 months of receiving a completed application, or has insufficient authority to grant such an application; and

• the project has been approved by a state siting authority in another state 

When transmission lines cross federal lands, or otherwise require federal approval, inefficiencies in the federal review process can see significant delays and an increase in overall project costs. Although steps have been taken to improve co-ordination between federal agencies, extra reforms are needed. The federal government will need to take measures to improve the federal siting process. 

The US distribution system requires investments if advanced grid technologies are to be successful. Unfortunately, many utilities and state public utilities commission (PUCs) do not want to invest as they are uncertain of the technologies’ benefits. To circumnavigate this uncertainty, the US Department of Energy (DOE) will need to formulate best practice policies for state PUCs to encourage growth and the modernization of the distribution infrastructure. Utilities, state PUCs and transmission planners should also co-ordinate when considering distribution investments. They should also consider new consultation and information-sharing mechanisms.

Enhance planning co-ordination across jurisdictions

As the grid becomes more integrated, policy and operational decisions made in one region will have a knock-on effect on surrounding regions. Although regions vary in market structure, policy priorities, and generation resource mix, better co-ordination between jurisdictions could overcome challenges, creating a more efficient and reliable system. The integration of clean energy generation will become more efficient too. It is up to Congress or the DOE to encourage interconnection-wide transmission efforts by means of funding and policy guidance.

Enable a more flexible and resilient system

By improving grid flexibility, there will be an improvement in operational reliability and an increase in the integration of cost-effective variable energy resources (VERs) such as wind and solar generation. Demand response, energy storage and dispatchable distributed generation can also add to grid flexibility. Utilities can also improve flexibility by co-coordinating dynamic scheduling, sharing of flexible reserves, and geographically broad real-time balancing markets. This could reduce the need for new generation or transmission facilities, thereby saving money and avoiding siting issues. Investment in grid modernization can improve the potential of these resources, providing enhanced system flexibility.

Although many utilities have been investing in advanced distribution system technologies, traditional cost-of-service regulation may not completely value the benefits of the technology. Incentive-based rate-making could encourage efficient investments in advanced distribution system technologies. The National Association of Regulatory Utility Commissioners (NARUC) should work with state PUCs to identify suitable, output-based distribution system performance metrics which can be used in incentive-based regulatory proceedings. Also, DOE should fund NARUC or state efforts to help develop guidelines for incentive-based regulation.

It is also essential to improve the ability of customers or third-party service providers to utilize the output of advanced metering systems in order to realize the potential of a modern grid. To do this, utilities and state PUCs should offer dynamic retail pricing of electricity where advanced metering infrastructure exists. States regulators should also ensure that customers are able to make their consumption data available to third-party demand response aggregators or other service providers securely. It is also important that utilities educate the consumer sufficiently about advanced metering.

Demand response can improve system flexibility, efficiency, and reliability. It can also be a cost-effective replacement to new transmission or generation investments. Despite the current interest in demand response programs, there is still a lot of untapped potential. To remedy this, market operators and regulators should permit demand response resources, able to perform in a manner comparable to conventional generation, to take part in electricity markets and auctions on the same terms as generation resources.

The DOE should carry out research with the aim of reducing energy storage technology costs, developing analytic tools and software for transmission planning over larger geographic regions, and developing software for the collection and analysis of phasor measurement unit (PMU) data. DOE should provide support for the deployment of advanced grid technologies.

Monitor and enhance operational reliability

Power outages can be very costly. It is therefore true that a reliable power grid can provide broad economic benefits for the country. As consumption is on the increase and new generation and technologies are being introduced to the grid, reliability of the system is paramount. The NERC and FERC should be working to improve data quality, industry standards, and the cost-effectiveness of reliability standards. Lessons learnt from reliability events should be used to make improvements in the electric system’s reliability. Real-time sharing of operational reliability data among grid operators could allow significant reliability events to be anticipated and avoided. 

To read the full report : American Security Project-BPC Report Calls for Regulatory Overhaul for Electricity Grid

Engerati Analysis

In order for the US grid to be more reliable and more efficient in the face of increasing consumption and addition of generation smart technology, the power sector will have to overcome regulatory, financial and technological hurdles.

Sources

American Security Project-BPC Report Calls for Regulatory Overhaul for Electricity Grid

Bipartisan Policy Center-Capitalizing on the Evolving Power Sector [pdf]