In the background of news about the Clean Power Plan, and the energy sector more broadly, lurks a ubiquitous but sometimes nebulous phrase: grid modernization. What exactly is grid modernization? Clearly it involves modifications and updates to the electric grid, but what makes these changes so transformative?
Today’s electric grid and related policies are still based largely on a traditional model in which the utility is the primary decision maker who plans for, generates or purchases, and then delivers energy to meet the demands of retail customers. Customers’ involvement is limited to using, and of course paying for, this energy. While there have certainly been advances in the past decades, especially in the wholesale world (including the development of regional wholesale markets, the implementation of open access transmission policies, and the introduction of standardized interconnection procedures), the entire industry—both the wholesale and distribution sides—is in the process of undergoing a fundamental transformation. New technology and policy developments are disrupting the traditional model and creating a greater and more active role for energy consumers and a need for infrastructure upgrades and changes.
One of the main technological developments has been the emergence of Distributed Energy Resources (DERs). While there is not a universally agreed-upon definition of DERs, they are generally smaller power generators located close to the loads they serve (in contrast to large, centralized generation typical under the traditional model). DERs can include rooftop solar, small wind turbine systems, energy storage, and behind-the-meter generators. While DERs offer benefits, such as allowing for increased use of renewable generation and greater customer autonomy over energy choices, integrating these decentralized resources into the grid also raises technical, economic, and policy challenges. Net metering is one current example, with states across the country grappling with how to compensate retail consumers who generate power back into the grid. In the future, the emergence of electric vehicles, and the corresponding need for charging stations, will raise new questions about generating, distributing, and storing energy.
Policy changes are also giving energy consumers a greater role to play in the grid. Compensation for demand response (recently in the news as the Supreme Court upheld FERC’s demand response rule) allows energy consumers to be paid for curtailing their consumption during periods of high energy demand. In addition, efforts to reduce carbon emissions (such as through the CPP and the Paris Climate Agreement) are changing the resource portfolio of the United States. The increased reliance on variable renewable energy, such as solar and wind power, further necessitates grid modernization.
Given the myriad of interconnected technological, policy, and legal challenges, grid modernization will require the coordination of a diverse range of actors. The Department of Energy is currently undertaking the second installment of its Quadrennial Energy Review, which “will develop a set of findings and policy recommendations to help guide the modernization of the nation’s electric grid.” Beginning tomorrow in Austin, TX, the Department of Energy is holding a series of Regional Workshops seeking feedback on grid-related technical challenges and emerging policy issues.
