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PJM©2010www.pjm.com
SMART GRID:REGULATORY CHALLENGES AND OPPORTUNITIES
Craig GlazerPJM Interconnection, L.L.C.Washington, D.C. USA
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KEY STATISTICSPJM member companies 550+millions of people served 51peak load in megawatts 144,644MWs of generating capacity 164,905 KMs of transmission lines 90,520GWh of annual energy 729,000generation sources 1,310square miles of territory 164,260area served 13 states + DCInternal/external tie lines 250
19% of U.S. GDP produced in PJM
6,038
substations
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Fuel Mix of Existing PJM Installed Generating Capacity
As of 12/31/2009
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Generation In the PJM Queue:
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Smart Grid: Key Ingredients
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Key Regulatory Ingredients
• Clear Government Policy• Complementary Regulatory Structure• Effectively Using Traditional Regulatory Tools• Devising New Regulatory Tools• Harmonizing Federal/State Approaches
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Key Ingredient #1---Govt. Policy
2007 Energy Independence Act: “It is the policy of the United States to support
the modernization of the Nation's electricity transmission and distribution system to maintain a reliable and secure electricity infrastructure that can meet future demand growth and to achieve each of the following, which together characterize a Smart Grid:”
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Key Ingredient #1---Government Policy
Smart Grid Features: • (1) Increased use of digital information and
controls technology to improve reliability, security , and efficiency of the electric grid.
• (2) Dynamic optimization of grid operations and resources, with full cyber-security .
• (3) Deployment and integration of distributed resources and generation, including renewable resources.
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Key Ingredient #1—Government Policy
• (4) Development of demand-side resources and energy -efficiency resources.
• (5) Deployment of `smart' technologies for metering, communications concerning grid operations and status, and distribution automation.
• (6) Integration of `smart' appliances
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Key Ingredient #1---Government Policy
• (7) Deployment and integration of advanced electricity storage and peak-shaving technologies, including plug-in electric and hybrid electric vehicles, and thermal-storage air conditioning.
• (8) Provision to consumers of timely information and control options.
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Key Ingredient #1---Government Policy
• (9) Development of standards for communication and interoperability
• (10) Identification and lowering of unreasonable or unnecessary barriers to adoption of smart grid technologies, practices, and services.
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Key Ingredient #1---Government Policy
• U.S. Model of Concurrent Jurisdiction• Energy Independence Act of 2007:
– Smart Grid Vision– Development of interoperability standards– Federal assignment to states on price responsive
demand– Incentive returns for smart grid– Regulatory approval of “consensus” standards
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Key Ingredient #2---Sound Regulatory Structure
• Use Existing Tools Effectively• Development of New Regulatory
Tools • Federal Matching Grants• Federal Interoperability Protocols• Cyber Security Protections and Regulatory
Structure
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Traditional Regulatory Paradigm
Distribution and Transmission Improvements– Recovered on Cost + Basis– Standard for rate base inclusion: “Used and Useful”– No “single issue” ratemaking
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Traditional Regulatory Paradigm
Features:• Predictability of Return Once in Rate Base• Technology Risk Borne by Utility• Performance Risk Borne by Consumer• Deployment driven by regulatory directive:
– CAIFI, SAIFI, SAIDI indices
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Traditional Regulatory Paradigm
Disadvantages of Traditional Paradigm:• No accelerated return• Rolled in return on investment• Prudence risk• Disincentives for deployment of cutting edge
technology• Deployment often company by company: no
national or state policy
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U.S. Regulatory Challenges
Disruptive Technology– The Google Model– Discounted role of the utility– Issues re: proprietary role of the
utility– Open Network Architecture
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U.S. Regulatory Challenges
Need for Complementary Regulation– Communications regulation– Monopoly regulation– Price regulation– Cyber security regulation– State regulation– Customer education
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U.S. Regulatory Challenges
• Federal Stimulus Monies Used for Deployment• Differing visions of role of Smart Grid:
– Outage Management– Advanced Meter Reading– Demand Side Response
• Cyber Security Threats
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AVOIDING THE QUAGMIRE OF INACTION
“Hanging in mid-air”: a dangerous place
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LET’s TALK
Craig GlazerVice President-Federal Government PolicyPJM InterconnectionWashington, D.C. [email protected]
