This is the first of a three part series on the Future of the Grid and the transformation of legacy models.
The electric system in the United States is in the initial stages of a major transformation. This transformation completely changes the legacy model of central generation, transmission and distribution to a highly diverse and distributed model with substantial amounts of renewable energy, customer-owned generation, and smart, price-responsive loads.
The present regulatory framework does not serve the needs of this transformation. If current regulatory requirements – such as net metering – were carried forward to a world of large numbers of customer-owned generation, the result would be the much written about “death spiral” for the utility industry. This means utilities would remain responsible for reliability and the supplier of last resort while being deprived of much of their revenue.
Over the past year, the U.S. Department of Energy Office of Electricity Deliver and Energy Reliability (DOE OE) and the Gridwise Alliance have undertaken a Grid Visioning Initiative and facilitated a series of four regional workshops across the country to aggregate stakeholder views on ways that grid operations, business models, and regulatory models must evolve.
The regional workshops were held in four locations:
- Western Workshop, December 11, 2013, Seattle, WA
- Central Workshop, February 4, 2014, Dallas, TX
- Southeast Workshop, April 8, 2014, Durham, NC
- Northeast Workshop, May 13, 2014, New York, NY
Attendees included consumer advocates, public service commissioners, manufacturers, renewables developers, state energy officials, utility executives, and state and federal legislators and staff.
Future of the Grid National Summit
The Future of the Grid Summit held June 26, 2014 in Washington, DC, was the culmination of these workshops. Panel sessions were held to discuss each of the elements of the framework and engage attendees with questions and discussions. The participants discussed the key themes that emerged from the regional workshops and discussed the framework developed by the Gridwise Alliance based on data gathered from the regional workshops. Cisco provided sponsorship for the National Summit, adding Cisco to the list of those providing support and leadership to the Department of Energy and the Electric utility industry.
Keynote speakers at the summit were:
- Bob Shapard, Chair of Gridwise Alliance and CEO of Oncor
- Eric Lightner, Director, Smart Grid Task Force, Office of Electricity Delivery and Energy Reliability, U.S. Department of Energy
- Representative Jerry McNerney (D-CA)
- Dr. Ernest Moniz, Secretary, U.S. Department of Energy
- Patricia Hoffman, Assistant Secretary, Office of Electricity Delivery and Energy Reliability, U.S. Department of Energy
As Secretary Moniz conveyed in his remarks, the Department of Energy is engaged in conducting their Quadrennial Energy Review. The collaboration and leadership provided by the Gridwise Alliance is critical to the future of the industry and a sustainable energy future.
Becky Harrison, CEO of Gridwise Alliance, framed the discussion with an overview of the findings from the regional workshops, and the framework developed as a result.
A New Grid Framework
The framework begins with the Evolution of Grid Operations. Grid modernization is not only updating the grid infrastructure for resilience and reliability, it is also fundamentally changing the operating model of the grid from a focus on central generation and delivery to a highly distributed and dynamic multidirectional flow of power from diverse resources.
The next step is the Evolution of Business Models. With more and more power coming from renewable resources and distributed generation owned by customers, the business model of the industry must change to one that fairly values and fairly compensates all participants and customers.
The Evolution of Regulatory Models immediately follows as there is very little flexibility in the existing legacy regulatory framework of the industry that is embedded in a mix of Federal and state legislation, regulation, and jurisdiction. Does the “natural monopoly” of the grid persist when growing amounts of power are produced by customer-owned assets?
The fourth element of the framework is Transitioning to the Future Grid. The enormity of the grid requires that this transformation take place over time. It is completely impossible to renovate the grid as we might renovate a building – you can’t shut it down, undertake a huge construction project, and open it with a ribbon cutting ceremony at some point in the future.
The framework is iterative as each portion changes to accommodate changes in the other elements. This in itself is a dramatic departure from the largely static regulatory and business model that has existed for more than 70 years.
Why is this important for Cisco?
Cisco has been a longtime member of the Gridwise Alliance (GWA) with both Laura Ipsen and now Rick Geiger, serving as board members. GWA holds a unique voice in the industry as an organization and a forum for discussion and collaboration across the entire ecosystem of stakeholders in this critical industry. Cisco is able to hear and understand diverse points of view as well as provide input and thought leadership on issues that are shaping the future.
As we engage utility customers in discussions of their strategic objectives and the priorities and business outcomes they seek, the work of Gridwise Alliance and the role of Cisco provide tangible credibility of our commitment to the industry.
If you’d like to know more about Gridwise Alliance, please contact me by commenting on this blog. Also, watch out for parts 2 and 3, where I’ll break down the DOE’s final summary report and the vision of the nation’s future electricity grid.