[Senate Hearing 111-13]
[From the U.S. Government Publishing Office]
S. Hrg. 111-13
SMART GRID INITIATIVES AND TECHNOLOGIES
=======================================================================
HEARING
before the
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
TO
EXAMINE THE PROGRESS ON SMART GRID INITIATIVES AUTHORIZED IN THE ENERGY
INDEPENDENCE AND SECURITY ACT OF 2007, AND FUNDED IN THE STIMULUS BILL,
AND TO LEARN OF OPPORTUNITIES AND IMPEDIMENTS TO TIMELY INSTALLATION OF
SMART GRID TECHNOLOGIES
__________
MARCH 3, 2009
Printed for the use of the
Committee on Energy and Natural Resources
U.S. GOVERNMENT PRINTING OFFICE
48-648 PDF WASHINGTON : 2009
----------------------------------------------------------------------
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512�091800
Fax: (202) 512�092104 Mail: Stop IDCC, Washington, DC 20402�090001
COMMITTEE ON ENERGY AND NATURAL RESOURCES
JEFF BINGAMAN, New Mexico, Chairman
BYRON L. DORGAN, North Dakota LISA MURKOWSKI, Alaska
RON WYDEN, Oregon RICHARD BURR, North Carolina
TIM JOHNSON, South Dakota JOHN BARRASSO, Wyoming
MARY L. LANDRIEU, Louisiana SAM BROWNBACK, Kansas
MARIA CANTWELL, Washington JAMES E. RISCH, Idaho
ROBERT MENENDEZ, New Jersey JOHN McCAIN, Arizona
BLANCHE L. LINCOLN, Arkansas ROBERT F. BENNETT, Utah
BERNARD SANDERS, Vermont JIM BUNNING, Kentucky
EVAN BAYH, Indiana JEFF SESSIONS, Alabama
DEBBIE STABENOW, Michigan BOB CORKER, Tennessee
MARK UDALL, Colorado
JEANNE SHAHEEN, New Hampshire
Robert M. Simon, Staff Director
Sam E. Fowler, Chief Counsel
McKie Campbell, Republican Staff Director
Karen K. Billups, Republican Chief Counsel
C O N T E N T S
----------
STATEMENTS
Page
Bingaman, Hon. Jeff, U.S. Senator From New Mexico................ 1
Butler, Frederick F., President, National Association of
Regulatory Utility Commissioners, Newark, NJ................... 32
Gaddis, Evan R., President and CEO, National Electrical
Manufacturers Association, Rosslyn, VA......................... 47
Gallagher, Patrick D., Ph.D., National Institute of Standards and
Technology, Department of Commerce............................. 16
Hamilton, Katherine, President, Gridwise Alliance................ 38
Hoffman, Patricia, Acting Assistant Secretary for Electricity
Delivery and Energy Reliability, Department of Energy.......... 11
Kelly, Suedeen G., Commissioner, Federal Energy Regulatory
Commission..................................................... 4
Lu, Edward, Advanced Projects Program Manager, Google, Inc.,
Mountain View, CA.............................................. 43
Murkowski, Hon. Lisa, U.S. Senator From Alaska................... 2
Standish, Thomas R., Group President, Regulated Operations,
CenterPoint Energy, Inc........................................ 58
Udall, Hon. Mark, U.S. Senator From Colorado..................... 2
APPENDIX
Responses to additional questions................................ 61
SMART GRID INITIATIVES AND TECHNOLOGIES
----------
TUESDAY, MARCH 3, 2009
U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC.
The Committee met, pursuant to notice, at 10:04 a.m. in
room SD-106, Dirksen Senate Office Building, Hon. Jeff
Bingaman, Chairman, presiding.
OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR FROM NEW
MEXICO
The Chairman. OK, why don't we get started.
This morning's hearing is on a topic that most of us had
not even heard of a few years ago, but today is widely
discussed here in Washington and around the country, and that
is the smart grid.
Briefly understood, this phrase refers to the digitization
of the transmission and delivery systems for electricity in
order to make maximum use of modern technologies. We're told
that smart grid technologies can make the transmission system
more efficient, reducing line loss, reducing congestion, which
cause higher costs. We're also told that it can make the
transmission distribution systems more reliable by allowing
quicker response to failures in the event of emergencies.
Further, the customers can take advantage of computerized
meters and appliances to reduce demand at peak hours through
shifting load to off-peak hours. This reduces the need for peak
generation, reducing emissions and lowering costs.
In 2007, we initiated a number of programs to further the
digitization of the grid. In the Energy Independence and
Security Act that President Bush signed in December 2007, we
required the Department of Energy to form a Smart Grid Task
Force to track developments and advance this program. We
required the National Institute of Standards and Technology, in
cooperation with the Department of Energy and the Federal
Energy Regulatory Commission, to head up an effort to develop
an interoperability framework to establish uniform standards
for these technologies.
We also authorized a grant program for demonstration
projects to better understand the potential for smart grid
benefits and to come to understand the problems that might
attend actual installation on a commercial scale. We authorized
a grant program for investments in the installation,
development, and manufacture of these technologies.
In the American Recovery and Reinvestment Act, just passed
2 weeks ago, we funded these grant programs. Witnesses are here
today to report on the progress thus far in implementing these
programs. Government witnesses are able to testify as to the
steps taken to get the interoperability framework underway, as
well as how the funding for the grant programs is being
prioritized and administered. Industry witnesses can give their
perspectives on these same programs. We're anxious to know
whether or not we have gotten it right, as far as the structure
of the programs go, and whether there are additional actions we
need to take to move the country to a smart grid.
Let me call on Senator Murkowski for any comments she has.
[The prepared statement of Senator Mark Udall follows:]
Prepared Statement of Hon. Mark Udall, U.S. Senator From Colorado
Thank you, Mr. Chairman, for today's hearing on smart grid
technology.
Smart grid technology will play a critical role in making all
Americans smarter and better informed about how we use our energy. By
providing up-to-the minute information about how much energy each
individual is using and conveying the price at that moment for that
energy, this technology allows consumers to be the ultimate
decisionmakers about their energy use.
We are not there quite yet. There is much more to accomplish
regarding smart grid technology as well as the regulations and policies
that govern how energy information is available to consumers. But with
this hearing and a growing national awareness, we are on the right
track.
Specifically, I believe that if we have the right partnership of
government, NGO's and businesses, we can promote and embrace current
energy efficient technology, and also spur the development of new
advances that will save future generations even more.
Colorado is already leading the way with such a partnership through
SmartGridCity.
Xcel Energy, local government officials, and many others
transformed Boulder, Colorado into a community of the future. Some
Boulder residents can now program their dishwashers to start when
energy prices are low from their blackberries. Or use energy stored in
a hybrid car battery to wash clothes.
One important point to emphasize about the SmartGridCity is that
the Federal Government has not contributed to the approximately $100
million cost. The fact that private, profit-driven companies put so
much money toward this experiment shows just how promising this
technology is.
Smart grid is the future and the program in Boulder demonstrates
daily how much potential this technology has. We need SmartGrid Cities
in every state across the U.S. Today's hearing will help us get there.
I look forward to hearing from the witnesses and would like to thank
them for being here today.
STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR
FROM ALASKA
Senator Murkowski. Thank you, Mr. Chairman. Thank you for
convening this hearing. You put us in a bigger room to
accommodate all those that are so interested in what we're
discussing this morning: the smart grid.
Smart grid, like shovel-ready and green jobs, is what
everyone's talking about nowadays. I think that that's a good
thing, but I think we need to ask the question, Are we all
talking about the same thing? Some appear to confuse the idea
of making our electrical grid smarter with making it bigger. We
know that smart grid is not the buildout of miles and miles of
high-voltage transmission lines; instead, it's--what we're
really talking about is a potential transformation in how we
use and deliver electricity.
As you note, Mr. Chairman, we saw this potential, back in
2007, with passage of the smart grid provisions in the Energy
Independence and Security Act. In that bill we recognized that
our national security efforts must include the modernization of
the nation's electrical infrastructure. Senator Cantwell worked
very hard on this and was a real leader in it.
The promises of a smarter grid are many. Consumers will be
able to monitor in real time the amount, price, and even source
of the electricity that they consume. Discussion about, you
know, your dishwasher being smarter than you are, in terms of
when it's going to run and how much energy it will consume.
Plug-in hybrid vehicles will be able to store electricity, and
a more flexible network should be better able to handle the
intermittent nature of renewable resources. Utilities will be
able to locate, isolate, and restore power outages more
quickly.
At the same time, we recognize that a smarter grid poses
some new challenges. There are several. The lack of an
interoperability framework. It was just last week that
Secretary of Energy Chu cited the lack of standards and
protocols necessary to allow different systems to communicate
with one another as the biggest roadblock in the advancement of
smart grid technology.
Another issue is cyber-security. Smart grid technologies
are supposed to result in a more reliable and secure grid, but
if cyber-security issues are not addressed, we could be making
ourselves, perhaps, more vulnerable to cyber-attacks.
Then, there's also the issue about public acceptance. Is
the average consumer willing to pay the up-front costs of a new
system, and then respond appropriately to the price signals?
Or, you know, if people are told, or understand, that a utility
may be able to reach inside their home to turn down a
thermostat, is that just too much? Is that just a place where
people are not ready to go?
Now, as we all know, the stimulus bill provided $4.5
billion in funding for smart grid activities. I will tell you,
Mr. Chairman, I'm concerned with our government's ability to
process this unprecedented amount of money in a meaningful way.
How can this funding best be allocated to advance our smart
grid technologies?
Without an interoperability framework in place before these
funds are expended, do we risk making investments in technology
that may perhaps become obsolete?
I want to thank the witnesses on this first panel, and on
the second, as well. Look forward to your testimony and getting
your thoughts on the issues that I have outlined.
Thank you, Mr. Chairman.
[The prepared statement of Senator Murkowski follows:]
Prepared Statement of Hon. Lisa Murkowski, U.S. Senator From Alaska
Good morning. Thank you all for being here today. And thank you to
Chairman Bingaman for convening this hearing on the timely topic of
Smart Grid.
The term ``Smart Grid,'' like ``shovel ready'' and ``green jobs''
is now part of our lexicon. Millions of people saw GE's Smart Grid
commercial during the Superbowl. It seems like everyone is talking
about Smart Grid these days.
But are we all talking about the same thing? Some appear to confuse
the idea of making our electrical grid ``smarter'' with making it
``bigger.'' Smart Grid is not the build out of miles and miles of high
voltage transmission line. Instead, what we're really taking about is a
potential transformation in how we use and deliver electricity.
Congress saw this potential back in 2007 with passage of the Smart
Grid provisions in Title XIII of the Energy Independence and Security
Act. In that bill, we recognized that our national security efforts
must include the modernization of the nation's electrical
infrastructure. [I see the Senator from Washington is here today. I
know this is an issue Senator Cantwell has worked very hard on and I'd
like to thank her for her efforts].
NOTE: Washington state is home to Itron, a Smart Meter manufacturer
and Schweitzer Engineering Labs, which makes digital relay switching
devices.
The promises of a smarter grid are many:
consumers will be able to monitor in real time the amount,
price, and even source of the electricity they consume. With
two-way grid communication, the dishwasher may choose to run
when electricity is less expensive or maybe the washing machine
won't turn on until wind power is available;
plug-in hybrid electric vehicles will be able to store
electricity and a more flexible network should be better able
to handle the intermittent nature of renewable resources; and
utilities will be able to locate, isolate and restore power
outages remotely and quickly.
At the same time, a smarter grid poses some new challenges, such
as:
The lack of an Interoperability Framework--last week, DOE
Secretary Chu cited the lack of standards and protocols
necessary to allow different systems to communicate with one
another as the biggest roadblock to the advancement of Smart
Grid technology;
Cyber Security--Smart Grid technologies are supposed to
result in a more reliable and secure grid but if cyber security
issues are not addressed, we could be making ourselves more
vulnerable to cyber attacks; and
Public Acceptance--is the average consumer willing to pay
the upfront costs of a new system and then respond
appropriately to price signals? Or will people view a utility's
ability to reach inside a home to turn down a thermostat as
Orwellian?
As we all know, the Stimulus bill provided $4.5 billion in funding
for Smart Grid activities. I am concerned with the government's ability
to process this unprecedented amount of money in a meaningful way. How
can this funding best be allocated to advance Smart Grid technologies?
Without an Interoperability Framework in place before these funds are
expended, do we risk making investments in technology that may soon
become obsolete?
I'd like to thank all of our witnesses for joining us today. I look
forward to hearing your testimony and getting your thoughts on the
issues I have outlined. Mr. Chairman, thank you again for convening
this important hearing.
The Chairman. Thank you very much.
Let me just introduce our first panel. First is Honorable
Suedeen Kelly, who is a commissioner with FERC. Thank you very
much for being here. Patricia Hoffman is principal deputy
assistant secretary in the Office of Electricity Delivery and
Energy Reliability at the Department of Energy. Patrick
Gallagher is here representing the National Institute of
Standards and Technology.
So, why don't we just have you proceed in that order, if
you could each take maybe about 6 minutes and tell us the main
points we need to understand about this issue. I'm sure we'll
have questions.
Thank you.
STATEMENT OF SUEDEEN G. KELLY, COMMISSIONER, FEDERAL ENERGY
REGULATORY COMMISSION
Ms. Kelly. Mr. Chairman and members of the committee, thank
you very much for the opportunity to speak here today.
My testimony addresses FERC's efforts to develop and
implement smart grid technology. I will summarize them now,
and, at the end, highlight a few issues that we see in our
future.
Our Nation's electricity grid generally depends on decades-
old technology and has not incorporated new digital
technologies extensively. Introducing digital technology to the
grid can transform it by providing benefits to the electric
industry and its customers, enhancing the grid's efficiency,
and enabling its technological advancement, while ensuring its
reliability and security.
I'd like to talk about several of our roles in this effort.
The first is our interoperability role.
Deployment of smart grid involves a broad range of
government agencies at both the Federal and State levels.
FERC's primary responsibility is to promulgate interoperability
standards through a rulemaking once FERC is satisfied that
NIST's work on the development of these standards has reached
sufficient consensus.
Development of the interoperability framework is, indeed, a
challenging task. Well-designed standards and protocols are
needed to make smart grid a reality. Recent funding for NIST's
efforts will help, but coordination and cooperation among
government agencies and industry participants is just as
important. DOE, NIST, and FERC have been working with each
other for the last year, and with other Federal agencies, to
ensure progress, and those efforts will continue.
Second, I'd like to talk about our collaborative efforts. A
year ago, FERC and the National Association of Regulatory
Utility Commissioners, the State regulatory commissioners,
began a collaborative on smart grid. I and Commissioner Butler,
of the New Jersey Board of Public Utilities, who will be
speaking on the next panel, co-chair that collaborative. FERC
and NARUC started this effort because we understood that
smartening the grid will cut across traditional jurisdictional
boundaries, and therefore, State and Federal regulators should
work together to ensure interoperability across the boundaries,
and coordination of information on smart grid technology and
deployment, as well as coordination of policies.
Currently, the collaborative has begun to develop criteria
that participating regulators would like to see DOE use in
applying to projects seeking smart grid grants under the
stimulus bill funding. The collaborative members are focusing
on criteria that would help them fulfill their responsibility
as to the smart grid projects they will be asked to approve.
Now, our efforts on fostering deployment of smart grid. The
Energy Policy Act of 2005, Section 1223, directs FERC to
encourage the deployment of advanced transmission technologies,
and expressly includes technologies related to the smart grid
in that section. Examples include energy storage devices,
controllable load, enhanced power device monitoring, and direct
system-state sensors.
FERC can use its existing authority under the Federal Power
Act to help facilitate implementation of smart grid technology.
For example, FERC could provide rate incentives for appropriate
smart grid projects, and can provide guidance on appropriate
cost recovery for these projects. Providing clear guidance on
the types of smart grid costs recoverable in rates and the
procedures for seeking rate recovery may eliminate a major
concern for utilities that are considering making these
investments.
A critical issue as smart grid is deployed is the need to
ensure grid reliability and cybersecurity. The interoperability
framework and the technology itself must leave no gaps in
physical security or cybersecurity. Reliability and security
must be built into smart grid devices and not added later. The
significant benefits of smart grid technologies must be
achieved without taking reliability and security risks that
could be exploited.
Another area for initial emphasis could be standards that
promote common software semantics throughout the industry.
These would enable realtime coordination of information from
both demand and supply resources.
The next level for prioritization could include standards
related to key challenges now confronting our grid, or that
will soon confront our grid, including, integrating more
intermittent renewables into the grid and accommodating plug-in
electric vehicles. Accordingly, we might suggest a priority for
development of standards permitting system operators to rely on
automated demand resources, emerging electric storage
technologies, and technologies such as phase or measurement
units for wide area system awareness and congestion management.
Another area could be standards for the charging of plug-in
electric vehicles.
As to future issues, concerns about access to, and security
of, smart grid control systems and data must be resolved. For
example, as I mentioned earlier, consumers need realtime data
on how and when their electricity usage is affected. Both
demand-and supply related information.
This data could also be valuable to various business
entities to enable them to better design technology that helps
consumers make smarter decisions about their electricity use.
This data may also be helpful to regulators seeking to better
understand the cost-benefit equation of smart grid technology.
In making this data available, we must take a number of things
into account, including privacy concerns, authorized
dissemination, and possible marketing of the data, as well as
concerns about information that might enable the identification
of critical energy infrastructure, something that we don't want
to have occur.
A final issue involves enforcement of the smart grid
interoperability standards that FERC will promulgate under the
Energy Independence and Security Act. This section in the
Energy Independence and Security Act is a standalone provision
of law. In other words, it's not an amendment to the Federal
Power Act. So, it does not provide that these standards are
mandatory, and it does not provide authority or processes for
enforcing them. FERC can use some existing authority in the
Federal Power Act to require some, but not all, entities to
comply with the standards.
In terms of ensuring compliance, FERC's ratemaking
authority applies to FERC jurisdictional public utilities, but,
of course, not all the public utilities in America. Our
mandatory reliability authority applies to users, owners, and
operators of the bulk power system, but not the rest of the
electric system.
FERC's authority generally excludes local distribution
facilities, and our reliability authority requires FERC to
refer standards to NERC's standard-setting process before they
can be mandated. If Congress intends for the smart grid
standards to be mandatory beyond the scope of the Federal Power
Act, then additional legislation should be considered.
Thank you, again, for the opportunity to testify today. I'd
be happy to answer any questions you have.
[The prepared statement of Ms. Kelly follows:]
Prepared Statement of Suedeen G. Kelly, Commissioner, Federal Energy
Regulatory Commission
INTRODUCTION AND SUMMARY
Mr. Chairman and members of the Committee, thank you for the
opportunity to speak here today. My name is Suedeen Kelly, and I am a
Commissioner on the Federal Energy Regulatory Commission (FERC or
Commission). My testimony addresses the efforts to develop and
implement a range of technologies collectively known as the ``Smart
Grid.''
Our nation's electric grid generally depends on decades-old
technology, and has not incorporated new digital technologies
extensively. Digital technologies have transformed other industries
such as telecommunications. A similar change has not yet happened for
the electric grid. As detailed below, a Smart Grid can provide a range
of benefits to the electric industry and its customers, enhancing its
efficiency and enabling its technological advancement while ensuring
its reliability and security.
Smart Grid efforts involve a broad range of government agencies, at
both the Federal and state levels. The Federal agencies include
primarily the Department of Energy (DOE), the National Institute of
Standards and Technology (NIST) and FERC. DOE's tasks include awarding
grants for Smart Grid projects and developing a Smart Grid information
clearinghouse. NIST has primary responsibility for coordinating
development of an ``interoperability framework'' allowing Smart Grid
technologies to communicate and work together. FERC is then responsible
for promulgating interoperability standards, once FERC is satisfied
that NIST's work has led to sufficient consensus.
Development of the interoperability framework is a challenging
task. Recent funding for NIST's efforts will help, but cooperation and
coordination among government agencies and industry participants is
just as important. DOE, NIST and FERC have been working with each other
and with other Federal agencies to ensure progress, and those efforts
will continue. FERC also has been coordinating with state regulators,
to address common issues and concerns.
FERC can use its existing authority to facilitate implementation of
Smart Grid. For example, FERC can provide rate incentives for
appropriate Smart Grid projects, and can provide guidance on cost
recovery for such projects.
