Smart Grid: A Game-Changing Technology with Exciting Business

and Public Policy ChallengesJuly 16, 2010David K. Owens

Executive Vice President, Business OperationsEdison Electric Institute

AABE Chair, Legislative Issues and Public Policy CommitteeRemarks From:

Thomas H. GrahamPresident – Pepco Region

Pepco Holdings, Inc.

Changing Electric Utility Landscape

Changing Regulatory Paradigm Obama Administration and Congress are

aggressively pursuing an energy policy agenda focused on: Reducing greenhouse gas emissions Enhancing energy efficiency, demand response,

distributed generation Building the smart grid Expanding renewable energy

Why Do We Need A Smarter Grid?

What is a Smart Grid?

The Smart Grid …

will: Help consumers use energy more efficiently—empower the

customer Improve the efficiency and resiliency of the power grid Integrate new sources of renewable energy and distributed

generation Integrate demand response, energy-efficiency and energy

storage resources Reduce the need for future infrastructure investments Enable smart appliance and consumer devices (Home Area

Network) Enable plug-in electric and hybrid electric vehicles. Support microgrids Support net-zero energy homes and commercial sites

Today’s Grid

Balance Dispatchable Generation with Forecastable Load

Base LoadGeneration

Load FollowingGeneration

+ +/–

Supply Side

InterruptibleLoad DR

Built-inDemand

–

Demand Side

Bulk Energy Storage

Tomorrow’s Grid

Base LoadGeneration

Load FollowingGeneration

+ Bulk EnergyStorage

+/–

Distributed Generation

+ CentralizedWind & Solar

Variable

–

Balance Variable Generation with Unpredictable Demand-side Resources

Price Responsive DR

+/–

“Demand-side” ResourcesElectric Vehicles andBattery Storage Systems

+/–

InterruptibleLoad DR

Built-inDemand

–

Supply Side

Demand Side

Operating Closer to the Edge?Early Warning Signs?

Transformational Technology

Game Changing Technology that Will Transform the Industry New Customer Relationships Greater and Better Customer Energy Control New Businesses / Strategic Partnerships New Market Participants New Products for Consumers

It will impact: Structure Business models Customer relationships Regulatory policies

The Fundamental Challenge

Technology has transformed several key industries: Telecommunications, retailing, publishing, etc.

The Challenge-uncertainty at this point in time as to how that transformation will unfold Customers are raising questions about the

benefits Need a process to develop plausible deployment

pathways with input from all major stakeholders

Smart Grid is a Game Changer In front of the meter

Accommodates central and distributed electric generation and storage options.

Enables increased levels of renewable energy. Provides for power quality for a range of needs by all types of

consumers. Anticipates and responds to system disturbances. Optimizes asset utilization and operating efficiency of the electric

power system. Operates resiliently to respond to physical and cyber attacks and

natural disasters. Behind the meter

Enables informed participation by consumers in retail and wholesale electricity markets.

Enables new products, services, and markets (home area networks, electric vehicles, etc.).

Electric Utility Smart Grid Focus Smart Meters and Smart Rates

New Pilot Programs Full-scale Deployment in 33 states 6% of Electricity Consumers Nationwide have Smart Meters Expecting ~60 million smart meters in-service by 2019

T&D Automation Increasing deployment of synchrophasors Service restoration and “self-healing” (remote controllable

devices including automated voltage regulators, capacitor banks, reclosers, etc.)

Electricity Storage Demonstration projects Electric vehicles

DOE American Recovery & Reinvestment Act

Transmission/Smart Grid Funding

Total: $ 4.5 billion

($ million)

DOE Smart Grid Investment Grant Awards

Total: $ 3.4 billion

($ million)

Total: $ 620 Million

($ million)

DOE Smart Grid Regional Demonstration & Storage Program

Awards

Smart Grid Benefits Puts decision making in the hands of customers

- Improved information, programs and pricing options will allow customers to make informed energy choices

- Gives customers better information about their service and use Automatically accommodates changing conditions

– Fault isolation, quick automatic restoration– Reroute power flows, change load patterns, improve voltage profiles– Minimal workforce intervention, auto notification for corrective actions

and maintenance activities Lets utilities operate the system with greater efficiency

– Better asset management – optimize grid design – Optimized grid operations– Greater reliability and security

Promotes green energy initiatives and enables distributed, renewable energy resources to participate

Changing Competitive Environment

The Smart Grid Public Policy Arena National Institute of Standards and Technology (NIST) –

Organizing industry input to the NIST process, especially high-level governance, technical committees and working groups; coordinating input from Standards Development Organizations

Federal Energy Regulatory Commission (FERC) – Coordinating industry input on the enforceability of smart grid standards as they relate to system reliability and cybersecurity

Department of Energy (DOE) – Educating agency on the impacts (higher rates, projects downsized / canceled) from taxing stimulus grants; Coordinating industry response to RFIs on Communications and Data Access.

States – Engaging regulators and Smart Grid Collaborative on stranded costs / cost recovery and customer / system benefits

Federal Communications Commission (FCC) – Responding to National Broadband Plan recommendations and any subsequent legislative and / or agency actions

Smart Grid Issues

CybersecurityData Access/Privacy Interoperability StandardsCost RecoveryHome Energy ManagementConsumer Concerns

Cybersecurity

Data Access / Privacy

Interoperability Standards

Interoperability Standards - NIST Process

NIST is engaging industry, government, and consumer stakeholders in an open process to facilitate development of interoperability standards needed to make the Smart Grid a reality.

NIST has launched a three-phase plan to expedite development and promote widespread adoption of Smart Grid interoperability standards. Release 1.0 Framework and Roadmap for Smart Grid Interoperability –

provides an initial foundation for an interoperable and secure Smart Grid. Established a more permanent public-private partnership, the Smart Grid

Interoperability Panel (SGIP), to guide the development and evolution of the standards.

Establish a testing and certification framework for the Smart Grid.

NIST’s immediate priority is to complete the Priority Action Plans that are now tackling the highest-priority needs in the standards portfolio.

Cost Recovery

Home Energy Management

Emerging Consumer Concerns Consumer questions – What are you doing and how will

it impact me? “No clear, concise, and specific information to all stakeholders

regarding [the utility’s] overall vision to implementing a smart grid, the expected costs, technology choices and consumer and environmental benefits”

Won’t help me – just costs too much Consumer bills – Current bills increasing faster

Payments today for future benefits? (NPV of deferred generation costs) Payments today, but no benefits for years of deployment Addition to ever increasing electric bills (CapEx, Cap and Trade, RPS,

net metering, etc.) Like restructuring, implementation comes at a time of increasing costs

Will blame smart grid for higher rates

Conclusion Smart grid is a “game changer” which will transform

the utility-customer relationship, provide new business opportunities while enabling utilities to meet energy and environmental public policy goals

Electric utilities are making substantial investments in smart grid and innovative technologies from smart meters to plug-in electric vehicles

Cybersecurity is a top priority of the utility industry because it impacts reliability of service

Electric utilities are working with regulators and smart grid technology companies to ensure the smart grid provides value for consumers.

Smart Meter Movie