Grid Modernization Activities are Taking Off Nationwide

Grid modernization is on the upswing: Last year, 44 states plus the District of Columbia explored or took action on the issue — an increase of 60 percent over 2017.

The ongoing boost is due to a combination of lower investment costs, a growing urgency to strengthen vulnerable infrastructure and increased pressure from state regulators. That’s according to the latest “50 States of Grid Modernization” report by the NC Clean Energy Technology Center, which is affiliated with North Carolina State University.

“We’re seeing a lot of new states jump into this area because they see it as something they need to start working on,” Autumn Proudlove, the report’s co-author, tells BizTech. “The costs are coming down on those technologies, and there’s a lot of adoption happening across the country.”

Among those developments: new or revised policy proposals, energy storage targets and implementation of advanced metering infrastructure such as smart meters, communications networks and data management systems enabling two-way communication between utilities and customers.

Although costs and specifics have deterred or reduced some efforts, the investments’ long-term advantages continue to drive momentum.

“As we see increasing major storms, we’re seeing the reliability and resilience benefits of grid modernization,” says Proudlove, senior manager of policy research at the clean energy center, who addressed some key points of the report. 

Grid Modernization Studies Have Spiked

The number of related studies increased by 70 percent in 2018, a sign of potential developments to come.

The report — whose authors reviewed state utility commission dockets, legislative bills and news sources — found that Maryland, Nevada, and North Carolina completed independent studies focused on energy storage last year, while New York published an energy storage roadmap. Legislators in New Jersey and Virginia authorized studies on the topic.

“Of course, not all proposals are actually adopted, but the increase in activity shows that there is more conversation and there are more proposals under consideration,” Proudlove says. “We’re going to see more concrete action coming out of these pretty lengthy investigations.” 

Energy Storage Deployment Is a Main Focus

Producing and capturing energy for use at a later time — a process known as energy storage — is also driving much of the momentum, Proudlove says. The report notes that several states took steps to set or expand energy storage targets, including Nevada, New Jersey and New York.

The approach “can offer different ancillary service benefits, improve quality and retain reliability,” Proudlove says. Energy, she notes, can be “islanded” via battery storage, or in a microgrid, when the broader grid goes out during a natural disaster or blackout.

Still, Proudlove says, “a lot of states and utilities differ on how storage can offset the grid that is driving some of these questions more holistically — how the grid can be transformed to accommodate more distributed energy resources and how to achieve the same reliability.” 

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Utility-Driven Proposals Are Rising

Lawmakers aren’t the only ones pushing for change: “We’re starting to see more of these grid modernization plans being proposed by utilities,” Proudlove says, noting that the pitches can meet resistance or refusal if technology specifics and cost recovery methods aren’t addressed. “I think a lot of regulators are struggling with how to evaluate these proposals,” Proudlove says. “There’s a general need for more information and a framework to evaluate potential investments and determine what is in the common interest.”

It’s no surprise, then, that AMI proposals in Kentucky, Massachusetts and New Mexico were rejected in 2018, the report notes. Meanwhile, expansive grid modernization plans put forward by utilities in North Carolina, Rhode Island and Virginia were scaled back substantially. 

Performance-Based Regulation Is Driving Some Updates

A revenue model that rewards utilities’ performance against set goals — rather than cost-of-service regulation, where returns come from the level of capital investment — are on the rise as states seek to reduce costs and drive efficiencies.

Massachusetts regulators evaluated performance incentive mechanisms put forward by Eversource and National Grid, and the Hawaii Legislature enacted a bill requiring a transition to performance-based ratemaking, the report found. The approach is also being considered by Michigan and Minnesota lawmakers.

The concept is appealing because it can be customized to meet a state’s needs or goals. Targets, Proudlove notes, can range from reducing system peak demand to building electronic vehicle charging stations: “There are limitless opportunities in the metrics you can develop.”