A critical issue as Smart Grid is deployed is the need to ensure
grid reliability and cyber security. The significant benefits of Smart
Grid technologies must be achieved without taking reliability and
security risks that could be exploited to cause great harm to our
Nation's citizens and economy.
Finally, if the intent of Congress is for the Smart Grid standards
to be mandatory beyond the scope of the Federal Power Act, additional
legislation should be considered.
EISA
Section 1301 of the Energy Independence and Security Act of 2007
(EISA) states that ``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'' a
number of benefits. Section 1301 specifies benefits such as: increased
use of digital technology to improve the grid's reliability, security,
and efficiency; ``dynamic optimization of grid operations and
resources, with full cyber-security;'' facilitation of distributed
generation, demand response, and energy efficiency resources; and
integration of ``smart'' appliances and consumer devices, as well as
advanced electricity storage and peak-shaving technologies (including
plug-in hybrid electric vehicles).
Section 1305(a) of EISA gives NIST ``primary responsibility to
coordinate the development of a framework that includes protocols and
model standards for information management to achieve interoperability
of smart grid devices and systems.'' NIST is required to solicit input
from a range of others, including the GridWise Architecture Council and
the National Electrical Manufacturers Association, as well as two
international bodies, the Institute of Electrical and Electronics
Engineers and the North American Electric Reliability Corporation
(NERC). Many of the organizations working with NIST on this issue
develop industry standards through extensive processes aimed at
achieving consensus.
Although EISA does not define interoperability, definitions put
forth by others often include many of the same elements. These include:
(1) exchange of meaningful, actionable information between two or more
systems across organizational boundaries; (2) a shared meaning of the
exchanged information; (3) an agreed expectation for the response to
the information exchange; and (4) requisite quality of service in
information exchange: reliability, accuracy, security. (See GridWise
Architecture Council, ``Interoperability Path Forward Whitepaper,''
www.gridwiseac.org
Pursuant to EISA section 1305, once FERC is satisfied that NIST's
work has led to ``sufficient consensus'' on interoperability standards,
FERC must then ``institute a rulemaking proceeding to adopt such
standards and protocols as may be necessary to insure smart-grid
functionality and interoperability in interstate transmission of
electric power, and regional and wholesale electricity markets.''
Section 1305 does not specify any other prerequisites to Commission
action, such as a filing by NIST with the Commission or unanimous
support for individual standards or a comprehensive set of standards.
FERC's role under EISA section 1305 is consistent with its
responsibility under section 1223 of the Energy Policy Act of 2005.
Section 1223 directs FERC to encourage the deployment of advanced
transmission technologies, and expressly includes technologies such as
energy storage devices, controllable load, distributed generation,
enhanced power device monitoring and direct system state sensors.
SMART GRID TASK FORCE
As required by EISA section 1303, DOE has established the Smart
Grid Task Force. The Task Force includes representatives from DOE,
FERC, NIST, the Environmental Protection Agency and the Departments of
Homeland Security, Agriculture and Defense. The Task Force seeks to
ensure awareness, coordination and integration of Federal Government
activities related to Smart Grid technologies, practices, and services.
The Task Force meets on a regular basis, and has helped inform the
participating agencies on the Smart Grid efforts of other participants
as well as the efforts outside the Federal Government.
SMART GRID COLLABORATIVE
A year ago, FERC and NARUC began the Smart Grid Collaborative. I
and Commissioner Frederick F. Butler of the New Jersey Board of Public
Utilities co-chair the collaborative. The collaborative was timely
because state regulators were increasingly being asked to approve pilot
or demonstration projects or in some cases widespread deployment in
their states of advanced metering systems, one key component of a
comprehensive Smart Grid system.
The Collaborative began by convening joint meetings to hear from a
range of experts about the new technologies. A host of issues were
explored. Key among them were the issues of interoperability, the types
of technologies and communications protocols used in Smart Grid
applications, the sequence and timing of Smart Grid deployments, and
the type of rate structures that accompanied Smart Grid projects.
Through these meetings, Collaborative members learned of a range of
Smart Grid projects already in place around the country. The Smart Grid
programs in existence were varied in that they used a mix of differing
technologies, communications protocols and rate designs. Collaborative
members began discussing whether a Smart Grid information clearinghouse
could be developed that would then allow an analysis of best practices.
This information could help regulators make better decisions on
proposed Smart Grid projects in their jurisdictions. As discussed
below, recent legislation requires DOE to establish such a
clearinghouse.
The Collaborative members have begun to look beyond the information
clearinghouse to who could best analyze this information to identify
best practices from Smart Grid applications. The Collaborative has met
with staff from DOE to discuss possible funding for a project under the
auspices of the Collaborative that could act as an analytical tool to
evaluate Smart Grid pilot programs, using the information developed by
the clearinghouse. This issue is still being explored.
THE STIMULUS BILL
The American Recovery and Reinvestment Act of 2009 (the ``Stimulus
Bill'') appropriated $4.5 billion to DOE for ``Electricity Delivery and
Energy Reliability.'' The authorized purposes for these funds include,
inter alia, implementation of programs authorized under Title XIII of
EISA, which addresses Smart Grid. Smart Grid grants would provide
funding for up to 50 percent of a project's documented costs. In many
cases, state and/or Federal regulators could be asked to approve
funding for the balance of project costs. The Secretary of Energy is
required to develop procedures or criteria under which applicants can
receive such grants. The Stimulus Bill also states that $10 million of
the $4.5 billion is ``to implement
[EISA] section 1305,'' the provision giving NIST primary
responsibility to coordinate the development of the interoperability
framework.
The Stimulus Bill also directs the Secretary of Energy to establish
a Smart Grid information clearinghouse. As a condition of receiving
Smart Grid grants, recipients must provide such information to the
clearinghouse as the Secretary requires.
As an additional condition, recipients must show that their
projects use ``open protocols and standards (including Internet-based
protocols and standards) if available and appropriate.'' These open
protocols and standards, sometimes also referred to as ``open
architecture,'' will facilitate interoperability by allowing multiple
vendors to design and build many types of equipment and systems for the
Smart Grid environment. As the GridWise Architecture Council stated,
``An open architecture encourages multi-vendor competition because
every vendor has the opportunity to build interchangeable hardware or
software that works with other elements within the system.'' (See
``Introduction to Interoperability and Decision-Maker's Checklist,''
page 4, www.gridwiseac.org.)
The Collaborative has begun discussing additional criteria that
regulators would like to see applied to projects seeking Smart Grid
grants. The Collaborative members are focusing on criteria that could
help them fulfill their legal responsibilities as to Smart Grid
projects they would be asked to approve. For example, cost-
effectiveness could be a key criterion and could inform regulatory
decisions on rate recovery issues. Upgradeability could be another
criterion. Once the Collaborative reaches consensus on the criteria,
the Collaborative intends to ask the Secretary of Energy to consider
its recommended criteria.
INITIAL DEPLOYMENTS ARE STILL IN PROGRESS
Initial efforts to use Smart Grid technologies are still being
implemented and analyzed. Even comprehensive pilot projects such as
Xcel's project in Boulder, Colorado (which includes smart meters, in-
home programmable control devices, smart substations and integration of
distributed generation), are in the early stages of development and
data gathering. Thus, it is too early to assess the ``lessons learned''
from such efforts.
A particularly interesting project, however, is under development
by Pepco Holdings, Inc. (PHI). At the transmission level, Smart Grid
can be equated with wide-spread deployment of advanced sensors and
controls and the high-speed communications and IT infrastructure needed
to fully use the additional data and control options to improve the
electric system's reliability and efficiency. PHI's proposal follows
this model. In a filing with FERC seeking approval of incentive rates,
PHI committed to promote interoperability through insistence ``upon
open architecture, open protocols and `interoperability''' when dealing
with potential vendors, and to adhere to ``available standards which
have been finalized, proven, and have achieved some levels of broad
industry acceptance'' as much as possible for its Smart Grid
deployments. Furthermore, PHI committed to ``provide a method of
upgrading systems and firmware remotely (through the data network as
opposed to local/site upgrades) and ensure that unforeseen problems or
changes can be quickly and easily made by PHI engineers and system
operators on short notice.'' Adherence to such principles, along with
adequate consideration of cyber security concerns, is essential at this
early stage of Smart Grid development. The Commission granted incentive
rates for this project, and construction is expected to start in 2009.
NEXT STEPS
As Congress recognized in enacting EISA, the development of an
interoperability framework can accelerate the deployment of Smart Grid
technologies. The process of developing such a framework may take
significant time. NIST has primary responsibility for this task, and
must coordinate the efforts and views of many others. As a non-
regulatory agency, NIST is used to serving as a neutral mediator to
build consensus toward standards. Achieving consensus among the many,
diverse entities involved in Smart Grid may be difficult. Coordinated
leadership is needed to help minimize conflicting agendas and
unnecessary delay. The Stimulus Bill's funding will help NIST's
efforts, but may not guarantee quick achievement of the goals. In the
meantime, the Commission may be able to take steps to help hasten
development and implementation of Smart Grid technology. For example,
the Commission's day-to-day knowledge of the electric industry may
allow it to suggest aspects of the interoperability framework that
should be prioritized ahead of others. This prioritization may
facilitate progress on the Smart Grid technologies that will provide
the largest benefits for a broad group of participants.
An overarching approach for prioritization could focus initially on
the fundamental standards needed to enable all of the functions and
characteristics envisioned for the Smart Grid. This may include, for
example, standards for cyber security, since the electric grid and all
devices connected to it must be fully protected. This approach also may
include standards that promote common software semantics throughout the
industry, which would enable real-time coordination of information from
both demand and supply resources.
The next set of targets for prioritization could be standards
needed to enable key Smart Grid functionalities identified by relevant
authorities including FERC. For example, challenges associated with
integrating variable renewable resources into the generation mix and
reliably accommodating any new electric vehicle fleets could be
addressed, at least in part, through certain capabilities envisioned
for the Smart Grid. Accordingly, priority could be placed on the
development of: (1) standards permitting system operators to rely on
automated demand response resources to offset an unplanned loss of
variable generation such as wind turbines or to shift load into off-
peak hours with over-generation situations; (2) standards permitting
system operators to rely on emerging electric storage technologies for
similar purposes; (3) standards permitting transmission operators to
rely on technologies such as phasor measurement units for wide-area
system awareness and congestion management; and, (4) standards
permitting some appropriate control over the charging of plug-in hybrid
electric vehicles, particularly encouraging such charging to occur
during off-peak hours.
Even before NIST's work has led to sufficient consensus, the
Commission could provide rate incentives to jurisdictional public
utilities for early implementation of certain Smart Grid technologies,
if adequate steps are taken to ensure reliability and cyber security
while minimizing the risk of rapid obsolescence and ``stranded costs.''
The Commission also may be able to use its ratemaking authority, apart
from incentives, to encourage expansion of Smart Grid technologies.
Providing clear guidance on the types of Smart Grid costs recoverable
in rates, and on the procedures for seeking rate recovery, may
eliminate a major concern for utilities considering such investments.
While FERC, by itself, may be able to take steps such as these to
foster Smart Grid technologies, achieving the full benefits of a Smart
Grid will require coordination among a broad group of entities,
particularly DOE, NIST, FERC and state regulators. For example, DOE's
authority to support up to 50 percent of the cost of a Smart Grid
project may elicit little interest from utilities if they are uncertain
of their ability to recover the rest of their costs. Similarly,
Congress itself recognized, in EISA section 1305(a)(1), the need for
NIST to seek input from FERC, the Smart Grid Task Force established by
DOE and ``other relevant Federal and state agencies.'' Also, the
concurrent jurisdiction of FERC and state commissions over many
utilities will require regulators to adopt complementary policies or
risk sending conflicting regulatory ``signals.'' More fundamentally, a
Smart Grid will require substantial coordination between wholesale and
retail markets and between the Federal and state rules governing those
markets. Similarly, Smart Grid standards may require changes to
business practice standards already used in the industry, such as those
developed through NAESB, and the industry and government agencies
should support the work needed to evaluate and develop those changes.
Concerns about access to, and security of, Smart Grid control
systems and/or data also must be resolved. For example, data on how and
when individual customers use electricity could be valuable to various
commercial entities, but customers may have privacy concerns about
unauthorized dissemination or marketing of this data. Similarly,
generation owners and operators may be concerned about cyber access to
control systems that operate their facilities. Access to information
enabling the identification of critical energy infrastructure must also
be limited. Issues about who owns Smart Grid-generated data and the
security of some of its products are unresolved.
An additional issue involves enforcement of Smart Grid standards
promulgated by the Commission under EISA section 1305. This section,
which is a stand-alone provision instead of an amendment to the Federal
Power Act (FPA), requires FERC to promulgate standards, but does not
provide that the standards are mandatory or provide any authority and
procedures for enforcing such standards. If FERC were to seek to use
the full scope of its existing FPA authority to require compliance with
Smart Grid standards, this authority applies only to certain entities
(i.e., public utilities under its ratemaking authority in Sections 205
and 206, or users, owners and operators of the bulk power system under
its reliability authority in Section 215). FERC also has asserted
jurisdiction in certain circumstances over demand response programs
involving both wholesale and eligible retail customers. However, FERC's
authority under the FPA excludes local distribution facilities unless
specifically provided, its authority under sections 205 and 206 applies
only to public utilities, and its section 215 authority does not
authorize it to mandate standards but rather only to refer a matter to
NERC's standard-setting process. If the intent of Congress is for the
Smart Grid standards to be mandatory beyond the scope of the Federal
Power Act, additional legislation should be considered.
Finally, in developing and implementing Smart Grid technologies,
the electric industry and vendors must meet the critical need,
recognized by Congress in EISA section 1301, for grid reliability and
``full cyber-security.'' An entity subject to FERC-approved reliability
standards under FPA section 215 must maintain compliance with those
standards during and after the installation of Smart Grid technologies.
Also, the interoperability framework and the technology itself must
leave no gaps in physical security or cyber security. Reliability and
security must be built into Smart Grid devices, and not added later, to
avoid making the grid more vulnerable and to avoid costly replacement
of equipment that cannot be upgraded. The significant benefits of Smart
Grid technologies must be achieved without taking reliability and
security risks that could be exploited to cause great harm to our
Nation's citizens and economy.
CONCLUSION
A properly coordinated and timely deployment of Smart Grid can
provide many positive benefits to the Nation's electric industry and
its customers, if we are careful to maintain and enhance grid security
and reliability at the same time. Indeed, I would expect Smart Grid to
evolve in many unanticipated but beneficial ways. Well-designed
standards and protocols are needed to make Smart Grid a reality. They
will eliminate concerns about technology obsolescence, allow system
upgrades through software applications, and ultimately permit plug-and-
play devices, regardless of vendor. FERC is committed to working
closely with DOE, NIST and others to facilitate rapid deployment of
innovative, secure Smart Grid technologies.
Thank you again for the opportunity to testify today. I would be
happy to answer any questions you may have.
The Chairman. Thank you very much.
Ms. Hoffman, go right ahead.
STATEMENT OF PATRICIA HOFFMAN, ACTING ASSISTANT SECRETARY FOR
ELECTRICITY DELIVERY AND ENERGY RELIABILITY, DEPARTMENT OF
ENERGY
Ms. Hoffman. Mr. Chairman and members of the committee,
thank you for this opportunity to testify before you on the
Department's progress in advancing smart grid projects and
activities under title 13 of the Energy Independence and
Security Act and the American Recovery and Reinvestment Act.
A smart grid uses information technology to improve the
reliability, availability, and efficiency of electric systems
from large generation, including renewables, through the
delivery system to electricity consumers, and eventually to
individual end uses or appliances.
There are several guiding principles to the Department's
smart grid efforts. First is the need to establish quantitative
metrics for guiding the implementation of a smart grid. In June
2008, the Department sponsored a Smart Grid Implementation
Workshop, which brought together stakeholders from across the
country to discuss smart grid definitions, metrics, and
analysis. The Department envisions these metrics may become key
indicators for understanding progress toward implementing a
smart grid.
A second guiding principle is transparency. It is the
Department's intent to use every means at its disposal to keep
the public informed of, and involved in, the progress of smart
grid developments. There are several avenues for effective
communication and coordination to occur.
For example, the Federal Smart Grid Task Force, as required
by EISA, Section 1303, has met every month since March 2008 to
coordinate Federal activities. This coordination and
involvement included the Federal Energy Regulatory Commission,
the National Institute of Standards and Technology, the
Environmental Protection Agency, the Department of Homeland
Security, the United States Department of Agriculture, and the
Department of Defense.
Additionally, the Department is contributing to the efforts
of a NARUC-FERC smart grid collaborative by supporting the
development of a Web-based information clearinghouse to share
what is known about smart grid projects and foster a better
information exchange.
The Department is committed to moving smart grid standards
through the development processes and getting to them--getting
them to the point of adjudication by Federal and State
regulatory agencies as rapidly as possible by implementing EISA
Section 1305. The Department is working closely with NIST, who
has the primary responsibility to coordinate the development of
a framework for interoperability standards.
The cornerstone of a smart grid is the ability of multiple
agents--for example, devices--to interact with one another via
a communications network. The interaction of multiple devices,
and the benefit that that brings to the electric power system,
is what differentiates a smart grid from the existing system.
If not properly protected, the smart grid could be vulnerable
in areas including a breach of availability, a breach of data
integrity, or a breach of confidentiality.
Over the last 8 months, DOE has been working
collaboratively with the Utilities Communication Architectures
User Group to develop cyber-security requirements for advanced
metering infrastructure, AMI, a key application for the smart
grid. This work will help accelerate the development of cyber-
security requirements and other smart grid technologies.
Additionally, the Department is currently developing EISA
Section 1309, a study of the security attributes for a smart
grid system, for delivery to Congress by the end of the fiscal
year.
The Department envisions an electric system--generation,
delivery, and use--with the capability to measure and
understand performance on a realtime basis, to model and
analyze policy and regulatory objectives, and improve
resiliency. The Department's highest priorities are to
implement the recovery plan and accelerate the development of
interoperable open standards.
With respect to the Recovery Act, the Department is poised
to release two notices of intent in order to implement the
Smart Grid Investment Grant Program and the regional
demonstration projects, followed by a subsequent release of
formal solicitations for proposals.
This concludes my statement, Mr. Chairman, and I look
forward to answering any questions you may have.
[The prepared statement of Ms. Hoffman follows:]
Prepared Statement of Patricia Hoffman, Acting Assistant Secretary for
Electricity Delivery and Energy Reliability, Department of Energy
Mr. Chairman and Members of the Committee, thank you for this
opportunity to testify before you on the Department's progress in
advancing smart grid projects and activities under Title XIII of the
Energy Independence and Security Act of 2007 and the American Recovery
and Reinvestment Act of 2009 (Recovery Act). Creating smart grid is
critical to meeting future demand growth while maintaining a reliable
electric system.
A smart grid uses information technology to improve the
reliability, availability and efficiency of the electric system: from
large generation through the delivery system to electricity consumers
and eventually to individual end-uses or appliances. The information
networks that are transforming our economy in other areas are also
being applied to grid applications for dynamic optimization of electric
systems operations, maintenance, and planning.
There are several guiding principles to the Department's smart grid
efforts. First is the need to establish quantitative metrics for
guiding the implementation of smart grid activities. Efforts to develop
smart grid metrics have been underway for some time. For example, in
June 2008, the Office of Electricity Delivery and Energy Reliability
(OE) sponsored a ``Smart Grid Implementation Workshop'' which brought
together stakeholders from across the country to discuss smart grid
definitions, metrics, and analysis and the data and methodologies that
will be needed for the effective application of those metrics. The
Department envisions these metrics may become key indicators for
understanding progress toward implementing a smart grid.
POTENTIAL SMART GRID METRICS
Dynamic Pricing:--fraction of customers and total load
served by Real Time Pricing (RTP), Critical Peak Pricing (CPP),
and Time of Use (TOU) tariffs
Realtime System Operations Data Sharing:--Total Supervisory
Control and Data Acquisition (SCADA) points shared and fraction
of phasor measurement points shared.
Distributed-Resource Interconnection Policy:--percentage of
utilities with standard distributed-resource interconnection
policies and commonality of such policies across utilities.
Policy/Regulatory Progress:--weighted-average percentage of
smart grid investment recovered through rates (respondents'
input weighted based on total customer share).
Load Participation Based on Grid Conditions:--fraction of
load served by interruptible tariffs, direct load control, and
consumer load control with incentives.
