ISSUE BRIEF

February 2010

Smart Grid

Summary
Smart grid investments into the electric grid are often touted by the national news media, in Congress and the Administration. However, there is often confusion about what the term means and often the reference to smart grid intimates utilities and the electric power delivery system are not functioning well, when, in fact, we have an outstanding record of reliability. To the American Public Power Association (APPA), smart grid means utilizing our existing infrastructure to its fullest potential. In the past, technological advancements have been focused on actual assets like transmission lines, substations and the power plants. More recently the focus in Congress, the Administration, and the media seems to have turned to getting the latest and greatest, as fast as possible and typically centered on the consumers home. While we agree that advancing technologies have the ability to do more and make us smarter about what is going on, the industry (and how we use energy) does not often get credit for many of the concepts already in place that make the grid run smartly. Electric utilities are also concerned that every small advancement in technology be cost-effective and ready for commercial deployment. It is also important to note a difference between electric and telecommunications technologieswhile speed and impact are considered best in terms of advancements in information technology, the best advancements for electric utilities are centered on safety and connectivity. Technological advancements can often significantly improve the response to any disruption on the grid, and improving safety for our employees and public is of the utmost importance to our operations.

Despite these concerns, APPA believes there is a strong role for the implementation of smart grid technologies as long as they are proven and cost-effective. Many of APPAs members are leaders in implementing such workable technology.

Background
APPA and its members have struggled with the amorphous definition of smart grid and the subsequent confusion this has often caused in Congress and the Administration involving both policy and funding matters. APPA recently released a document entitled Smart Grid Essentials. The intent of this document is to explain what smart grid is and what it can do to help consumers, distribution systems, transmission systems and generation operations. The document highlights the changing relationship between the utility and the consumer. In the past, the electric utility industry operated in a linear fashion: utilities generated electricity that was then transmitted first over transmission and then over distribution lines to the end-use retail customer. With evolving technology, including distributed generation, renewable generation, increased ability to store electricity, and two-way meter communications, the user and utility can interact and modify consumption, impacting overall demand for electricity over time. When APPAs members were surveyed regarding their major objectives for implementing smart grid technologies, they responded as follows: (1) maximize the effective use and investment in existing grid assets; (2) bring more detailed information about end-use loads (i.e., demand) and their effects on the system into utility operations; (3) coordinate capabilities of highload appliances, consumers and distributed generation

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in order to assist in maintaining high system reliability while reducing customer costs; and (4) improve the process of balancing energy supply with real-time demands to minimize utility operating costs through more effective load control and response. Components of the electric grid that already exist or are in place that are expected to grow as technology advances include: (1) intelligent home area networks and appliances; (2) advanced metering systems; (3) two-way communication between customer networks and the utility; (4) processing of real-time information about generation, distribution and transmission systems; (5) use of data and system controls to integrate customer load into the distribution, transmission and generation optimization process; (6) continued education of the consumer to take advantage of the information and choices available and; (7) data and information flow across the utility. For those in the utility business, these concepts are not new. However, improvements to these areas certainly can make electrical systems smarter.

communications, and distribution automation; integration of advanced electricity storage and peak-shaving technologies; and development of standards. With those characterizations, the legislation established The Smart Grid Investment Grant Program under which the Department of Energy would reimburse up to 20 percent of qualifying smart grid investments. The American Recovery and Reinvestment Act of 2009 boosted this program by providing $4.4 billion that is open to utilities involved in smart grid development. The legislation also expanded opportunities for smart grid demonstrations that had a 50 percent cost-share requirement and provided $100 million for worker training for green jobs. A number of APPA members have received grants under these programs. It has also become increasingly apparent that new smart grid technologies will have ramifications for grid security and for how electric utilities might be regulated in the future. These issues will continue to be explored in Congressthe cyber security of the grid has already drawn intense congressional scrutiny over the last few years.

Congressional Action
During the 110th Congress, the Energy Independence and Security Act (EISA) of 2007 was signed into law. The goals of this legislation included fostering renewable fuels, increasing the energy efficiency of buildings and vehicles, and enhancing the nations energy independence. This legislation also includes a characterization of what Congress should deem smart grid increased use of digital information and controls technology; optimization of grid operations and resources; deployment and integration of distributed resources, including renewables; incorporation of demand response, demand-side resources, and energy-efficiency resources; integration of smart technologies (real-time, automated, interactive technologies that optimize the physical operation of appliances and consumer devices) for metering,

APPA Position
APPA believes there is a role for the implementation of smart grid technologies as long as they are proven and cost-effective. We agree that the federal government should play the lead role in defining exactly what smart grid means so lawmakers, media, stakeholders, utilities and their customers all have a common understanding of the term. Many public power systems are already investing in communications systems to homes, distribution automation, advanced meters, customer-side devices and other demand response applications that might be labeled as smart grid technologies. However, we also agree that many components of the system have yet to be developed.

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