Load Served by Microgrids:--the percentage total grid summer
capacity.
Grid-Connected Distributed Generation (renewable and non-
renewable) and Storage:--percentage of distributed generation
and storage.
Electric Vehicles (EVs) and Plug-InHybrid Electric Vehicles
(PHEVs):--percentage shares of on-road. For example, light-duty
vehicles of comprising EVs and PHEVs.
Grid-Responsive Non-Generating Demand-Side Equipment:--total
load served by smart, grid-responsive equipment.
Transmission &Distribution (T&D) System Reliability:--
utilizing the Institute of Electrical and Electronics
Engineers, Inc (IEEE) indices that measure distribution system
reliability.
T&D Automations:--percentage of substations using
automation.
Advanced Meters:--percentage of total demand served by
advanced metered customers
Advanced System Measurement:--percentage of substations
possessing advanced measurement technology.
Capacity Factors:--yearly average and peak-generation
capacity factor.
Generation and T&D Efficiencies:--percentage of energy
consumed to generate electricity that is not lost.
Dynamic Line Ratings:--percentage miles of transmission
circuits being operated under dynamic line ratings.
Power Quality:--percentage of customer complaints related to
power quality issues, excluding outages.
Cyber Security:--percent of total generation capacity under
companies in compliance with the North American Electric
Reliability Corporation (NERC) Critical Infrastructure
Protection standards.
Open Architecture/Standards:--Interoperability Maturity
Level--the weighted average maturity level of interoperability
realized among electricity system stakeholders
Venture Capital:--total annual venture-capital funding of
smart grid startups located in the U.S.
A second guiding principle is transparency. It is the Department's
intent to use every means at its disposal to keep the public informed
of and involved in the progress of he smart grid developments. There
are several avenues for effective communication to occur. These
include, for example:
Bi-annual reports to Congress, as required by the Energy
Independence and Security Act of 2007 (EISA) Section 1302, on
the status of smart grid implementation nationwide. The first
such report is undergoing the concurrence process and should be
available shortly.
The Smart Grid Subcommittee of the Electricity Advisory
Committee, as required by EISA Section 1303, which has produced
a report, ``Smart Grid: Enabler of the New Energy Economy,''
with recommendation for how OE proceeds with its smart grid
activities. This report can be downloaded from our website
(http://oe.energy.gov/DocumentsandMedia/final-smart-grid-
report.pdf).
The Federal Smart Grid Task Force, as required by EISA
Section 1303, has met every month since March 2008 to
coordinate Federal activities, and includes involvement from
Federal Energy Regulatory Commission (FERC), National Institute
of Standards and Technology (NIST), Environmental Protection
Agency, Department of Homeland Security, United States
Department of Agriculture, and the Department of Defense.
The offering of ``Smart Grid E Forums'' to provide
information on key topics of interest through web-based
seminars in collaboration with utilities, state regulators,
consumer groups, equipment manufacturers, and national
laboratories and universities from across the country. Last
week OE sponsored its 4th such E Forum which provided
information on the potential role for the smart grid to enable
clean energy development and covered topics such as wind
integration and electric and hybrid electric vehicles.
The establishment of a Smart Grid Clearinghouse to serve as
a central repository for smart grid project information,
applications, requirements, performance, costs and benefits,
standards, etc.
It is the Department's intent to build on these activities and work
closely with key stakeholders so that the Nation is working in a
consistent direction and not at cross purposes. There is neither the
time nor the resources to spend dealing with problems that could be
addressed through effective stakeholder engagement and Federal
coordination.
For example, the Department is contributing to the efforts of the
National Association of Regulatory Utility Commissioners (NARUC)-FERC
Smart Grid Collaborative by supporting the development of a web-based
information clearinghouse to share what is known about smart grid
projects and foster better information exchange. The Department is also
working with the Smart Grid Stakeholders Roundtable and EPA to assist
public and private sector group to develop a common understand of smart
grid challenges and opportunities.
Interoperability Standards:--The Department recognizes that one of
the major barriers to commercial success is the lack of industry-based
standards for governing how the many different devices involved in
smart grid, and their ability to communicate with each other in an
efficient and secure manner, can become more interoperable than they
are today.
The Department has learned hard lessons over the years about the
amount of time and effort it takes to get standards of this type
developed, implemented, and accepted. For example, after more than 10
years of development, there are still activities underway for full
implementation of uniform and consistent grid interconnection standards
for distributed energy resources. The Department understands that there
are standards development organizations such as the Institute of
Electrical and Electronics Engineers, International Electrotechnical
Commission, American National Standards Institute, International
Organization for Standardization, and the International
Telecommunications Union who need to be involved in the process and
that these organizations rely primarily on volunteers and contributions
from their members to work on the standards development effort.
The Department is committed to moving the standards through the
development process and getting them to the point for adjudication by
Federal and state regulatory agencies as rapidly as possible by
implementing EISA Section 1305. The Department is working closely with
NIST which has primary responsibility to coordinate development of a
framework for interoperability standards, as called for n EISA Section
1305. The Department has provided technical and financial assistance to
NIST to support their efforts.
Cyber Security:--The cornerstone of a smart grid is the ability of
multiple agents, i.e. devices, to interact with one another via a
communications network. The interaction of multiple devices, and the
benefit that this brings to the electric power system, is what
differentiates the smart grid from the existing system. If not properly
protected, the smart grid could be vulnerable including:
Breach of Availability.--Smart grid technology will include
an immense communications network to manage the distribution
infrastructure. One of the key reliability promises of the
smart grid is enhanced management of the grid under emergency
conditions. However, without proper planning, a natural-or man-
made event could disable the communications infrastructure,
rendering the smart grid ineffective at coping with the
emergency situation.
Breach of Integrity.--A basic service for the smart grid is
the ability to measure the use of electricity and transmit that
information to the utility for billing purposes. A cyber
intruder could compromise the data and send false information
to the utility and either lower or increase the billing,
depending upon the motivation.
Breach of Confidentiality.--If a perpetrator is able to
access and view data being transmitted between the utility and
smart meters at customer premises, they could potentially use
that information for unauthorized or illicit purposes.
Over the last 8 months, DOE has been working collaboratively with
the Utilities Communications Architecture Users Group (utilities,
vendors, et al) to develop cyber security requirements (including
vulnerability testing through the DOE Smart Grid Test Bed) for advanced
metering infrastructure (AMI), a key application for the smart grid.
This work will help accelerate the development of cyber security
requirements for other smart grid technologies. Additionally, the
Department is currently developing the EISA Section 130-Study of the
Security Attributes of a Smart Grid System for delivery to Congress by
the end of the fiscal year.
Success Stories:--Wide Area Measurement Systems (WAMS) technology
is based on obtaining high-resolution power system measurements (e.g.,
voltage) from sensors that are dispersed over wide areas of the grid.
The data is synchronized with timing signals from Global Positioning
System (GPS) satellites. The real-time information available from WAMS
allows operators to detect and mitigate a disturbance before it can
spread and enables greater utilization of the grid by operating it
closer to its limits while maintaining reliability. When Hurricane
Gustav came ashore in Louisiana in September 2008, an electrical island
was formed in an area of Entergy's service territory. Entergy used the
phasor measurement system to detect this island, and the phasor
measurement units (PMU) in the island to balance generation and load
for some 33 hours before surrounding power was restored.
The Department has also been actively involved in supporting early
demonstration and testing of smart grid applications through National
Laboratories and Power Marketing Administrations. For example, Pacific
Northwest National Laboratory and the Bonneville Power Administration
conducted a demonstration of ``Smart'' white appliances and dynamic
pricing on the Olympic Peninsula and elsewhere in the Northwest. The
results of that demonstration have been studied nationally and
internationally. Building on this type of Department success is a
priority in moving he smart grid along.
End Goal:--The Department envisions an electric system (generation,
delivery and use) with the capability to 1) measure and understand
system performance on a real-time (time and location) basis; 2) model
and analyze policy and regulatory objectives and 3) improve resiliency
(faster response times and ability to withstand cyber attacks without
loss of critical services).
The Department's highest priorities are to implement the Recovery
Plan and accelerate the development of interoperable, open standards.
With respect to the Recovery Act, the Department is focused on
releasing two notices of intent (NOIs) in order to implement the Smart
Grid Investment Grant program and the Regional Demonstration Projects,
followed by a subsequent release of formal solicitations for proposals.
The NOIs will provide instructions regarding what types of projects
qualify, who is eligible to be receive funding, and how proposals will
be evaluated. The Recovery Act requires issuance of NOIs for the
Investment Program within 60 days of enactment and within 30 days for
the Regional Demonstration Projects. The apartment is currently on
track to complete both NOIs prior to the respective deadlines.
This concludes my statement, Mr. Chairman. I look forward to
answering any questions you and your colleagues may have.
The Chairman. Thank you very much.
Dr. Gallagher.
STATEMENT OF PATRICK D. GALLAGHER, PH.D, DEPUTY DIRECTOR,
NATIONAL INSTITUTE OF STANDARDS AND TECHNOLOGY, DEPARTMENT OF
COMMERCE
Mr. Gallagher. Chairman Bingaman, Ranking Member Murkowski,
members of the committee, I want to thank you for the
opportunity to appear before you today to discuss the role of
the National Institute of Standards and Technology to enable
interoperability of smart grid devices and systems.
NIST is the nation's measurement science and standards
agency. For over 100 years, NIST's world-class science has
provided the foundation for American innovation by providing
technical leadership, cutting-edge measurement technologies,
and by promoting effective standards in the marketplace.
As part of the Department of Commerce, NIST's mission is
uniquely focused on U.S. industry. These characteristics make
NIST well suited and ready to support the national effort on
smart grid technology.
Smart grid presents an exciting and yet complex challenge.
It is fundamentally the marriage of two complex systems: the
Nation's electrical transmission grid with modern digital
information technology. The capability that results from this
marriage will provide the measurements and controls to enable
greater reliability of electrical power, and it will enable a
host of new technologies, from distributed power generation
from renewable sources to smart appliances that can adjust to
market conditions. The President has repeatedly emphasized the
importance of smart grid to achieving both of these goals.
What is the NIST role in smart grid? Under the Energy
Independence and Security Act, NIST has primary responsibility
to coordinate development of a framework that includes
protocols and model standards for information management to
achieve interoperability of smart grid devices and systems.
Interoperability refers to the ability of a system to work
with other systems without any special effort on the part of
the consumer. An interoperable smart grid will allow utilities
and customers to purchase equipment that works smoothly,
reliably, and securely with other smart grid systems.
Manufacturers of smart grid equipment need assurance that
their products will be interoperable on the smart grid network.
Achieving interoperability requires effective standards and
tests to measure and validate that the performance conforms
with the standards. This is a classic NIST role.
The Nation's present electrical grid is already a complex
engineering marvel. There is a universe of standards on which
the present infrastructure is based, and NIST and many other
organizations are now assessing the applicability of these
standards to smart grid and to identify what new standards need
to be developed.
The addition of information technology will greatly
increase the complexity of this system. Many of the devices and
appliances that will be part of the smart grid do not presently
exist, but will be developed to meet future utility and
customer demands. Due to its inherent complexity, there can be
no single standard for smart grid devices and systems; rather,
suites of standards need to be developed, and these standards
will not be static, but they need to evolve to ensure that the
system interoperability is maintained even as new technology is
brought onto the grid.
Another challenge in the effort to develop smart grid is
the diversity of the participants in its development, use, and
regulation. Developing the smart grid involves Federal
agencies, State and local governments, utilities,
manufacturers, standards development organizations, and
consumer groups.
Engaging all of these stakeholders is an essential
ingredient to develop effective smart grid standards if they
are to be adopted and used. The Energy Independence and
Security Act specifically called for NIST to solicit input from
a wide variety of private and public entities, for this very
reason.
Knowledge of the standards development process is a unique
strength of NIST. We are viewed as an impartial and technically
knowledgeable partner. We have a long history of working
collaboratively with industry, standards organizations, and
government agencies. Over the past year, NIST has formed
stakeholder groups, called Domain Expert Working Groups, many
of whom have not previously worked in close coordination, to
promote the information-sharing necessary for the development
of effective smart grid standards. We are using their expertise
to identify where interoperability barriers exist, where
relevant standards current exist, and where standards exist but
are not interoperable, and, at times where the gaps exists,
where new standards need to be developed.
With appropriations from the American Recovery and
Reinvestment Act, NIST will expand the public-private
coordination framework and move more rapidly to make the needed
progress in smart grid standards. We are working closely at the
interagency level to develop the detailed action plans that
will support this expanded effort.
This coordination framework will allow us to establish
standards development priorities--a key step--support standards
assessments, and accelerate key standards development or
harmonization efforts where they are needed.
I would like to note that the process of agreeing upon
comprehensive and effective suites of standards is hard work.
To be effective, standards must be agreed upon, and, if
necessary, developed with broad representation and buy-in from
all stakeholders. While it can take time to develop the
consensus needed for success, NIST's framework will provide the
broad-based and expert input through an open and transparent
process. In the long term, we believe this will save time.
We believe that we can also maintain the aggressive
schedule needed to meet smart grid goals. While some of the
work can be done immediately, other aspects of this problem
will be more of a challenge. NIST has the means and capability
to meet it.
Standards alone do not guarantee interoperability. They
must be supported by conformity assessment testing to ensure
that smart grid devices and systems that are developed based on
the standards are truly interoperable. NIST laboratories will
be focused on supporting this effort.
NIST is proud to have been given an opportunity and to have
this role in the Energy Independence and Security Act
Legislation and under the American Recovery and Reinvestment
Act. I want to thank you for the opportunity to testify today
on our work. I would be happy to answer any questions the
committee may have.
[The prepared statement of Mr. Gallagher follows:]
Prepared Statement of Patrick D. Gallagher, Ph.D. Deputy Director,
National Institute of Standards and Technology, Department of Commerce
Chairman Bingaman, Ranking Member Murkowski and Members of the
Committee, thank you for the opportunity to appear before you today to
discuss the National Institute of Standards and Technology's (NIST's)
role to enable a resilient Smart Grid composed of secure and
interoperable devices and systems. NIST carries out this work in
coordination with the Department of Energy (DOE) and the Federal Energy
Regulatory Commission (FERC), both represented here today.
The availability of clean, reliable and affordable energy is
essential to the economic welfare and security of our Nation. We can
improve our energy supply through increased use of new renewable and
distributed energy sources provided that we can make them widely
accessible to industry, businesses and consumers through the Nation's
electric power grid. This, however, is not an easy task given the
current state of the electric power grid.
As stated by President Obama, we need to ``update the way we get
our electricity by starting to build a new Smart Grid that will save us
money, protect our power sources from blackout or attack, and deliver
clean, alternative forms of energy to every corner of our nation.''\1\
---------------------------------------------------------------------------
\1\ Gross, Grant. ``Obama Includes Broadband, Smart Grids in
Stimulus Package.'' Stimulus Speech. January 8, 2009. IDG News Service.
www.itworld.com/government.
---------------------------------------------------------------------------
For this vision to succeed, utilities and others who are
implementing the Smart Grid need to be able to purchase equipment in
the marketplace and readily incorporate it into the Smart Grid so that
it works seamlessly and interoperates with all other systems.
Interoperability refers to the ability of a system or a product to
work with other systems or products without special effort on the part
of the customer. Achieving interoperability requires reliable standards
and validated performance--that is the challenge for NIST.
Under the Energy Independence and Security Act (EISA) of 2007
(Title XIII, Section 1305), NIST has ``primary responsibility to
coordinate development of a framework that includes protocols and model
standards for information management to achieve interoperability of
smart grid devices and systems . . . '' The American Recovery and
Reinvestment Act provided $10 million for NIST for this purpose.
NIST is well-suited for this role. The agency has a reputation as
an impartial, technically knowledgeable third party with a long history
of working collaboratively with industry and other government agencies,
including DOE and now the Federal Energy Regulatory Commission (FERC).
NIST also has provided measurement technology and assistance to
utilities, equipment manufacturers, and other power-system
stakeholders. Only through collaborative efforts with all stakeholders
will Smart Grid solutions to the complex and layered problems of
interoperability be adopted by the many participants--power generators,
Independent System Operators (ISOs), Regional Transmission Operators
(RTOs), electric service providers, consumers, vendors, etc
The present electric power grid infrastructure is based on numerous
standards, and many organizations are now assessing their applicability
to the Smart Grid and determining what new standards need to be
developed. NIST is working with these organizations to ``tie it all
together'' so that unnecessary redundancy, conflicts, and gaps among
the standards can be avoided and resolved. For there to be true
interoperability, new Smart Grid devices also require testing to show
that they conform with the standards.
The nation's electrical grid has been called ``the greatest
engineering achievement of the 20th century'' and ``largest
interconnected machine on Earth.'' Due to the complexity of the grid,
we and many others believe that there can be no single standard for
Smart Grid devices and systems. Rather, we expect suites of standards
to be developed for different aspects, including distributed energy
resources (DER), demand response (DR) devices/appliances, electric
vehicles, wide area measurement systems (WAMs), and other parts of the
Smart Grid vision. The Smart Grid also needs to be evolutionary--
beginning with the existing energy infrastructure and evolving as new
innovations arise and the energy infrastructure and consumer needs and
behavior change. This means that standards, conformance tests and other
efforts to ensure interoperability must also continue to evolve.
NIST has begun the coordinating of the interoperability framework
by bringing together the many stakeholders. Working in close
cooperation with the DOE and its Grid Wise Architecture Council (GWAC),
domain expert working groups have been established that cover key areas
of the Smart Grid, including transmission & distribution, and
commercial, industrial, and residential buildings. Additional groups
and task forces to address higher-level and crosscutting issues--in
business and policy, cyber security, and smart grid framework/
architecture, to name a few--have been initiated.
Our goal is to bring these experts together, many of whom have not
worked in close coordination before, to promote the information sharing
necessary for the development of effective Smart Grid standards. We are
using their expertise to support the framework development by
identifying where the barriers to interoperability exist. In addition,
we are identifying where relevant standards currently exist, where
standards exist but are not interoperable, and where gaps exist that
will need to be filled by new standards.
With appropriations from the recent enactment of the American
Recovery and Reinvestment Act (ARRA), NIST will make significant
headway working with its team comprising of NIST staff, contractors,
and staff from the Department of Energy (DOE), the Federal Energy
Regulatory Commission (FERC), the Grid Wise Architecture Council (GWAC)
and many other industry and standards developing organizations to more
rapidly make progress in the following ways:
Interoperability Framework/Architecture.--An initial version
of the interoperability framework will be developed--one that
will have the flexibility to evolve as the Smart Grid develops.
Smart Grid Standards Gap Analysis and Roadmap.--We will
develop a smart grid standards gap analysis and road map to
identify critical areas and guide interoperable standards
development.
Publicly Accessible Interoperability Knowledge Base.--NIST
plans to create a publicly accessible interoperability
knowledge base that will be the repository of the information
necessary to perform standards assessments.
Accelerate Standards Development. With the clear picture of
the standards landscape and roadmap established, NIST will work
effectively with standards development organizations (SDOs),
contractors, and industry experts and other stakeholders to
accelerate the development of scalable, compatible and
interoperable standards.
I would like to caution, however, that the process of creating good
consensus-based standards is not easy. To develop robust standards and
ensure their use, the standards developing groups should have broad
representation from all key stakeholders. Achieving consensus agreement
among such a diverse group of stakeholders can take significant time,
particularly if the resulting standards need to be applicable
domestically and internationally.
Having good standards alone does not guarantee interoperability.
Conformity assessment testing is necessary to ensure that the Smart
Grid devices and systems developed based on the standards are truly
interoperable. The NIST laboratories have long supported the
development of the reference implementations of the standards for
emerging technologies and the tests that will validate their
interoperability.
NIST has been providing technical support for the development of
Smart Grid devices for several years now. These include the Phasor
Measurement Units, devices that will enable operators to get the
information about grid conditions that they need to limit the effects
of disruptions and instabilities in the grid and avoid large scale
blackouts as occurred in the Northeast in August 2003. They also
include high-megawatt power converters that will provide the
flexibility to readily and reliably connect alternative and renewable
resources to the grid.
Under the EISA, once sufficient consensus has been achieved, FERC
will begin the rulemaking process for adopting standards and protocols.
NIST's goal is to support this action by working closely with
stakeholders to identify and develop the standards as quickly as
possible based on broad participation and expert input. NIST believes
that the most effective standards will be developed through broad input
from experts, including industry and other stakeholders. The proposed
approach will provide expert input through a voluntary consensus
standards development process, while pursuing the aggressive schedule
needed to develop the Smart Grid.
Finally, NIST has the important responsibility to develop Federal
Cyber Security standards. Interoperability across the electric power
grid infrastructure will do us no good if the grid is disabled by a
cyber attack enabled by access through the Smart Grid system. Security
must be integrated into the interoperability framework in order to
ensure the integrity and availability of the infrastructure and the
privacy of Smart Grid users. The cyber security strategy for the Smart
Grid must account for both domain-specific and common risks when
developing interoperability solutions. Collaborative efforts will
enable the development of the standards needed to reach our vision for
Smart Grid interoperability.
The following is a preliminary list of cross cutting security
requirements for the Smart Grid that have been identified and will be
addressed by NIST and its team:
Identification and authentication to provide unambiguous
reference to system entities.
Access control to protect critical information. Integrity to
ensure that the modification of data or commands is detected.
Confidentiality to protect sensitive information, including
personally identifiable information (PII) and business
identifiable information (BII).
Availability to ensure that intentional attacks,
unintentional events, and natural disasters do not disrupt the
entire Smart Grid or result in cascading effects.
Security architecture to ensure that there is no single
point of failure.
Conformity Assessment Procedures for Smart Grid devices and
certification criteria for the personnel and processes.
Strategies for isolating and repairing compromised
components of the Smart Grid.
Auditing to monitor changes to the Smart Grid.
Supply chain security to ensure that products and services
are not compromised at any point in the life cycle. This is a
defense-in-breadth strategy.
NIST is proud to have been given such an important role in the EISA
legislation. We have received enthusiastic support from DOE, GWAC, and
many industry and other stakeholders. We believe that with the
continued cooperation and collective expertise of the industry in this
effort, we will be able to establish the interoperability and standards
frameworks that will enable the Smart Grid vision to become a reality.
Thank you for the opportunity to testify today on NIST's work on
Smart Grid interoperability. I would be happy to answer any questions
the committee may have.
The Chairman. Thank you. Thank all of you for your
testimony.
I'll start with a couple of questions. I guess one
question, maybe to you, Dr. Gallagher--I'm not clear as to what
kind of timeframe you're looking at here. I think you referred
to developing this framework, as I understand it, in order to
meet the schedule for deployment of the smart grid. I believe,
something to that effect. What is the schedule for deployment
of the smart grid? Are there time limits on development of
these suites of standards that you've referred to here? What
can we expect?
Mr. Gallagher. I think the question of timing is front and
center for everybody right now, and we are all changing gears
rapidly to address a much quicker pace on this program. I think
that there are no defined timeframe standards, at least from
the Federal interagency process, but we do know of some very
powerful drivers on the standards development process,
including the fact that the grants program, that DOE will be
managing, will be investing heavily in smart grid devices and
technology, and that these investments make more sense when
there is a standards framework involved.
What NIST is focused on doing is basically accelerating the
process by which the standards development can occur. In other
words, the convening and the priority-setting. The actual
standards development work is going to be a process that takes
place largely in the private sector, with standards development
organizations, with utilities, with all the stakeholders. The
duration of those processes will depend on the complexity of
the specific problem. In some cases, it will occur very
quickly--months--and in other cases, if it's technically very
challenging, it may take considerably longer.
But right now what's desperately needed is a overall
roadmap; in other words, a coordination effort by which we can
establish which standards in this complex suite of issues are
the most important to address right away, which ones affect
regulatory concerns or technical challenge, and to basically
provide that coordination to the community.
The Chairman. Do you have an idea--if what is needed is
this roadmap, when will the roadmap be completed?
Mr. Gallagher. The roadmap is under development now. We
were beginning that work even before the Recovery Act funding.
We hope to have an initial draft of the roadmap by this summer,
working with the community.
The Chairman. OK. So, initial drafts and--when would it be
sufficiently final that, say, FERC could--as I understand it,
you've got to complete this roadmap, so-called ``framework,''
and then FERC and other agencies have to then move and adopt--
do a rulemaking to adopt standards. When would the roadmap be
sufficiently finalized that FERC could go ahead and begin to
adopt a standard?
Mr. Gallagher. I don't want to answer for FERC, but it's my
understanding that what FERC would need in rulemaking is
basically, what makes it powerful to them is a standard that's
widely adopted and used in the community. In other words, it's
the level of consensus surrounding a given standard that makes
it appealing, that it is useful in the rulemaking process for
regulations, because it basically allows their rulemaking not
to address the formation of a specific standard.
So, I don't believe that this roadmap is directly tied to
the progress FERC needs to make. What the roadmap is really
designed to do is--the smart grid itself is so complex; we have
transmission and distribution, we have devices, we have demand
response, we have all of these various subsystems in the smart
grid that there's a bit of a jam right now, in terms of which
specific standards are most urgent to move forward. The roadmap
basically provides that coordination. The timeframe that FERC
needs to look at is the actual specific standards in their
regulatory area that are out there and have reached a level of
maturity where they believe it's suitable for rulemaking. At
least that would be my understanding.
The Chairman. Commissioner Kelly, did you have a
different--a thought on that?
Ms. Kelly. Yes, thank you, Mr. Chairman.
Dr. Gallagher is correct--we believe that the first step is
to come up with a roadmap, and that means prioritizing the
development of the standards. NIST is in charge of putting
together the standards development organizations and attempting
to get as much consensus around proposed standards as possible.
We believe that that process really has to be driven and
managed so that it doesn't just meander. We are very optimistic
that, with the stimulus bill's funding of $10 million for NIST,
that they will now have sufficient resources to be able to do
that. We are working with them, and will continue to work with
them, to provide input on how the standards development process
should be prioritized, and also to help give them information,
based on our day-to-day understanding of the electric industry,
about how to move forward. But, we are anxious that it move
forward with some urgency, and we do believe that NIST agrees
with us.
The Chairman. Senator Murkowski.
Senator Murkowski. Thank you.
I mentioned Dr. Chu's comments about the lack of standards
being the greatest bottleneck, and he suggested that we lock
people up in a room and tell 'them to come out with a standard
in a few weeks. Based on what you've just told us, Dr.
Gallagher, and confirmed by you, Commissioner Kelly, you're
probably not going to be able to come up with standards in a
week or so, even if you were to be locked in a room.
But, it does certainly present the question. There is a
great deal of funding--Federal funding out there now for NIST
for implementation of the smart grid. Should disbursal of these
stimulus funds be contingent on development of the standards
and protocols? I mean--what I'm concerned about is
obsolescence. We go ahead and we direct hundreds of millions,
perhaps even billions, of dollars, but if we don't have the
standards and protocols in place, we spend it, but we don't
have the systems, the interoperability, that we had hoped for,
and now the money that we have spent is on obsolete systems,
and, to a certain extent, we're starting all over again. Is
there some prioritization of this funding that we might be
considering?
Commissioner Kelly.
Ms. Kelly. Thank you, Senator.
We believe that there are some safeguards that can and
should be put into place by DOE, in acting on these
applications, that would ensure or minimize to a great extent
the risk of obsolescence. That's basically that the
applications deal with the open architecture issue.
Short of standards, technology can be developed that is
open, if you will. It may not be plug-and-play, but if it can
upgraded with--relatively easily, at relatively little cost, it
may be open enough to be approved.
But, the point you raise is an important one. We don't
think that we have to wait until standards are promulgated, but
we do think that addressing the issue of how open the
architecture is, or the technology that's proposed, is
something that's very important.
We also believe that some of the demonstration projects can
help with standards development, because some of the standards
and protocols that are being discussed--there isn't consensus
around them, because, in part, they haven't been tested. So,
the demonstration projects could help further the standards
process, if it's handled appropriately.
Senator Murkowski. So, Dr. Ghallagher [sic], is this what
you were referring to when you said that the standards would
not be static?
Mr. Gallagher. That's correct. I think that anytime you're
developing standards in a realm where the technology itself is
rapidly evolving--and I think some of the demonstration
projects that will be funded through the DOE program are
designed to basically push the technology forward--
interoperability in this environment is difficult because you
can't write a standard against a technology that doesn't exist
yet. So, this issue of extense-ability and extend-ability of
the standards to preserve the upgrade-ability of the devices is
going to be a key component.
Senator Murkowski. Let me ask you, Ms. Hoffman--you
mentioned the information clearinghouse is going to make this
smart grid data available to the public. How does DOE propose
to undertake this responsibility, just in terms of the
information that is out there? How do we deal with the privacy
concerns?
Ms. Hoffman. In implementing the clearinghouse, what the
Department of Energy plans to do is release a solicitation
asking for competitive bids for an organization to manage the
clearinghouse and to have it Web-based. We have worked with
FERC and NARUC to develop a consensus of what types of
information should be placed in the clearinghouse in order to
evaluate costs and benefits of each of the different smart-
grid-type demonstration projects, so there can be a consistent
framework or architecture for evaluation of the different
projects. Those are our initial thoughts on what we plan to do
with implementing the clearinghouse.
Senator Murkowski. Question for all three of you. Is NIST
the right entity to deal with the interoperability framework?
Dr. Gallagher, you said you're ready to take it on. You've been
given the task, you've been given the money. Are you the right
entity?
Mr. Gallagher. I think the answer to that question, from
our perspective, is yes, but it's not, in the sense that we
were a smart-grid agency ready to be deployed. What we are is
an agency that has a long track record of working on standards-
related issues, including interoperability of standards; for
example, in health IT, in computer security standards. It's not
so much not just the technical expertise within NIST and our
laboratories, but it's also our ability to work--we have a long
track record of working effectively with standards development
organizations, of understanding how to coordinate Federal
involvement in standards, and we believe this positions us
somewhat uniquely.
But, I would say it's not a question of NIST doing this
alone. I take most seriously the language in the EISA Act, that
NIST coordinate. This has to be intrinsically an interagency
process, and that the governance and priority- setting has to
be done in concert with DOE.
Senator Murkowski. Commissioner Kelly, you agree?
Ms. Kelly. Yes, Senator, I agree. We believe that NIST does
have the in-depth expertise to handle this task, and also, it
does have established relationships with standards-development
organizations, including international ones. In particular,
attempting, at this point, to transfer the task to another
agency would cause delay. As I mentioned before, the $10
million that the stimulus bill provides in funding for the
standards development work should enable the process to be
accelerated, which is what we would like to see; we would like
to see it accelerated. We think that we can play a very
constructive role, as Dr. Gallagher mentioned, providing
information that we have, that NIST doesn't have, about the
technology and the day-to-day workings of the industry.
Senator Murkowski. My time is up. Did you want to add
something, Ms. Hoffman?
Ms. Hoffman. Yes, very quickly, Senator. I agree with, and
I concur with, the statements that were said earlier.
One other point is, we do need to be able to bring things
to closure, to be able to adjudicate, to be able to actually
get acceptance of the standards, with FERC and the States, just
to bring things to closure, to keep things moving.
The Chairman. Senator Cantwell.
Senator Cantwell. Thank you, Mr. Chairman. Thank you for
having this hearing this morning.
I was looking at the statute, section 1305, which is called
a Smart Grid Interoperability Framework. I'm noticing,
thankfully--remembering, thankfully, how much we wrote that
word ``framework'' into that language in the section, because,
listening to the testimony this morning--and I think--
Commissioner Kelly, I think you even have a section where you
talk about open architecture, which--I think, Dr. Gallagher,
what we're really talking about here is APIs, right? We
certainly want open standards, but we want, you know,
application program interfaces so that various technologies can
talk to each other. Is that correct?
Mr. Gallagher. I think that anytime you're including
looking at digital information technology being added to
something, the communication interfaces and protocols are going
to be at the heart of that system.
Senator Cantwell. I'm comparing that to the difference
between open architectures, which means, you know, opening up
someone's entire architecture; you don't care what someone's
architecture is, as much as it can communicate with other
companies and that there's a protocol that can do that. We've
had a lot of confusion in the stimulus bill about this issue,
and so, I want to make sure that we're clear this morning.
Mr. Gallagher. Yes, I think our position is that this has
more to do with the characteristics of the standard both being
flexible, uniform, and technology-neutral; in other words, not
having proprietary lock-in as part of the standards, that's
correct.
Senator Cantwell. Wouldn't you say that a lot of the
standards bodies that are referenced in the statute--they are
like IEEE and others--you know, are pretty good organizations
for helping us get this done?
Mr. Gallagher. Oh, I think there's no question. In fact, I
think, in the United----
Senator Cantwell. That we might even impede them sometimes?
Mr. Gallagher. I think so, and I think they don't like to
be held back. I think, in the United States, we have a long
track record of having standards developed in the private
sector. The NIST role is not to take over their role. We
basically want to harness that energy and ability. The issue
has been the priority-setting and coordination. We believe
that's been the missing piece.
Senator Cantwell. So, we have to figure out how we can do
that in this particular instance, because I think there's a lot
going on with the technology in the private sector that
probably is already coordinated, to a certain degree. Anyway,
I'd just go back to the point that it is about a framework, and
it is about APIs and open standards, as opposed to open
architectures; that being an important point.
Another issue is, as it relates to, say, for example, like,
wireless meters, you know, there's a certain element here that
the packets of information are so small, it's not really cost-
effective to do, you know, on an Internet protocol. Is that
your understanding?
Mr. Gallagher. I don't have a specific understanding on
that issue, at this point.
Senator Cantwell. OK. I think that's something else that we
also--because, again, there was a lot of discussion in the
stimulus about, you know, an IP architecture, where, you know,
there's--which is great for a lot of data to flow--may not be
as cost-effective for a small amount, a packet of information.
So, that's why these networks that are already there are
working effectively. So, we need to keep our eyes on that.
I think this discussion we've had here, and I'm sure the
next panel will have a lot of input, and so, I look at it, and
I think, OK, coordinate with IEEE and others, and make our way
down this road, leaning on them, but the one thing that we can
do, the one thing that we have to really think about, is rate
recovery. Commissioner Kelly, you touched on it, and others.
That's a key issue here. That's the stumbling block. We look at
this issue from weatherization, and we say, yes, invest in
weatherization now; it's costing you some money, and you save
money in the future. Yet, the same principle is here. The same
principle of smart metering, from an investment perspective, is
``Invest now, and you're going to get a return.'' So, how can
we do a better job, as policymakers, on this greater recovery
issue, and flatten this so that we can make this energy-
efficiency platform happen at a more rapid rate?
So, Commissioner Kelly.
Ms. Kelly. Yes, Senator. You raise an excellent point. The
demonstration project, and the funding of it, I think, is a
real opportunity to advance this, because, with the 50-50
match, it will give an incentive to spend the money and recover
the outlay for the utility. I think what we anticipate seeing
is a real demonstration of the benefits, and that the benefits
justify the cost.
At the transmission level, it's easier for us to do that,
frankly, than at the distribution level, because some of the
benefits at the distribution level are, as yet, unknown, and
it's unclear exactly how the interfaces will work with
consumers, and what the consumer acceptance will be, and the
consumers' ability to respond. I think the demonstration
projects will help establish that.
Senator Cantwell. Anybody else on that point?
No? OK, I guess I'll save my follow up for the second
panel, on this point.
But, Mr. Chairman, I actually think that this is--I think
this rate-of-recovery issue is one that we need to spend more
time thinking about. So, I thank you for the hearing.
The Chairman. Thank you.
Senator Corker.
Senator Corker. Very good. Mr. Chairman, thank you for this
hearing. Thank each of you for testifying.
I have to say that the smart grid is interesting to me. OK?
I can see some tremendous benefits, and, at the same time, we
sort of live in this world right now where, you know, quote,
``capitalism has failed,'' and we're going to kind of make
everything happen from this central government. This one
doesn't seem quite as concerning as some of the other things
that I've heard throughout the last several weeks. But, what is
your greatest fear? I mean, as you look at this, at the smart
grid--and I can see all kinds of benefits, if this is done
properly--what is--as you step back away from it, and maybe
somebody else occupies or your position in a couple of years,
and maybe they make a huge blunder of this--what are your
biggest concerns? Each of you. Briefly. Thank you.
[Laughter.]
Mr. Gallagher. That could be a long list.
[Laughter.]
Mr. Gallagher. Thank you. I have a number of concerns, but
I think going narrowly to the position of trying to establish
an effective mechanism because what NIST is talking about is
putting together the machinery that makes the standards
development activity work very effectively--is basically making
sure that all the players are brought to the table. The concern
is that you have, in some cases, the technology moving forward
in some areas already--States, localities, and so forth--and we
want that type of innovation; and yet, it can start to jam the
ability to get people together to reach consensus. We think
that everyone understands the urgency to work together, because
the entire system depends on reaching a broad agreement about
how these devices will work in concert with each other. That's
really what makes smart grid smart, is the ability of these
systems to work together.
So, NIST can work with DOE, we can convene, we can help set
priorities, but the real pace of this is going to be set by the
willingness of this entire sector--the utility companies,
consumer groups, industry, manufacturers--to work effectively
together. I think they're up to it, but I think that's the
concern. That's really the major issue I think about.
Senator Corker. OK, thank you.
Ms. Hoffman. Following on with what Dr. Gallagher said, my
concern is that we may miss an opportunity if we don't
adequately integrate the technology with the policy options--
i.e., for consumers you can have a smart meter, but you need to
have an innovative rate for the consumers to help them, educate
them on their consumption. It's not just energy efficiency,
it's energy management at the consumer level. So, my concern is
that we don't miss any opportunities to educate the consumers
to advance energy efficiency to the next level, to advance the
intelligence on the transmission system, that we can have
faster recovery and resiliency on the system.
Senator Corker. Commissioner.
Ms. Kelly. Thank you, Senator.
Our first concern is security and cyber-security, and we
want to ensure that, with the two-way communication capability,
that the security is retained.
Our second concern is the possibility of stranded costs and
obsolescence, but we think that, with the appropriate emphasis
on openness for the demonstration projects, that that concern
will be minimized or eliminated.
Then, the third concern is, Will the benefits to the
consumer actually be able to be demonstrated? There are a
number of things that have to come into place to ensure that
that happens, including that the information that the consumer
needs is readily available and that the ability of the consumer
to respond with demand response is available.
Again, we think that, with the appropriate handling of the
demonstration projects that DOE has money to implement, that we
can achieve those objectives.
Senator Corker. So, I look at the stimulus bill. I know
that has $4 and a half billion in there. I've watched the
healthcare situation. I think all of us scratch our head to
look at a healthcare system that doesn't have a standard
technology where everybody talks with each other. I mean, it's
been the most frustrating thing, I think, that most of us have
looked at in that industry. So, I can see why developing this
framework in advance is important, before people get sort of
married to certain types of software and hardware.
So, on the stimulus bill, does it not make sense for you
all to sort of finish that before money starts being spent on a
smart grid, in that, aren't we simultaneously creating a
problem for ourselves? It's not as massive as we have in the
healthcare system, but that part doesn't make a lot of sense to
me.
Since my time's running out and I won't be able to ask
another question, also, How important is this to
transportation? To me, it seems like it might be very important
down the road.
But, I'd love any answers along both those lines, if the
Chairman will let you answer.
Ms. Hoffman. I think it's very important to implement the
$4.5 billion in the Recovery Act, especially the demonstration
projects and such, to get that moving further along, as
Commissioner Kelly has already brought up. It will provide us
great insights along with some of the existing projects
currently going on, into, what are the costs, what are some of
the benefits, and what are some of the hurdles that we need to
plan for.
Ms. Kelly. Senator, I would agree with Ms. Hoffman that we
can ensure a minimum risk of obsolescence and stranded costs if
the applications are evaluated with an eye to their openness
and their ease of upgrade-ability with minimum cost.
Mr. Gallagher. Yes, I'm going to answer the question from a
different perspective. Speaking as somebody looking at the
standards development process, while it's desirable to lower
the risk of these investments by having the standards in place
first and making it a precondition, two things make that not
necessarily the right approach.
One is, we want to see the innovation coming out of these
projects, because they will, in essence, drive some of the
standards work itself. But, the other issue is that it can turn
the priority-setting around. In other words, the priorities can
become about which standards need to go out to release funding
to do specific things, rather than which standards need to go
out to basically promote the overall interoperability of the
system. So, we believe that the priority-setting process within
the standards development framework needs to be driven by this
major goal of making sure the system is interoperable, and not
necessarily according to other criteria.
The Chairman. Senator Dorgan.
Senator Dorgan. Mr. Chairman, I was on the floor of the
Senate, so I missed the presentations. However, I've had a
chance to read some of the testimony.
My colleague from Tennessee asked the question about
government involvement. Let me ask it in a different way. What
if smart grid, as a terminology and as a point of discussion
with respect to government policy, just takes a complete
backseat. I know we've got money out there in the stimulus
bill, but let's assume that this is not about government, but
about companies deciding what they want to do in their own
interest. What would become of what we now call smart grid
initiatives?
Ms. Hoffman.
Ms. Hoffman. From my perspective, it would still move
forward, but at a slower pace. Currently, I believe FERC
estimates there are 7 million meters out there. I know that a
recent report from KEMA estimates, that by 2015, they're going
to see approximately 30 million meters come out in the
marketplace. I do believe the technology will move forward. The
question is how can we coordinate as Federal agencies to make
sure that we have the most open architecture possible and that
we actually can advance the state of communication and
capabilities within the United States.
Ms. Kelly. Senator, I would say that one of the differences
here is that we have a regulated industry, versus deployment of
technology in a competitive market without regulated
industries. Because we have regulated industries, we have a
couple of gatekeepers. We have the utility, which is a
gatekeeper, and we have the Federal and State regulators, which
are gatekeepers. That process makes the deployment of advanced
technology in the sector much slower.
So, providing stimulus money helps cut through that and
enables--and the other thing I guess I was going to say is that
those gatekeepers, particularly the utility, when it spends
money on smart grid technology, the benefits don't necessarily
accrue entirely to the utility. So, it's--having a stimulus
funding helps them get over that hurdle.
Senator Dorgan. Yes. In many ways, smart grid is kind of at
odds with the traditional concept of a utility company. A
utility company is in place to sell electricity for the benefit
of its shareholders and to earn a profit. One would expect that
better performance is measured by better sales and more sales.
However, smart grid is, in many ways, about more efficient use
and conservation. The CEO of Duke Energy, James Rogers, for
example often speaks before our committee about the basic model
of our system.
Let me ask a question about Xcel Energy's Boulder Smart
Grid City initiative. What is happening with respect to a
demonstration project, like Boulder, and the interaction
between the folks that put that project together and the folks
that are developing standards? What kind of interaction exists,
at this point?
Mr. Gallagher. I don't have specific names, but I know that
the NIST folks who are working on the standards development are
working with the city of Boulder, in terms of their
demonstration projects. That's true of many of the areas where
these demonstration projects are going on, we are actually very
interested in these demonstration projects, and want the people
involved with them to be involved in the standards development
effort.
Senator Dorgan. Ms. Hoffman.
Ms. Hoffman. The Xcel project looks at different aspects of
the smart grid, from the smart home to the smart city. So, what
it does is, it provides some insights on the different
technologies that are used at the home which will allow some of
the standards to be developed with respect to communicating
with a hybrid vehicle or with other home area networks. It
provides insight, as well as feedback, into the development of
the standards, as required.
Senator Dorgan. Dr. Gallagher, you talked about
cybersecurity some. I had a CEO of a major corporation meet
with me, within the last 2 weeks, who talked about your company
setting up a computer with the substantial protections and so
on. They did it as a demonstration to find out what kind of
attacks were going to be coming against that computer. Within
24 hours, of establishment, there was an attack against that
computer. They traced it to an eastern European company, which
was traced then to an African country, and then they lost the
trace. But, there was still an attempt to infiltrate that
computer. So, the issue of cyber-security is really important.
Should there be demonstration projects that deal with cyber-
security----
Mr. Gallagher. I think there's----
Senator Dorgan [continuing]. As we put together smart grid?
Mr. Gallagher. I think there's absolutely no question that,
when you combine digital information technology into a system
that's controlling and moving electricity, that the security
implications are enormous. The way I view it is, the
information security has to be built in. It's the very
foundation of these standards. It can be, not only in the
demonstrations, in terms of looking at vulnerabilities in those
deployed demonstrations, but it's a key part of the conformity
assessment piece. In other words, you have to have the ability
to test these systems to make sure that they're complying with
the standards, including the security standards.
Senator Dorgan. If I might just make a comment, as my time
is up, that I think the two barriers on smart grid have been
described as the standards, both technology standards and
interoperability standards. I think Senator Cantwell talked
about that. The second, I referred to in my first question;
that is, the need for regulatory reform and incentive
structures. Because the existing model, is a model largely--it
has been, for decades--to sell more and increase your revenue--
this actually is counterintuitive to that model. But, there are
a number of utility companies--I mentioned Xcel and Duke--that
are very interested in helping us and working with us to change
that model, which I think is refreshing, as well.
Let me thank the panel.
The Chairman. Senator Barrasso.
Senator Barrasso. Thank you very much, Mr. Chairman. I want
to thank the members of the panel. I apologize for missing the
presentation.
Mr. Chairman, I want to thank you for the leadership that
you showed this morning on getting Tony Blair and others here
to discuss the issues of global climate change, energy, and
those needs. I thought it was very productive. One of the
things we discussed was smart grid and the need to have that
kind of interaction and opportunity and technology.
So, as we talked about energy and the economy and the
environment, all together, smart grid is an important part of
that. Obviously, deploying this is going to require significant
cost. When you turn on the news and find, now, 27 percent of
Americans are having a hard time sleeping because of the
economy, the question is, What are the costs going to be, and
what's the impact going to be, on the users, and what those
expenses are going to be? Are there thoughts of that? Someone
mentioned the idea of informing the consumer, educating the
consumer. What's being done about that?
Ms. Kelly. Senator, through the regulatory process, there
has to be approval by the Federal regulator, for smart grid
advancements to the transmission system, and the State regular,
for smart grid advancements to the distribution system. As part
of that process, the cost-benefit analysis is required to be
demonstrated. The clearinghouse, the information clearinghouse
provisions that you added to the stimulus bill, will help us in
this effort, because we don't always fully understand what the
benefits are likely to be, because it's new technology, and it
hasn't been deployed, and it hasn't been used by consumers.
But, the point that you make is a critical one. We have to have
a benefit, and be able to show consumers a benefit for the
investment.
Senator Barrasso. Yes. Ms. Hoffman, you had mentioned the
stimulus package, and there was a front-page story in the Wall
Street Journal, ``Next Challenge On Stimulus: Spending All That
Money,'' and they specifically talked about the Department of
Energy. It says, ``The new Energy Secretary says he'll have to
transform how parts of his agency work if the President's--if
the President's stimulus plan is to succeed.'' This goes on,
and there's a picture of the new Secretary with the President;
talks about, ``DOE is going to have to dramatically change how
it does business if it hopes to push all this money out the
door,'' said a former senior Energy Department official who--it
says, quote, ``They're going to need more people, more
oversight, and more freedom to waive regulations.'' Could you
talk about what's going on in that area, please?
Ms. Hoffman. Thank you, sir.
The Secretary has made a statement, even within the
Department, that we are going to put the resources necessary to
implement all aspects of the stimulus bill at the Department of
Energy. We are looking at accelerating as many processes as
possible with respect to the smart grid legislation. We are
trying to get more information out to the public sooner, so
that they can plan for projects, proposals, and submissions in
a timely fashion. We plan to release funding opportunities for
smart grid activities shortly. From that point, we hope to
teach potential applicants faster, as well as through the Web
site, grants.gov, and get them engaged in the process so that
they're informed and we can expedite implementation.
Senator Barrasso. This article goes on to say, ``The
Department has a history of delays, of letting--and of letting
costs spiral.'' It says, ``The Energy Department has missed
deadlines and misjudged the cost of projects before.'' It said,
``Mr. Chu has heard an earful about such delays,'' and he says
he's talking to officials at other agencies that he says have,
quote, ``a better track record of getting financial aid to
companies quickly. Some of these agencies' employees could be
temporarily reassigned,'' it says, ``to the Department of
Energy to help it mete out the funds.'' Are you doing things
along those lines yet?
Ms. Hoffman. Yes, sir. The Secretary is looking at all
possible avenues, as well as talking to other agencies, and is
looking at bringing folks onboard to help implement the
program.
Senator Barrasso. Thank you.
Thank you, Mr. Chairman.
The Chairman. Thank you very much.
Dr. Gallagher, let me just ask if you could, maybe, provide
us with something. In your testimony, you talk about suites of
standards to be developed for different aspects of this smart
grid, including distributed energy resources, demand-response
devices, appliances, electric vehicles, wide area measurement
systems, and other parts of the grid. You also talk about the
various standard-setting organizations, or standards
development organizations, SDOs. Could you give us sort of an
inventory--I don't mean right now, but I mean submit it to us--
as to what the different standards are that you currently think
will need to be developed and what the organizations are that
would logically be involved in the development of those?
Mr. Gallagher. Yes, we'd be happy to provide both the
structure of why we set this framework up in these areas,
identify the standard suites that we envision, and, to the
extent we know them at this point, the standards that are
involved in each of those areas. We'd be happy to----
The Chairman. That's great. As I understand it, this draft
framework you're talking about having this summer will at least
begin to prioritize which of these standards have to be done
first and what the timeframes are. Is that accurate?
Mr. Gallagher. That's accurate. The idea is to provide the
coordination so we can decide what's most important to move
forward.
The Chairman. Yes. That would be very useful, I think.
Senator Murkowski, did you have anything else from this
panel? We have a second panel.
Senator Murkowski. Just very, very quickly. This follows up
on Senator Barrasso's comments about the cost. There was an
article in the Wall Street Journal, just a week or so ago,
speaking to the effort in Boulder, Colorado. It was very
interesting reading. You know, you think about Boulder as a
pretty innovative community looking to take on some cutting-
edge things, and the comments about just how people were
dealing with a smart grid capability within their home, and
what it meant, I think--the comment that struck me was the--was
that of the head of the university, or the president of the
university, and his wife. You would think that these would be
some pretty progressive people. It's going to be a challenge
for us to really educate consumers as to, How do you take
advantage of this? Because if you don't take advantage of it,
you're going to be billed for it, and you're not going to be
seeing the benefits.
So, haven't really heard as much this morning about how
that outreach will actually work, how this information
clearinghouse is actually going to work. I do hope that we will
be aggressive, and we will be aggressive before things are put
in place, because then you're just going to be playing catch-up
with people. So, I would hope that, within the Department, that
effort, as far as public education and how we transmit this
information, is really a very aggressive one.
Ms. Hoffman, do you care to comment on that?
Ms. Hoffman. Briefly. The Department has been appropriated
$100 million for work force training and education as part of
the Recovery Act, and we will make an effort to help consumers
better understand the smart grid, and the benefits and the
costs as part of that.
Senator Murkowski. Thank you, Mr. Chairman.
The Chairman. Senator Shaheen, we're through with our
questions of this panel. We have a second panel coming on,
here. Did you want to ask some questions of this panel?
Senator Shaheen. No, I'll wait.
The Chairman. OK.
Thank you all very much for your testimony, and we will
stay in touch.
I'll call the second panel forward. We have The Honorable
Frederick Butler, who is the head of the National Association
of Regulatory Utility Commissioners--he's the president of that
organization this year, as I understand it; Edward Lu, who is
with Google, Inc.; Katherine Hamilton is with GridWise
Alliance; and Evan Gaddis, who is with the National Electrical
Manufacturers Association. So, thank you all for being here.
I think if we could follow the same basic procedure with
this panel and each of you take maybe about 6 minutes and tell
us the main points you think we need to understand, and then we
will have a few questions.
Why don't we start with you, Fred, if you would go ahead
and give us the perspective of the National Association of
Regulatory Utility Commissioners.
Thank you.
STATEMENT OF FREDERICK F. BUTLER, PRESIDENT, NATIONAL
ASSOCIATION OF REGULATORY UTILITY COMMISSIONERS, NEWARK, NJ
Mr. Butler. Thank you very much, Senator. Good morning,
Senator Bingaman and Senator Murkowski, members of the
committee.
My name is Fred Butler, and I am a member of the New Jersey
Board of Public Utilities. I also serve as president of the
National Association of Regulatory Utility Commissioners,
NARUC, on whose behalf I'm testifying here today. I am honored
to have the opportunity to appear before you and to offer our
State's perspectives on smart grid.
We have submitted testimony, which I hope will go into the
record, and I will summarize our views for you.
My message is simple: the timing and deployment of smart
grid is the key here, and that we don't think we should put the
cart before the horse. As a State regulator in New Jersey, and
as co-chair of the national board of the FERC-NARUC
collaborative studying smart grid issues, I'm convinced of the
smart grid's potential to revolutionize how energy is delivered
and consumed. I know the smart grid can change how utilities
oversee their networks and improve reliability. I know that
consumers could have greater control over their usage and have
potential to conserve energy and lower their carbon footprint
and lower their bills. I also know that if we do not do this
correctly, in terms of implementing this, we can endanger our
coming even close to meeting any of those lofty aspirations.
The benefits of the smart grid are obvious, and we must be
sure that we move deliberately so that the costs of rolling out
the necessary infrastructure are borne by those who will
benefit. This means that we should not focus immediately on the
end user; rather, we must start with the backbone, the
transmission and distribution systems themselves, while
proceeding carefully to go inside consumers' homes.
Our Nation's energy problems will not be slain by a silver
bullet, but rather by what's been referred to by many, and
what's become one of my mantras, the silver buckshot. This
includes building some new transmission, encouraging renewable
resources, promoting efficiency, resolving the nuclear waste
storage problem, and developing new technologies.
Meanwhile, achieving the ultimate goal of reliable service
at a fair and reasonable price is becoming harder in this era
of rising costs. There's a high probability that, within the
next 3 to 10 years, all electric consumers will be facing
higher bills due to increased costs driving rate increase, new
environmental regulations, and other factors. I mention this
right now because some of us are selling the smart grid as that
silver bullet that will empower consumers to lower their usage
and, correspondingly, their energy bills. While this may
ultimately be the case, we must learn from electricity
restructuring experience that many States have had.
The promise of restructuring is that consumers would save
money by shopping for power. In many States, rates were cut
and/or frozen for a set number of years so that, at the outset,
the structuring seemed to be a success. The 2000-2001 western
energy crisis prompted many to rethink this approach. Instead
of lower prices, consumers saw their rates skyrocket as
utilities were forced to buy electricity through the volatile
spot market, which we later found out was being manipulated.
Also, in Illinois and along the East Coast, starting in 2006,
when the rate caps expired in Maryland and, to a certain
extent, in Delaware, ratepayers and politicians led a mutiny
that nearly resulted in the demise of the States' public
service commissions in those jurisdictions. The problem was not
restructuring, per se, but the way it was sold to consumers; we
promised too much and we delivered too little. Because of this
approach, the concept of restructuring has taken a significant
hit. We cannot make the same mistake with the smart grid. If we
want to make the biggest impact, we should focus on the
operational side first, before moving to the end-use consumers.
Many have extolled the virtues of how an updated
transmission system will give grid operators a much better view
of their transmission and distribution network. New
technologies can be installed on distribution poles in
neighborhoods, and on those lines themselves, to give advanced
warning of an imminent power system failure. A modernized grid
can help utilities lower costs by avoiding some outages,
reducing the need for sending out trucks to read meters or
restore power. Business operations can be streamlined,
reliability can be improved, and money can be saved.
The question of who pays is of utmost importance, and with
consumers already being challenged because of rising rates and
the economic downturn, we must be careful before putting more
on their plate. In this case, starting with the backbone means
the initial investments would be paid for mostly by the
utilities themselves, as they will be the largest initial
beneficiaries. Meanwhile, advanced meters, and the applications
they enable, can be deployed strategically in pilot and
demonstration projects, thus proving the benefits to those end-
use customers.
The second part of smart grid should be implemented by and
at the State and local--by a State and local effort. In my
experience, I've found that a key component for an initiative
such as smart grid is public outreach. We must use Federal
resources and State resources to explain to consumers that a
new smart grid program is worthwhile. Most State commissioners
understand the benefits of advanced-metering infrastructure and
time-of-use rates, but most consumers do not. Because these new
programs will need new rate structures, States must be sure
that consumers will embrace the technology and tolerate the
initial investment. You can't have a smart grid and dumb rates.
So far, this is only occurring in a few States.
In terms of where we go from here, a good place to look is
at the work we've done with the NARUC-FERC smart grid
collaborative, which I co-chair with FERC Commissioner Suedeen
Kelly. As this is an issue that cuts across both wholesale and
retail energy markets, the dialogs we are initiating through
this process will help us all as we move forward. The
collaborative has met three times since its February 2008
inception; most specifically, at NARUC, the winter meeting,
recently, last month. In my role as co-chair, I have spent a
considerable amount of time getting up to speed on different
technologies and pilot programs throughout the country. This
collaborative is analyzing these pilot and demonstration
projects, such as the Boulder, Colorado, Smart Grid City, to
see what works and what doesn't.
Smart meters are not cheap. Right now we're talking about
approximately $150 to $200 per meter. So, we must be careful in
forcing anyone to upgrade if they are not willing and if
they're not ready.
Pilot programs must be structured to create the buzz,
create the interest in the possibilities that exist, and a
certain level of excitement, not a taxpayer revolt--or, a
ratepayer revolt.
In addition, there should be large-scale demonstration
projects that cover a larger geographic area, that reflects a
microcosm of the country at large, including different incomes
and different education levels.
Smart grid can be successful, provided that we have Federal
and State governments working in concert with one another as
partners, not working in contrast as adversaries. The challenge
before us is great. The technology and the potential benefits
are exciting.
I respectfully request that this committee and this Senate
recognize and respect the unique roles of the Federal and State
governments and enable us to work together toward a truly 21st-
century electricity delivery system.
Thank you for your time, and I would be happy to answer any
questions.
[The prepared statement of Mr. Butler follows:]
Prepared Statement Frederick F. Butler, President, National Association
of Regulatory Utility Commissioners, Newark, NJ
Good morning Chairman Bingaman, Ranking Member Murkowski, and
Members of the Committee:
My name is Frederick F. Butler, and I am a member of the New Jersey
Board of Public Utilities (NJBPU). I also serve as President of the
National Association of Regulatory Utility Commissioners (NARUC), on
whose behalf I am testifying here today. I am honored to have the
opportunity to appear before you this morning and offer a State
perspective on ``Smart Grid''.
NARUC is a quasi-governmental, non-profit organization founded in
1889. Our membership includes the State public utility commissions
serving all States and territories. NARUC's mission is to serve the
public interest by improving the quality and effectiveness of public
utility regulation. Our members regulate the retail rates and services
of electric, gas, water, and telephone utilities. We are obligated
under the laws of our respective States to ensure the establishment and
maintenance of such utility services as may be required by the public
convenience and necessity and to ensure that such services are provided
under rates and subject to terms and conditions of service that are
just, reasonable, and non-discriminatory.
There's a worn-out cliche that goes something like this: Don't put
the cart before the horse. In an industry as old as the electric
utility sector, this saying aptly describes the situation we face in
dealing with the modern Smart Grid and future demand growth. As a State
regulator in New Jersey and co-chair of a national board analyzing
Smart Grid issues, I am absolutely convinced of the Smart Grid's
potential to revolutionize how energy is delivered and consumed. I know
the Smart Grid can change how utilities oversee their networks and
improve reliability. I know that, in the end, consumers could have
greater control over their usage and have the potential to lower their
bills. I also know, however, that if we do not do this correctly, if we
move too quickly and promise too much we can endanger our coming close
to meeting any of those lofty aspirations.
That is why it is important to remember that old cliche and not put
the cart before the horse. The benefits of the Smart Grid are obvious,
and we must be sure that we move deliberately and in stages so that the
costs of rolling out the necessary infrastructure are borne by those
who will benefit. If we expect the horse--i.e. the consumers--to push
the cart before it is ready, we many never get the Smart Grid off the
ground. This means that we should not focus immediately on the end user
and demand response; rather, we must start with the backbone--the
transmission and distribution systems--while proceeding carefully to go
inside consumers' homes.
Achieving the ultimate goal of reliable service at a fair and
reasonable price is becoming harder and harder in this era of rising
costs. There is a high probability that within the next three to 10
years all electricity consumers will be facing higher costs because of
rising fuel and commodity prices, as well as the initial sticker shock
of Federal and State initiatives to increase renewable generation and
the anticipated costs associated with climate change legislation. These
costs are and will continue to hit energy companies hard, and State
regulators are faced with having to approve rate increases that a
growing number of consumers may not be able to afford. Should the
potentially substantial price tag of Smart Grid be suddenly thrust upon
them, not withstanding the Federal funding increase in the stimulus
law, ratepayers will not be happy.
The utility industry is facing tremendous challenges, and we all
need to welcome new technologies that could help this country become
more efficient while bolstering the existing transmission grid. The
Smart Grid has this potential, but only if embraced by utilities and,
most importantly, consumers. Without getting the consumers on board,
the Smart Grid may just be another good intention.
Before going too much further, it must be stated that our nation's
energy woes will not be slain by a single silver bullet, but rather by
what has been referred to as silver buckshot, a whole array of various
and new revolutionary energy programs. This includes building some new
transmission, encouraging renewable energy resources, promoting energy
efficiency, resolving the nuclear-waste storage problem, and developing
new technologies. The easiest and cheapest of this list is, of course,
energy efficiency, but we must consider the role new technologies can
play in helping us fix our current situation.
Here is where the Smart Grid comes into play. With the right
investment and incentives, modernizing the nation's transmission system
could revolutionize how and when we use electricity. If done correctly,
utilities can streamline their operations and have more control over
their networks. The more efficient we get, the less electricity will be
lost on the transmission grid. Consumers, meanwhile, can reduce their
usage across the board, and especially during peak times. This can
actually lead to reduced electricity bills. From an operational,
business, environmental and economic standpoint, the Smart Grid, if
implemented properly, can be a major win-win.
But we do need to be careful. Right now, we are selling the Smart
Grid as a means of empowering consumers to lower their usage and,
correspondingly, their energy bills. While this may ultimately be the
case, we must learn our lesson from the restructuring experience before
heading down this path. The promise of restructuring was that consumers
would save money by shopping for power. Nearly half the States
introduced some kind of restructuring legislation in the mid- and late-
1990's. Congress also considered mandating a national restructuring
scheme during the late 1980's and early 1990's. In many States, rates
were cut and/or frozen for a set number of years, so at the outset,
restructuring seemed to be a success.
The 2000-2001 Western Energy Crisis prompted many to rethink this
approach. Instead of lower prices, consumers saw their rates skyrocket
as utilities were forced to buy electricity through the volatile spot-
market costs which, we later found out, were being manipulated. Along
the East Coast, starting in 2006, when rate caps expired in Maryland,
ratepayers and politicians led a mutiny that nearly resulted in the
demise of the State's Public Service Commission. Cooler heads prevailed
and the massive rate increases were phased in over time, but many
consumers still feel burned. Delaware and Illinois have had similar
experiences. We have not had these kinds of problems in New Jersey, but
the sting in many States is being felt across the country.
The problem here was not restructuring per se, but it was the way
it was sold to consumers. Instead of determining the best way to move
forward deliberatively, we jumped right in, with the promise of lower
rates to follow. Because of this approach, and because of the results,
the concept of restructuring has taken a significant hit. Indeed, we
put the cart before the horse.
We cannot make this same mistake with the Smart Grid if we want it
to succeed. There is no doubt that the Smart Grid will bring consumers
significant benefits. However, if we want to make the biggest impact,
we should consider a different approach and concentrate first on the
operational side while we educate consumers and deploy smart meters
very strategically. Many utilities, engineers, and vendors have
extolled the virtues of how an updated, modernized transmission system
will give grid operators a much better view of their transmission and
distribution network. New technologies can be installed on distribution
poles and on the lines themselves to give advanced warning of a power
surge. A modernized grid can help utilities lower costs by reducing the
need for sending out trucks to read meters or restore power. Business
operations can be streamlined, reliability can be improved, and money--
real money--can be saved.
For instance, phasor measurement and backscatter sensors on the
transmission grid, along with video sagometers and wireless mesh
sensors, can use radio-frequency identification (RFID) technology to
give utilities real-time information on the status of specific lines.
These sensors can detect problems on the grid as they develop and that
are relayed back to the utility for resolution before they escalate
into a massive blackout. Instead of relying on costly and time-
consuming manual visits from work crews, utilities will have up-to-date
information on their system and can act accordingly. These reasons
alone will make the Smart Grid a safe and worthwhile investment for
utilities, whether or not end-users choose to get on board later.
From my perspective as a State regulator, it seems to make the most
sense that if we're going to begin investing in a Smart Grid, we should
start here. If we start with the backbone--if we update and improve the
delivery system first--we will see the utility company side benefits of
the Smart Grid. The question of who pays is important--and with
consumers already challenged because of rising rates and the economic
downturn, we must be careful before putting more on their plate. In
this case, starting with the backbone means the initial investments
would be paid for by the utilities themselves, as they will be the
initial beneficiaries, and not immediately by ratepayers. While we all
would like to see end users enjoy the benefits of Advanced Metering
Infrastructure, the Smart Grid can still make an immediate and long-
lasting improvement for the industry by making the delivery system more
efficient. This alone will result in considerable savings and fewer
outages. Meanwhile, advanced meters and the applications they enable
can at the same time be deployed strategically in pilot and
demonstration projects thus demonstrating the benefits to end-use
customers. Moreover, these backbone investments are necessary at some
point during the transition to the Smart Grid. So let's ready the cart
to be pulled before asking the horse--or consumers--to pull it.
The second part of Smart Grid should be developed and implemented
in an effort coordinated by State and local officials. In my experience
as a Commissioner I have found that a key component for an initiative
such as Smart Grid is public outreach. We should use some Federal
resources to explain to the consumers that a new Smart Grid program is
worthwhile. Most State commissioners understand the benefits of
Advanced Metering Infrastructure and time-of-use rates, but most
consumers do not. Because these new programs will need new rate
structures that will be disruptive to habits of paying energy that have
been in place for over 120 years, we must proceed carefully to avoid
public backlash. Time-of-use rates are being welcomed by some sectors
of society and feared by others. States must be sure that consumers
will embrace the technology and tolerate the initial investment. So
far, this is only occurring in a few States. In California, for
example, the Public Utilities Commission is committed to rolling out
the Smart Grid to their consumers. The State has taken a number of
steps laying out the initial foundation, including a decision in
September 2008 approving a smart-metering program for Southern
California Edison, one of the State's three investor-owned utilities.
Still, my colleague on the California PUC, Commissioner Dian
Grueneich, said that despite the commission's conclusion on the
benefits, key California consumer groups remain unconvinced that the
Smart Grid will deliver. The advanced metering infrastructure
deployment for Southern California Edison will cost about $1.63
billion, with estimated benefits ranging from $9 million and $304
million for consumers. Speaking in September 2008 at the Grid Week
forum in Washington, D.C., Commissioner Grueneich said the PUC moved
forward despite the strong opposition from some consumers. ``Very
significant costs have been authorized and put into rates,'' she said.
``Our consumer groups are not comfortable'' with this.
The concern that many of my colleagues are trying to resolve is
that consumers are convinced that the Smart Grid will only raise their
rates with no discernable benefits. In a high-priced environment, some
or perhaps most consumers see advanced metering rollouts as just one
more headache and budget buster and are particularly scared that
utilities and vendors will keep raising rates as the technology
changes.
California will be launching a major education, marketing, and
outreach campaign next year. This will need as much support as possible
from all parties so the program can succeed and perhaps reduce the
sting on ratepayers. Once they see the benefits, they should also see
how they can turn this into savings.
As this experience demonstrates, the way a Smart-Grid program is
structured and rolled out is absolutely key to its success, and
regulators and industry must be flexible to ensure that consumers will
not feel inundated or overwhelmed. Depending on how a Smart-Grid
program is structured and rolled out will be the key to its success,
and Congress, regulators, and industry must be flexible to ensure that
consumers will not feel inundated or overwhelmed. As a State regulator,
here's how I think we should proceed.
A good place to look is at the work we're doing with the NARUC-
Federal Energy Regulatory Commission (FERC) Smart Grid Collaborative,
which I co-chair with FERC Commissioner Suedeen Kelly. As this is an
issue that cuts across both wholesale and retail energy markets, the
dialogs we are initiating through this process will help us all as we
move forward. The Collaborative brings together a diverse group of
State and Federal regulators, consumer groups, and industry experts and
allows us to talk in a public setting about these issues.
The Collaborative has met three times since its February 2008
inception, most recently at the NARUC Winter Committee Meetings last
month. We have discussed issues such as cost allocation, specific
technologies, interoperability, and pilot programs with consumers and
industry executives who are promoting Smart-grid technologies.
In my role as co-chair of this Collaborative, I have spent a
considerable amount of time getting up to speed on the different
technologies and pilot programs throughout the country. I am, as is the
entire Smart-Grid industry, very interested in the pilot program in
Boulder, Colorado, which is aiming to become the nation's first ``Smart
Grid City.'' I have discussed the many different pilots with my
regulatory colleagues and am convinced that we must take a deliberate
approach to introducing these new technologies to end-use consumers. As
described above, consumers have yet to ``buy into'' the concept of the
Smart Grid, and when they see any associated rate increases, they are
more than likely not going to be pleased. Smart meters are expensive--
right now we're talking about approximately $150-$200 per meter--so we
must be very careful in forcing anyone to upgrade if they are not
willing. Pilot programs must be carefully structured in such a way that
creates a ``buzz'' and excitement, not a ratepayer revolt.
In addition, there should be large-scale ``demonstration projects''
that cover a larger geographic area. We are all watching the Boulder,
Colorado effort and that project's success is instrumental to the
future of the Smart Grid. These kinds of projects must cover a
significant demographic area that reflects a microcosm of the country
at large, including different incomes and education levels. While the
pilot programs are useful, these larger projects will give us a glimpse
as to how a larger pool of consumers will react to the Smart Grid. The
project doesn't have to be huge, but it must be an accurate
representation of the society.
This approach lets consumers take part by building interest and
selling the product amongst themselves, rather than having Congress,
utilities, or regulators do it for them. The consumers who want the
meters will get the meters, and through word-of-mouth, others will find
out how valuable this new system can be, and will be more willing to
endure a slight rate increase to pay for it. What concerns me is that
under some proposals, millions of people will get these smart meters
whether they want them or not. They will be getting a rate increase and
new gadgets that they do not know how to use installed in their homes.
I am not sure if this will breed anything but hostility among a rate
class that is already facing challenging economic times.
Smart Grid can be successful provided we have Federal and State
governments working in concert with one another as partners; not
working in contrast to one another as adversaries. The challenge before
us is great, the technology and potential benefits exciting. The
Federal Government has resources that the States do not; the States
have expertise in the development and implementation of programs that
the Federal Government does not have. Therefore, this challenge calls
for a true partnership between the States and FERC that we are already
developing through the NARUC-FERC Smart Grid Collaborative.
We have to remember that the Smart Grid will only achieve its vast
potential if consumers embrace it. While we can certainly see major
improvements in efficiencies and reliability by upgrading the
transmission and distribution backbone, we will not change consumers'
habits and consumption if we are unable to convince them of its
promise. I respectfully request that this Committee and this Senate
recognize and respect our unique roles so that we can work toward a
truly 21st Century electricity delivery system.
The Chairman. Thank you very much.
Ms. Hamilton.
STATEMENT OF KATHERINE HAMILTON, PRESIDENT, GRIDWISE ALLIANCE
Ms. Hamilton. Chairman Bingaman, Ranking Member Murkowski,
members of the committee, thank you for inviting me to testify
on smart grid. On behalf of our membership, thank you for your
support and attention to the vision and goals of smart grid,
including creating the smart grid title 13 in the Energy
Independence and Security Act of 2007. Now, with the enactment
of the American Recovery and Reinvestment Act, we'll have the
opportunity to realize the impact of that title.
GridWise Alliance is a coalition of 78 organizations
advocating for a smarter grid for the public good. Our members
include utilities, independent system operators, utility
equipment manufacturers, large IT and communications companies,
small technology companies, venture capital firms, consultants,
universities, research organizations. By design, we are a very
broad representation of the energy value chain. That puts us in
a position to be an unbiased advisor.
We operate on a consensus basis. Everyone has the same
voice. We focus on policy solutions rather than technologies.
We believe the market should determine which smart grid
technologies will prevail.
GridWise Alliance advocates for making the entire grid
smarter, from the power plant bus bar through the transmission
lines and substations all the way to the meter and load center.
Since smart grid includes a broad range of solutions, there are
many working definitions of smart grid, and just as many
examples of initiatives that are underway that could be
considered smart grid projects.
In the simplest terms, smart grid is a dynamic, ubiquitous,
two-way communication system that allows for greater choice by
every stakeholder on the grid. A smart grid can look like a lot
of different things, and it depends on the regional and local
systems, as well as the goals of that system.
We're delighted that Congress and the President identified
smart grid as a priority and that it was funded significantly
in the Recovery Act. We have projected with substantial Federal
investment, smart grid could create as many as 280,000 jobs
over 4 years. These jobs include retaining and retraining the
current work force, as well as creating new jobs in software
and communications, analyzing and engineering, manufacturing,
and supplying goods and services. Those smart grid jobs are
based on what we see as the intent of Congress in the Recovery
Act, and that was that the $4.5 billion appropriated to smart
grid would be allocated to demonstration projects and
investment project matching funds.
Investment projects, we think, are more likely to stimulate
the economy, since they will be the first out of the chute, and
they will accelerate the deployment and advancement of smart
grid. We do not consider building transmission lines to be part
of smart grid, but do expect some projects to be funded that
include smarter transmission systems and technologies.
Smart grid was included in the Recovery Act because we
thought Congress correctly identified the smart grid as a key
economic stimulator. We expect DOE to fund a variety of
competitively solicited projects that can show scaled
deployment of smart grid technologies all across the electric
grid. We think these projects will stimulate economic growth,
helping utilities retain jobs, spurring offshoot industries,
and increasing jobs through installation of clean energy
technologies.
The GridWise Alliance is also pleased that the Recovery Act
funded the NIST standards-making process. As you know, NIST was
given an unfunded mandate to develop smart grid standards, but
DOE was able to fund the Pacific Northwest National Lab and
created the GridWise Architecture Council to bring industry
together to work closely with NIST to develop the architecture
for system interoperability. This process should continue and
be aggressively supported.
We understand the importance of developing standards and
protocols, also realize that entrepreneurs, utilities,
universities, and other businesses developing smart grid
technologies will continue to implement smart grid. We do not
want to hold up these efforts that can stimulate the economy by
waiting for standards to be developed.
The GridWise Alliance thinks of the smart grid
holistically, as a means to an end, not an end in and of
itself. A smart grid can increase reliability, heighten
security, optimize the entire electricity system from the
generation end to the consumption end, and contribute to the
de-carbonization of the electric industry.
A smarter grid enables integration of dynamic forecasting,
energy storage, clean distributed generation, energy efficiency
technologies, and plug-in hybrid vehicles. A smarter grid
allows for the effective deployment of energy from renewable
energy sources, reaping the full benefits of wind, solar,
geothermal, hydropower, and biomass power.
So, additional smart grid policies should be included when
energy or climate legislation is considered that involves our
electricity system. Smart grid, as a key enabler of integrating
dynamic renewable energy generation, should become an element
of an RPS. Smart grid, as an enabler of efficient distribution
technologies, should be built into an energy efficiency
standard. In a transmission bill, any additional transmission
should perhaps be required to have smart grid technologies
embedded to maximize the use of the grid.
In conclusion, GridWise Alliance reiterates that it's
important and critical that smart grid projects be funded
through the Recovery Act and that smart grid should be
considered an essential enabling component for any energy
legislation.
We can help Congress in defining what additional policies
for incentivizing smart grid we should consider and how to
integrate smart grid as a means to fulfilling many overarching
goals.
We thank you for allowing our collective industry voices to
be taken into consideration as this committee moves forward on
many energy fronts.
[The prepared statement of Ms. Hamilton follows:]
Prepared Statement of Katherine Hamilton, President,
The GridWise Alliance
Chairman Bingaman, Ranking Member Murkowski, members of the
Committee, thank you for inviting me to testify on smart grid on behalf
of the GridWise Alliance before the Senate Energy and Natural Resources
Committee. The GridWise Alliance has worked closely with this Committee
and its members since our inception in 2003, testifying before you on
several occasions. On behalf of our membership, I would like to thank
you all for your support and attention to our vision and goals,
including creating the Smart Grid Title XIII in the Energy Independence
and Security Act of 2007. With the enactment of the American Recovery
and Reinvestment Act, we will have the opportunity to realize the
impact of that smart grid title.
The GridWise Alliance is a coalition of 78 organizations advocating
for a smarter grid for the public good. Our members broadly represent
the nation's interest in smart grid, including leading utilities,
independent system operators, large IT and communications companies,
small technology companies, consultants, universities, and research
organizations. We operate on a consensus basis and remain technology
neutral, focusing on the policy issues surrounding the deployment of a
smarter grid. We believe the market should determine which technologies
prevail.
The GridWise Alliance advocates for making the entire grid
smarter--from the power plant bus bar through the transmission lines
and substations, all the way to the meter and appliances and equipment
that consume electricity. We define a smart grid as a dynamic,
ubiquitous two-way communication system involving the entire grid that
allows for greater choice by every stakeholder on the grid. A smart
grid will include a variety of technologies and solutions, depending on
the regional and local systems as well as the goals of the system.
The GridWise Alliance thinks of a smart grid as a means to an end--
not an end unto itself. A smart grid can increase reliability, heighten
security, optimize the entire electricity system from generation to
consumption, and contribute to the decarbonization of the electricity
industry. A smarter grid can also enable the integration of dynamic
forecasting, energy storage, clean distributed generation, and energy
efficiency technologies, including plug in hybrid vehicles. A smarter
grid allows for a more effective deployment of energy from renewable
sources, reaping the full benefit of wind, solar, geothermal,
hydropower, and biomass power.
Speaking on behalf of the entire industry, we were delighted that
Congress and the President identified smart grid as a top priority and
that it was funded significantly in the American Recovery and
Reinvestment Act of 2009 (Recovery Act). We projected that, with
substantial Federal investment, creating a smarter grid could result in
as many as 280,000 jobs over the next 4 years. With stimulus funding of
$4.5 billion and 50 percent cost share for smart grid projects, we have
determined, based on projects already in the hopper, that we could
create nearly 75,000 jobs within the first year. These jobs range from
technicians and new field installers, to new jobs in software and
communications; from analysts and engineers, to manufacturers and
suppliers. While the smart grid is clearly an evolving concept, we
believe that deployment of existing technologies is the most effective
way to encourage the development of the supply chain, to encourage
redesign of existing appliances so that they may be incorporated into a
smarter grid, and to familiarize consumers with the numerous benefits
that a smart grid offers. Stated somewhat differently, commercial
deployment is the most effective tool to encourage private sector
product research and development.
The GridWise Alliance jobs analysis conducted by our member
company, KEMA, Inc., had a positive impact on the discussion around
funding smart grid; however now we must answer the larger question
about how this funding will be allocated. We believe that the majority
of the $4.5 billion appropriated for smart grid in Recovery Act--that
on which we based our jobs numbers--is to fund Title XIII of the Energy
Independence and Security Act of 2007 (EISA). To that end, we have
prepared a set of recommendations to the Department of Energy to
provide guidance on the best way to spend those funds consistent with
Title XIII. Because we focused on impacts and not specific
technologies, we did not recommend numbers of meters or miles of
transmission. Instead, we looked at a variety of quantitative and
qualitative metrics. In our recommendations, we define the key metrics
the DOE should use to assess smart grid project applications; we
describe a process for achieving stakeholder buy-in to the metrics and
for identifying weighting of metrics to feed into the application
evaluation process; we suggest approaches for allocating funding to
different categories of smart grid projects that cannot easily be
compared to each other; and we recommend a process for monitoring and
reporting on effective use of funding.
The GridWise Alliance believes that critical issues for funding
smart grid projects include: 1) establishing clear guidelines for
applicant submittals, including a restatement of what types of projects
are eligible for funding and clearly incorporates the language of EISA
as amended in the Recovery Act; 2) establishing an expedited
contracting process consistent with the OMB Initial Implementing
Guidance for the Recovery Act; 3) establishing a rational approach
which fully respects both pre-existing Intellectual Property rights and
new intellectual property which emerge from the deployment of existing
intellectual property in R&D, demonstration or investment projects ; 4)
establishing minimum smart grid standards for other energy
infrastructure projects that are undertaken pursuant to provisions of
the Recovery Act apart from those that contain the specific smart grid
language; and 5) establishing a transparent, but not onerous, process
for monitoring allocations among different types of smart grid
endeavors and altering new allocations to secure balance as seem
appropriate in light of the overall Recovery Act and EISA objectives.
As part of this process, the GridWise Alliance believes that the
intent of Congress is clear: the $4.3 billion appropriated to smart
grid in the Recovery Act should be allocated to large-scale
demonstration projects and investment project matching funds as
provided for in sections 1304b and 1306 of EISA as amended. Between the
two, the investment projects should receive the larger funding overall
as these projects in general are more likely to both stimulate the
economy and accelerate the deployment and advancement of the smart
grid. We do not consider building new transmission lines to be part of
the smart grid, but certainly expect some projects to be funded that
include smarter transmission systems.
The GridWise Alliance is pleased that the Recovery Act also funded
development of the NIST process. In EISA 2007, NIST was given an
unfunded mandate to develop smart grid standards; DOE funded the
Pacific Northwest National Laboratory to begin the process and created
the GridWise Architecture Council to work closely with NIST and
industry to develop the architecture for system interoperability that
could be used as a foundation in developing standards. Much of the
groundwork has begun and this process deserves to be aggressively
supported. The GridWise Alliance prefers open standards and protocols
so that all players are allowed to compete in the market. Because of
cyber security issues, certain criteria in developing technology are
critical. Industry has been engaged in this process collectively
through several partnerships so that the security architecture for all
smart grid technologies will be consistent. Developing standards and
protocols for smart grid is important, yet entrepreneurs, utilities,
universities, and other businesses developing smart grid technologies
will continue to implement smart grid in the absence of NIST standards.
We do not want to hold up these efforts that can stimulate the economy
by waiting for standards to be developed.
Smart grid can be implemented differently in different places. The
simplest definition is a two-way communications, control and data
system from power station to home load center. The design and
implementation can vary, however, depending on the technologies and
solutions deployed and the needs of the regional utility, transmission
operator, and customer mix. For example, in some areas smart meters are
a good first step in providing information to consumers who want
increased choice in how they use their energy and for utilities who
want more data on consumer loads. In other areas, it would be wiser to
start developing the smart grid with transmission technologies like
phase shifting transformers. The issue is not so much which specific
technology application is better, but what improvements can be made to
the entire system. The GridWise Alliance believes that implementing
smart grid technologies on the current grid is just as important as
planning for additional transmission. While we recognize the need for
additional transmission to alleviate congestion and take renewable
energy generation to load centers, we strongly believe that planning
for this increase should include integrating smart grid technologies.
We reiterate that smart grid funding in the Recovery Act should not be
used to build those new lines, but rather to make the overall system
smarter, including making any additional transmission lines smarter.
While the electric grid has the same basic components everywhere,
the entities operating and using the grid vary according to region, as
do the goals of those systems. For example, a rural cooperative may
have higher reliability needs because of the vast area it serves and
the need to know who has electricity and where they have outages on
their system. A municipality may need to contain costs and have
consumers adjust demand given rate incentives and smart meter
technologies. A data center may require redundancy and security
measures. The stimulus funding will only go so far. Our government has
additional resources that can assist in developing the smart grid. We
have experts in state energy offices, Department of Commerce
Manufacturing Extension Partnership, and Department of Energy
Industrial Assessment Centers. Many universities--like Florida State,
Northern New Mexico College, University of Colorado, Washington State
University, and North Carolina State University--have smart grid
technology research programs. Edison Electric Institute has worker
training centers as does the IBEW. This technical expertise coupled
with public utility commissions and regional planning authorities
should enable this country to maximize the grid we have and make it
smarter, stronger, more reliable, and freer of carbon.
The real benefits of a smart grid will not be realized without
including the consumer in making informed decisions on how they use
electricity. Modern information technologies have transformed almost
every other sector of our lives; many of those same technologies can
change the way we use our electricity. Most consumers will not change
behavior without price signals, education, and technological
assistance. Because our electric system is so ubiquitous and robust, we
take it for granted. Electricity has become an integral part of our
lives and a necessity for businesses and homeowners. Most people don't
think about where electricity comes from other than the outlet in their
wall. They get their bill at the end of the month and react based on
the size of the bill, but don't know what they did to make it go up or
down. With increased information, and technological innovation,
consumers could see in real time the impact of their electricity use
and take action to reduce their bills. Utilities that have experimented
with smart grid technologies have received positive results and
feedback from their customers. As we move forward it is important that
we not just deploy a smarter grid but build coalitions with consumers
and other stakeholders so that they are fully engaged in the
implementation of that smart grid.
Smart grid was included in the Recovery Act because Congress
correctly identified the smart grid as a key potential economic
stimulator. The proof will be in the implementation, of course. We
expect DOE to fund a variety of competitively solicited projects that
can show a plethora of smart grid technologies and gather information
about how smart grid affects the system operators, utilities, and
consumers. The projects will be spread around the country to see how
smart grid differs by location. Those projects will stimulate economic
growth--by helping utilities retain jobs, by spurring offshoot
industries, by increasing jobs through installation of clean energy
technologies. But this is just the beginning. The GridWise Alliance
believes that, since a smarter grid is a means to an end, additional
smart grid policies need to be included when energy or climate
legislation is considered that involves our electricity system. Smart
grid is the great enabler of getting dynamic renewable energy
generation on line; smart grid could become an element of an RPS. A
smart grid enables integration of clean distributed generation
including solar and plug in hybrids; smart grid could be built into an
energy efficiency standard. In a transmission bill, any additional
transmission could be required to have smart grid technologies imbedded
to maximize the use of that grid. We are counting on this Committee to
make sure that a smart grid is the foundation to fulfill our nation's
energy independence, national security, and carbon mitigation goals.
In conclusion, the GridWise Alliance reiterates that smart grid
projects funded through the Recovery Act will create the cornerstone of
a more reliable, affordable, and cleaner grid. In addition, smart grid
provisions must be included as critical parts of future energy
legislation. Our Alliance is always available to help define what
policies are important and intend to keep you apprised of smart grid
developments in the coming months. We thank you for allowing our voices
to be taken into consideration as this Committee moves forward on many
energy fronts.
The Chairman. Thank you very much.
Mr. Lu, go right ahead.
STATEMENT OF EDWARD LU, ADVANCED PROJECTS PROGRAM MANAGER,
GOOGLE, INC., MOUNTAIN VIEW, CA
Mr. Lu. Mr. Chairman and members of the committee, my name
is Edward Lu, and today I would like to share my perspective on
how to advance the deployment of smart grid technology, and, in
particular, on the importance of energy information to
consumers.
I serve as a program manager in advanced projects at
Google, and I lead several energy-related projects, including
one that is developing an energy information software tool that
will enable consumers to make informed choices about their
energy use as they browse the Web, read their e-mail, or use a
mobile phone.
Prior to my position with Google, I served as a NASA
astronaut for 12 years. I had the privilege of flying two Space
Shuttle missions, a Russian Soyuz mission, and spent 6 months
abroad the International Space Station. By training, I'm an
electrical engineer, and I have a Ph.D. in applied physics.
As you know, the United States is currently building out a
smart grid that will bring our 1950s-era electricity
infrastructure into the digital age. The main point I would
like to make today is that we need to develop this grid in a
way that spurs innovation, that drives competition, and
supplies maximum information to consumers.
First, we must not forget about the consumer. That means
deploying smart grid technology that empowers consumers with
greater information, tools, and choices about how they use
electricity; and, second, that the energy information that the
consumers get should be open. That means that it is in a
nonproprietary format that spurs the development of products
and services to help consumers save energy and money.
Google is working in this space because this,
fundamentally, is a large-scale information-delivery problem,
and Google's strength is in bringing useful information to
millions of consumers.
So, why is energy information crucial? The way Americans
buy electricity today is a bit like shopping for groceries in a
store that has no prices and no cash register. Take what you
want, you leave, and at the end of the month you get a bill.
So, how could a family, like that, keep to a budget or make
smart choices about what they're buying? It's very difficult.
When it comes to electricity, how many consumers know how
much electricity their house uses, what appliances cost the
most to run, or how to even go about saving energy and money?
How many of you have gotten a big electric 1 month and
wondered, ``What caused it last month?'' I know I have.
Studies show that when consumers can see, in realtime, how
much energy they are using, they naturally save 5- to 15-
percent on their electricity use with simple behavioral
changes. That's even before they make investments in energy
efficiency. You manage what you measure.
Energy information empowers consumers to make smart
choices. The average United States residential consumer spends
about $1200 a year on electricity, so savings, simply based on
realtime feedback, could amount to $60 to $180 per year, per
consumer. The real power of this is when you scale that up to
millions of consumers. If just half of American households cut
their demand by 10 percent, the CO2 emissions
avoided would be equal to eliminating the emissions from about
8 million cars.
So, where's this data going to come from? A key step in
establishing a smart grid is to equip homes with advanced
electricity meters, or smart meters. These smart meters will
enable utilities to provide better service and a more robust
electricity delivery system, as we've heard already today.
Already, utilities are in the process of deploying 40 million
of these new meters, replacing the old-style electric meters.
Alternatively, consumers could opt to put in their own
energy monitoring devices into their own homes. So, the data is
forthcoming. But, installing the smart meters themselves does
not mean automatically that the data is either in realtime or
that consumers will have access to the data in a convenient
fashion. So, we encourage efforts by the utilities, and the
public utility commissions in the States, to ensure that the
data is as close to realtime as practical and is easily
accessible by consumers.
One open question is, Who owns the data? Google believes
that this personal energy information rightfully belongs to
consumers, and they should control who has access to it. But,
in many States there is no clear statement on this. So, we're
hoping that policymakers provide clarity on ownership of data
as the smart grid is built out, because it will encourage
entrepreneurs and businesses to get involved in this space.
So, what form should this data take? We think it's
important the consumer-facing data, that part that the consumer
actually sees from the smart meter, should be available in an
open, nonproprietary format. This will allow consumers to
easily and conveniently share their data with third parties.
The goal is to foster a thriving ecosystem of partners, where
third parties develop products to help consumers decrease and
manage their energy demand and save money. For example, a
utility or a third party could offer service that analyzes the
household's electricity usage data, identifies inefficient
appliances or practices in the house, and offers tips on how to
reduce energy, or even provide discounts on efficient
appliances or electronic equipment.
So, what are we doing at Google? We're partnering with
utilities with smart meter deployments, and with companies that
manufacture devices that measure the energies in your home, to
give consumers access to their data. Our engineers have
developed a simple and secure software tool, called Google
Power Meter, that will allow users to monitor their own home
electricity consumption, in realtime, on their computer or on
their cell phone. I have my own house information on my phone,
for instance. Our tool is free and scalable, and we plan to
release the technical specifications so anyone can build
applications on it.
The Google Power Meter is not yet available to the public,
since we're testing it out with Google employees first. We're
busy collecting data on the impact, how much people are saving.
The initial results are very promising.
It's important to note that there's really no one-size-
fits-all solution for providing consumers with this data. The
challenge is going to be to provide this information at the
scale of tens or even hundreds of millions of consumers. We
look forward to working with utilities and other industry
stakeholders to enable consumers to have a greater
understanding of, and control over, their energy use.
Thank you, Mr. Chairman, for the opportunity to testify
today, and I look forward to answering any questions you have.
[The prepared statement of Mr. Lu follows:]
Prepared Statement of Edward Lu, Advanced Projects Program Manager,
Google, Inc., Mountain View, CA
Mr. Chairman and members of the Committee, my name is Edward Lu and
I am pleased to share my perspective on how to advance the deployment
of smart grid technology. I serve as a Program Manager in Advanced
Projects at Google. I lead a number of energy-related projects
including one that is developing an energy information software tool
that will enable consumers to make informed choices about their energy
use as they browse the web, read email, or use a mobile phone.
Prior to my position with Google, I served as a NASA astronaut for
twelve years. I had the privilege of flying two Space Shuttle missions,
a Russian Soyuz mission, and a 6-month tour on-board the International
Space Station. I am an electrical engineer and have a Ph.D. in applied
physics.
Google's mission is to organize the world's information and make it
universally accessible and useful. We believe that access to
information about personal energy consumption is critical to helping
consumers save electricity and money, but unlocking this data requires
upgrading the electricity grid to make it smarter. We are tackling this
informational challenge on several fronts including developing consumer
tools, investing in energy technology companies, and advocating for
policies that advance a smarter grid.
The United States can build a ``smart grid'' and bring our 1950's-
era electricity infrastructure into the digital age. The main point
that I will make today is that we need to develop this grid in a way
that spurs innovation, drives competition, and supplies maximum
information to consumers.
First, we must develop and deploy smart grid technology in a
manner that empowers consumers with greater information, tools
and choices about how they use electricity, including access to
real-time energy information.
Second, energy information should be made available based on
open non-proprietary standards to spur the development of
products and services to help consumers save energy and money.
I will also briefly describe a free software product that Google is
developing to enable people to get better information about their home
electricity consumption.
I. INFORMATION HELPS CONSUMERS SAVE ENERGY AND MONEY
The way Americans currently buy electricity is like shopping for
groceries every day but not getting the bill until the end of the
month. How can a family keep to a budget or make smart choices? When it
comes to electricity, how many consumers know how much electricity
their house uses, what appliances cost the most to run, or how to go
about saving energy or money?
Studies show that when consumers can see in real time how much
energy they are using, they save 5 to 15 percent on their electricity
use with simple behavioral changes, and even more with investments in
energy efficiency. The average U.S. residential customer spends about
$1,200 a year on electricity, so savings simply based on a real-time
feedback monitor could amount to $60 to $180 per year. In fact, if just
half of American households cut their demand by 10 percent, the
CO2 emissions avoided would be equal to taking approximately
eight million cars off the road.
As a first step to establishing a smart grid, homes must be
equipped with advanced energy meters called ``smart meters'' that
identify detailed real-time energy consumption information. With the
help of state public utility commissions, utilities throughout the
United States are working to replace 40 million old-style electric
meters with digital smart meters that can be automatically read
throughout the day. Congress also recently included a provision in the
American Recovery and Reinvestment Act to speed the installation of
smart meters and other smart grid technology. Google applauds these
efforts, and encourages utilities, transmission operators, technology
companies, and public utility commissions to continue to modernize our
electricity infrastructure with the support of Congress.
The benefits of energy information can be enhanced when combined
with programmable appliances and dynamic energy pricing. A study
conducted by the Department of Energy's Pacific Northwest National
Laboratory (PNNL) gave customers access to energy consumption
information, broken down by appliance, every fifteen minutes and
allowed them to program their water heaters and thermostats to respond
to changes in electricity prices. Participants in the PNNL study
received cash when they operated their household loads in collaboration
with the needs of the grid by reducing their energy usage at times of
peak energy demand. Over the year of the study, peak load on the grid
was reduced by approximately 15 percent and consumers saved
approximately 10 percent on their electricity bills over the previous
year. Based on these results, the authors determined that if all
customers nationwide engaged in reducing peak loads, peak electricity
prices would be substantially reduced and approximately $70 billion in
new generation, transmission, and distribution systems could be
avoided, with the savings passed along to ratepayers.
II. CONSUMERS SHOULD HAVE ACCESS TO REAL-TIME ENERGY INFORMATION
Google believes consumers should have access to real-time
information about their home electricity use. This means that consumers
should know how much energy they are paying for at the time of use.
Personal energy information belongs to consumers and they should
control who has access to it. Policymakers should provide clarity on
ownership of data as the smart grid is built out.
To access energy information in greater detail, homes must be
equipped with smart meters or consumer-installed energy monitoring
devices. Smart meters are a key part of the smart grid and will enable
utilities to provide better service and a more robust electricity
delivery system, in addition to enabling consumer access to
information. However, installing smart meters does not automatically
mean that consumers will receive real-time information about their
electricity usage. While there are some limitations today on the
ability of utilities to provide real-time data to consumers, we believe
that there are substantial benefits to doing so. Utilities should be
encouraged to provide consumers with real-time access to their energy
information.
III. OPEN STANDARDS SPUR INNOVATION AND DRIVE COMPETITION
In order to achieve the greatest potential for energy savings,
consumers should receive information as part of an open ecosystem of
hardware and software for energy monitoring, home automation, and
device control. For that to happen, the consumer-facing data from the
smart meter needs to be available to the consumer in an open non-
proprietary format as well as in real time.
Truly open standards would allow consumers to share their data with
third parties in a format that is standardized, freely published, and
unencumbered by a patent or proprietary claim. The goal is to foster a
thriving ecosystem of partners where third-parties will develop and
provide products to help consumers decrease and manage their energy
demand and save money. For example, a utility or a third-party could
offer a service that analyzes a household's electricity usage data,
identifies inefficient appliances or practices in the home, and offers
tips on how to reduce energy or provides special discounts on efficient
appliances or electronic equipment.
The Texas legislature and Public Utility Commission have taken a
thoughtful approach to these issues and provides a useful example of a
consumer-friendly energy information policy:
Smart meters must be capable of providing consumers with
direct, near real-time access to electricity usage data.
That data must be stored on the meter in a form that
complies with nationally recognized non-proprietary standards.
Smart meters must also be capable of communicating with
other devices on the premises, such as monitoring devices, load
control devices, and prepayment systems.
Consumers own their energy usage data.
As smart meters are deployed in Texas, consumers will not
have to pay an additional fee or have to obtain special
permission to view their data.
IV. WE'RE DEVELOPING A SOFTWARE TOOL CALLED GOOGLE POWERMETER
Over the last year, our engineers have developed a simple and
secure software tool called Google PowerMeter. This will give consumers
a means to draw data from their utility or from devices they install
themselves to see their own home electricity consumption in near real
time, on their computer or cell phone. The default view shows the
current day's energy consumption compared to the previous day's, but
the graph can easily be extended further back in time to look for
peaks, troughs and other outlying data points. Our tool is free and
scalable, and we plan to release the technical specifications
(application programming interfaces or ``APIs'') so anyone can build
applications from it. Google PowerMeter is not yet available to the
public since we are testing it out with Google employees first.
Currently we are building partnerships with utilities and independent
consumer device manufacturers to roll this tool out in pilot programs.
We are busy collecting data regarding the impact that energy
information provided by Google PowerMeter has on electricity savings
and consumption, and preliminary results are promising.
There is no one-size-fits-all solution to providing consumers with
detailed energy information. It will take the combined efforts of
Federal and state governments, utilities, device manufacturers,
software engineers and non-governmental organizations to empower
consumers to use electricity more wisely by giving them access to
energy information. We look forward to working with utilities and other
industry stakeholders to enable consumers to have a greater
understanding of, and control over, their energy use.
Thank you, Mr. Chairman, for the opportunity to testify today. I
look forward to working with the Committee in its important examination
of ways to build and deploy a smarter electrical grid.
The Chairman. Thank you very much.
Mr. Gaddis.
STATEMENT OF EVAN R. GADDIS, PRESIDENT AND CEO, NATIONAL
ELECTRICAL MANUFACTURERS ASSOCIATION, ROSSLYN, VA
Mr. Gaddis. Mr. Chairman, Ranking Member Murkowski, and
members of the committee, thank you for the invitation to speak
on behalf of the over 400 electrical manufacturers in NEMA. Our
member companies represent the full spectrum of the grid, from
transformers, switch gear, thermostats, wire meters, and energy
storage, to lights and plugs. Better said, from the power plant
to your living room and your business.
Innovation and research is a constant driver in our
companies, and their technologies would be on the market today
if we had certainty of standards. I'll speak on the current
obstacles to, and the proposals to, advance building the smart
grid.
Historically, utilities have made piecemeal investments,
often resulting in customized solution; as we call them,
stovepipes. In certain instances, manufacturers responded with
proprietary systems; more stovepipes.
As to the regulators, their objective is to ensure just and
reasonable cost. Until recently, standardized systems was not a
major cost factor. The current grid was designed for one
purpose: to flow electricity downstream from nearby generators
to our homes, offices, and factories. Today, we need a grid to
do more. Our computers need constant reliable power. Our
climate policy requires green generation. We want to charge our
cars at home and at the office. Grids that were set up for
steady one-way power flow must now become more nimble and more
adaptable. Our smart grid must use new device communication
strategies. Utilities and their customers must communicate.
They must be interoperable.
What we need is not just a common language, but a common
alphabet. On the grid, this alphabet includes time, location,
and measurement. We need agreement on how we will time-stamp
events and commands. We need a standard for locating devices
and disturbances, both geographically and electrically. We need
to agree on how to record current and voltage, the fundamental
measurements of electrical power. Simply said, we need common
standards.
We can build on existing efforts. For example, NIST
maintains the official time of the United States. We already
have widely used standards for geographic information systems.
We, as an industry, need to adapt and adopt these existing
methods. We need common standards from the turbine to the plug.
In the 2007 energy bill, Congress recognized the need for
common standards, and Congress entrusted NIST with this
critical task. NEMA was named as a partner in this endeavor.
The process is not working. I think we got the taskings
backward. NIST was designated to provide guidance and
coordinate the standards. In more than a year, we have not seen
the first standard. NEMA and other standards development
organizations should write the standards, NIST should be our
navigator and approval authority.
NEMA has extensive experience in writing standards. We
administer over 50 U.S. technical advisory groups, and hold six
secretariats from the International Electrical Technical
Commission. We have over 240 ANSI-approved standards, including
39 for power equipment products. Today, anyone who uses a wall
outlet or a thermostat interacts with NEMA standards.
In the grid, NEMA is already at work writing levels of
intelligence which will provide decisionmakers with a quick and
objective measure of the intelligence of the grid. We have
worked hand in hand with NIST as we defined these levels of
intelligence.
Let me say it again. NIST should be the navigator and
approval authority. NEMA and other standards development
organizations should write the standards. Industry is ready
now.
From traffic signaling to baggage screening, NEMA has
developed standards that enable commerce today. We want to
accelerate our energy policy goals, your goals: independence,
renewables, and reliability. We will need a smart grid.
If we get grid standards in place before we start building,
we will save time and money. NEMA and our member companies
stand ready to deliver the grid technology compliant with
consensus standards and--excuse me--compliant with consensus
standards that regulators, utilities, and customers embrace.
We're waiting on the green light from government to do just
that.
Thank you for your time. It's an honor to talk with you
today.
[The prepared statement of Mr. Gaddis follows:]
Prepared Statement of Evan R. Gaddis, President and CEO, National
Electrical Manufacturers Association, Rosslyn, VA
Good morning, Mr. Chairman and members of the committee. On behalf
of the over four hundred NEMA member manufacturers, thank you for the
invitation to speak. I would also like to thank Commissioner Kelly and
Chairman Wellinghoff of the Federal Energy Regulatory Commission for
inviting us to host a grid technology demonstration day in April. Our
companies represent the full spectrum of the grid, from transformers
and switchgear to thermostats and advanced meters, with a burgeoning
energy storage section. Research and innovation is a constant driver in
our companies, and for now, the world still looks to the U.S. for
energy innovations. However, uncertainty on standards obstructs
adoption of many beneficial technologies and threatens our technology
leadership position. I will speak on the current obstacles to and
proposals for accelerating smart grid implementation.
Historically, utilities--NEMA member customers--have made piecemeal
investments, often resulting in customized solutions. And in certain
instances, manufacturers responded with proprietary systems. The
regulators' objective has been to ensure just and reasonable cost, and
until recently, standardized systems was not a major cost factor. The
grid of the 1900's was designed for one purpose--to let electricity
flow downstream from nearby generators to our homes, offices, and
factories.
Today, we need the grid to do more. Our computers need reliable
power; our climate policy requires green generation; we want to charge
our cars with domestic electrons. Grids that were set up for steady
one-way power flow must now become more nimble and adaptable, which
requires more communication among devices. Common sense suggests common
languages simplify complex systems.
In the 2007 Energy Independence and Security Act, Congress
recognized the need for interoperability standards and entrusted the
National Institute of Standards and Technology (NIST) with coordinating
this critical task. Congress also named NEMA to assist NIST in this
work.\1\
---------------------------------------------------------------------------
\1\ PL 110-140 s. 1305
---------------------------------------------------------------------------
Smart thermostats are an example of a device whose adoption today
is hampered by the lack of standards. A user-friendly smart thermostat
could intelligently talk to the utility to minimize your electric bill,
maximize comfort, or both. These devices are available today and are
incorporated into many demand response pilot programs, but do not
necessarily communicate using the same protocols. We need national
standards so that a thermostat or any equipment made for San Francisco
will also work in Syracuse.
The lack of adequate grid standards has already cost our nation
dearly. After the 2003 blackout, a major obstacle to decoding the data
was to determine if 2 pm recorded on one device meant 2:01 pm on
another. Recommendation 24 from the blackout report notes that piecing
together the events from the numerous logging devices would have been
``significantly faster and easier'' if the devices were synchronized. A
standard for time synchronization would have shaved months of data
analysis, and we may have even had enough data to prevent the grid's
problems from cascading across the country.\2\
---------------------------------------------------------------------------
\2\ US-Canada Power System Outage Task Force, ``Final Report on the
August 14, 2003 Blackout in the United States and Canada,'' April 2004.
---------------------------------------------------------------------------
Before we can create a common language, we must assemble a common
alphabet. On the grid, this alphabet includes time, location, and
measurement. We need agreement on how we will time stamp events and
commands, as we learned from the 2003 blackout. We need a standard for
locating devices and disturbances, both geographically and
electrically. Finally, we need to agree on how to record current and
voltage--these are the fundamental measurements of electrical power.
For each of these areas, we can build on existing efforts. NIST, of
course, maintains the official time for the United States. We already
have widely used standards for geographic information systems. And NIST
and the Department of Energy (DOE) are working on the standards for
sensors on the transmission system.\3\ For a smart grid framework, we
as the industry need agreement to adapt or adopt existing methods for
use on the entire electric system, from the plant to the plug.
---------------------------------------------------------------------------
\3\ North American Syncro Phasor Initiative, materials posted at
http://www.naspi.org/
---------------------------------------------------------------------------
Once we have agreement on a fundamental alphabet, we can begin the
process of harmonizing the languages. For example, once we have
agreement on time precision and accuracy, we will need to revise
substations or meter protocols to be readily interpretable to and from
a common framework. Each further revision will lead to systems that
require less and less customization.
As DOE Secretary Chu has alluded, one way to get industry agreement
is to lock the experts in a room until the right answer emerges. NEMA
has extensive experience in accelerating standards for urgent needs. We
administer more than 50 U.S. Technical Advisory Groups and hold 6
secretariats for the International Electrotechnical Commission. We have
over 240 ANSI-approved standards, including 39 for power equipment
products. Today, anyone who uses a wall outlet or a thermostat
interacts with NEMA standards.4}5
---------------------------------------------------------------------------
\4\ NEMA WD-6, ``Dimensional Requirements for Wiring Devices,''
revised 2008. Available at http://www.nema.org/stds/wd6.cfm.
\5\ NEMA DC-3, ``Electrical Wall-Mounted Room Thermostats,''
revised 2003. Available at http://www.nema.org/stds/dc3.cfm.
---------------------------------------------------------------------------
In the smart grid, NEMA is already at work. Our companies have
proposed a ``Levels of Intelligence'' rating system, which will provide
decisionmakers with an objective measure of the intelligence of the
grid.\6\ We are polling our companies on the protocols in use today to
draw a map from where we are now to where we want to go. And as
directed by Congress, our staff have assisted NIST since day one to get
the interoperability framework up and running.
---------------------------------------------------------------------------
\6\ NEMA Emerging Technologies Task Force, ``Standardizing the
Classification of Intelligence Levels and Performance Of Electricity
Supply Chains,'' December 2003. Available at http://www.nema.org/
smartgrid.
---------------------------------------------------------------------------
The government has stepped in before and recommended that the
industry adopt a standard. In the 1960's, there were many competing
methods for encoding the alphabet on magnetic and paper tapes. IBM,
NCR, and RCA accounted for eight different schemes. One proposal was
the American Standard Code for Information Interchange, or ASCII. In
1968, President Lyndon Johnson issued an executive order that directed
the Federal Government to purchase only computers that complied with
the ASCII standard ``to minimize costly incompatibility.''\7\
---------------------------------------------------------------------------
\7\ Lyndon B. Johnson, Memorandum Approving the Adoption by the
Federal Government of a Standard Code for Information Interchange,
March 11, 1968). The American Presidency Project, Accessed 2009-02-27
via Wikipedia. http://www.presidency.ucsb.edu/ws/index.php?pid=28724
---------------------------------------------------------------------------
To establish a similar incentive today, Congress, NIST, or the DOE
should direct accredited standards development organizations like NEMA
to accelerate the priority standards of time, place, and quantity. Such
an effort would be conducted in a consensus-based process, and NIST
could then review and ``bless'' the final outcome. To create a further
incentive to get the work done quickly, Congress should condition the
release of the 50 percent smart grid matching fund on the development
of NIST endorsed standards.\8\
---------------------------------------------------------------------------
\8\ The matching fund was codified in PL 110-140 s. 1306 and
amended by PL 111-5 s. 7002
---------------------------------------------------------------------------
NIST is our navigator, and the industry is ready to row. From
traffic signaling to baggage screening, NEMA has developed the
standards that enable commerce and demonstrate world leadership in
technology adoption. If we want to accelerate our energy policy goals--
independence, renewables, reliability--we will need a smart grid. If we
get grid standards in place before we start building, we will save time
and money.
NEMA and our member companies stand ready to deliver the standards
that will make the smart grid a national reality. What we need today is
a green light from the government to get the consensus process
underway, and assurances that our efforts would be fruitful and
adopted.
Thank you very much for the opportunity to testify.
The Chairman. Thank you very much for your testimony.
Senator Shaheen, why don't you go ahead. You haven't asked
any questions yet.
Senator Shaheen. Thank you, Mr. Chairman. Here I was
waiting for all of you to ask the brilliant questions of the
morning.
Let me go back--I don't know who wants to respond to this,
but there was an earlier session this morning, with former
Prime Minister Tony Blair and a number of Governors, CEOs, and
Senators, talking about the importance of addressing global
warming. Several people suggested that we couldn't get to an
energy revolution without dealing with global warming, because
we needed to set a price on carbon that would make industry--
give industry some certainty about the cost, and therefore,
create a willingness to invest.
Now, many of us--and I think your comments speak to the
fact that we're not going to be able to get to our energy
revolution without dealing with our transmission issues. One
suggestion, earlier, was that the private sector would be
willing to be an investor as we look at what we need to do with
our transmission system.
So, how do we get the private sector to invest? What kinds
of incentives--or do we need incentives to get the private
sector to invest as we move to a smart grid and a new
transmission system?
Whoever would like to take that on.
Mr. Gaddis. Senator, the companies will build the
technologies if they have certainty that their product will be
sold. The way you do that is, you develop a standard that they
can build to.
Mr. Butler. Senator, the issue of getting the private
sector to invest, in terms of transmission, there are some
merchant transmission companies that are working in this
country, but mostly all of the local distribution transmission
systems are owned by utilities. So, I think we need to create
an environment where those utilities are going to invest in
improving the outcome--the performance of those distribution
systems, and making them smarter so that we can allow for
addressing carbon issues and reducing carbon footprints of
individual end-use customers, whether they're residential or
large industrial, as well.
So, I think it's all of--all of a piece--there's a whole
range of things that we have to be addressing as we move
forward.
Senator Shaheen. Certainly I would agree that, in an ideal
world, we would hope that the utilities would invest because
they would benefit from that investment, but--we have an
example, in northern New Hampshire, where we have a number of--
we have a wind project and two biomass projects that are ready
to go, but there isn't the transmission capacity to bring them
down to the southern part of the State and southern New
England. The utility doesn't want to make the investment
without passing that cost on to the ratepayers. The ratepayers
obviously are not interested in paying for power that's going
to go to somebody else. So, how do we share that burden and get
everybody to invest in the way that's going to allow us to make
this smart grid a reality?
Mr. Butler. You've hit, exactly on the head, the issue
here, and that's getting a source of funds, revenue--rates--
that actually goes to the people that are going to benefit from
the increase in those rates. I think regional planning--New
England regional planning, which has improved, is--and has
improved in other regions of the country--is one of the
approaches that needs to be taken.
Then, you know, finding a way that you actually are passing
the costs on to those who are benefiting. I think regional
planning and RTOs can work on that score.
The Chairman. Senator Murkowski.
Senator Murkowski. Thank you, Mr. Chairman.
Mr. Lu, I appreciated your comment the--your statement was,
``The consumer will manage what we can measure.'' I think we
recognize--and your example is pretty apt, about going into the
grocery store and, if there's no prices and there's no
checkout, but you just take what you want, and you get billed
later, that's what we're facing as energy consumers. So, the
effort to figure out how we measure is what we're all talking
about here with the smart grid.
I actually have a coffee cup that I drink out of every
morning. I'm kind of a creature of habit. There's a saying on
it that says, ``Before we can measure, we must first know the
standard.'' That goes back to Mr. Gaddis's point here, that
it's so imperative that we have these standards, because,
without a standard that we can reference, we'll never get to
that measure that will be helpful for us, as individuals and as
families.
I wanted to ask you, Mr. Lu, in the stimulus bill, there's
a new requirement that demonstration projects must use, quote,
``open protocols and standards, including Internet-based
protocols and standards, if available and appropriate.'' Is
this something that works for a company like Google, as you
are--you're really moving out, in terms of your own power meter
issues. The opponents of this requirement are arguing that the
Internet-based standards can be slow and are perhaps not
appropriate in addressing reliability concerns. Can you just
speak to that aspect of what we have in the stimulus?
Mr. Lu. Sure. The language, in particular--the key part of
it is ``where appropriate.'' There are areas where Internet
protocols are appropriate; in particular, for the aspects of it
that face the consumer. When you deliver data to the consumers,
the Internet protocol is a fine way to do that, because there
is a host of platforms out there, almost everybody has a
device, a computer or a phone or something like that, that can
read that standard and can accept that data.
Now, we recognize that there are parts of this that are
involved--the--sort of, the back end of things, the guts of the
transmission, and so on, or the data going back to utilities,
that doesn't touch the consumers. So, again, the
appropriateness of the--that there is something that needs to
be discussed by the manufacturers of that equipment and the
utilities.
I don't want to give the impression that it's appropriate
everywhere, because it's not.
Senator Murkowski. Mr. Gaddis, you spoke to the concern of
stove-piping if, in fact, we don't have the confidence that
certain standards are in place there. You heard the testimony
from first panel, where all three were in agreement that we
don't need to be withholding stimulus moneys, at this point in
time, in making certain that those standards and protocols are
in place first, and then the money comes. The comment that was
used was that there will be a suite of standards, and that the
standards will not be static. Do you agree with this, or do we
still have the stovepipe issues that you raised?
Mr. Gaddis. I don't totally agree with it, Senator, but let
me explain.
First off, I do think we need to get these projects moving,
so I do support that. We need to put people to work. I think if
the government does its job--and that's NIST and FERC--and they
quickly come out and they designate the standards-writing
organizations--if they tell NEMA or--I believe Senator Cantwell
brought up the IEEE--if you tell us, ``Start writing these
standards,'' we will get them written quickly and----
Senator Murkowski. How quick is quickly?
Mr. Gaddis. You know, it really depends on the standard--
let me give you a good example. Homeland Security came to NEMA
a few months ago and said, ``We need a standard written in 6
months to be able to do baggage screening.'' We will have that
standard done in 6 months. Now, I would say a normal timeframe
is between 9 months and a year for a standard, but if we know
what it is that we have to do, and we have the approval, the
authorities given to us by the government--i.e., we're
designated to do this particular thing--the companies will come
together, everybody will come together, and we will start
working on these things. So, I think we can do it; we just need
to get on with it.
Senator Murkowski. Thank you, Mr. Chairman.
The Chairman. Thank you.
Senator Cantwell.
Senator Cantwell. Thank you, Mr. Chairman.
Mr. Gaddis, I didn't mean to--in mentioning the IEEE, to
exclude your organization, because I do think it can play a
very big role in the process. So, thank you for elaborating on
it this morning in talking about the process and how the
private-sector groups can move more quickly, because there is a
great deal of competitiveness, but also cooperation. So, thank
you for talking about that.
Ms. Hamilton, you mentioned the job-creation elements of
smart grid. I think you had a number, 280,000 over the next 4
years. That sounds like a very robust number. Do you know how
many of your member companies are hiring, today? Of the
businesses? I know you have utilities in the GridWise Alliance.
Do you know how many----
Ms. Hamilton. I would say all of my member companies are
either hiring or retraining on some level, and the stimulus
funding will greatly advance that, because projects that are in
the hopper, waiting for approval, will then get that extra
boost from the government to enable them to get started on
their projects that are, maybe, you know, waiting for PUC
approval. Then, once we see that there's another investment
stream coming in, that that will help get them out.
But, I would say all of my 78 members are actively working
in smart grid, and so, everyone is trying to look at where the
jobs are and where they could increase their work force.
Senator Cantwell. I know, for example, there's a couple of
companies in Washington State, both have openings, one having
openings for over 100 people. So, I think actually showing,
today, the potential--I mean, this is even without further
approval of projects; this is what--where people are looking
for jobs--I mean, where there are jobs right now, where people
are looking for a work force. I think the 280,000 probably, to
a lot of people, sounds like down the road. It sounds very
enticing, but I think the reality is, is that this is producing
jobs right now, one sector that is producing jobs, and a lot of
jobs.
Ms. Hamilton. That's absolutely right, Senator Cantwell.
There is actually going to be a work force issue in the utility
industry, because of an aging work force. So, we will need new
people to come online, we will need new people to build new
high-voltage transformers, because a lot of those folks have
retired or are retiring. So, yes, there's a huge work force
issue.
Senator Cantwell. I think Chairman Bingaman is looking at
the work force issue for the larger energy bill, which I
appreciate, because I think it is a key issue to matching up.
But, I wanted to ask you about depreciation rates on smart
meters, as well, because I think it was 2001 when I first
introduced legislation saying we ought to have a better
depreciation rate. We actually got it down, you know, from the
20-year period. Now everybody is kind of at a plateau, if you
will. I mean, they're so glad we got it down, but, in my
opinion, it should be treated like all computerized equipment,
because that's really--I mean, it shouldn't be discriminated
against. I mean, it basically is in that same category. A
faster depreciation rate is one of the ways to help make these
projects more cost-affordable.
I'm going to get to Mr. Butler in a second about rate
recovery, which I'm sure--I don't know whether we're going to
agree or not, but would you--on this particular issue, it is
one remedy that we have at our hands right now to give a 5-year
computerized depreciation across the board, including smart
meters.
Ms. Hamilton. That's absolutely right. We appreciate you
putting it in the stimulus for a period of time there. We
definitely agree, 5 years is the right amount, because it is
computer equipment; we would extend it to all energy management
devices, so not just meters, but extend it to all of those
technologies that would be operated just as, you know, data
could be----
Senator Cantwell. If GridWise has any information about
what that would do in the acceleration or advancement of
projects, that would be very helpful.
Ms. Hamilton. OK.
Senator Cantwell. Because, again, I think people think,
``Well, we just passed this policy, so why not just keep it
where it is?'' But, the fact that we made some progress, you
know, is--there's no reason why we shouldn't make more
progress, when there's so much job opportunity at hand here.
Commissioner Butler, I wanted to talk to you about the,
obviously, rate-of-recovery issue. I know that you are talking
about consumer groups and consumer interest. I don't if you
have a thought about the depreciation rate of smart meters, but
do you know if anybody's taken advantage of the language that
we had in the--you know, the directive that we had in the 2007
energy bill, to utilities?
Mr. Butler. I'm sure they are, utilities, Commissioner--
Senator. We have 20 States that are involved in the smart grid
collaborative now, including your own, and eight others that
showed up at the last meeting, after the stimulus money was
announced. It's amazing how $4 and a half billion can incent
some interest among some people. So, there is interest in
reducing the depreciation time period. That's one of the silver
buckshot items, I think, that I was talking about earlier.
States are anxious to get approval for these as quickly as
possible, while, at the same time, protecting the interests of
ratepayers. No State commissioner wants to be the one that
approves something that proves, later on, to be the wrong
project, or a project that's not open architecture, that cannot
be easily improved by plugging in some new components. So, I
think there is this great interest out there, and we're going
to try to move as quickly as is reasonable. At the same time,
educating our ratepayers so that they know the benefits that
can accrue to them.
Senator Cantwell. So, do you think--so, utilities have used
that, recovering remaining book-value cost of equipment?
Mr. Butler. They have certainly asked for it, and I know
that, in certain place, I think that it's been approved.
Senator Cantwell. Yes, I think having more information
about that--what else do you think we should do about stranded
costs?
Mr. Butler. Stranded costs is always an issue. I think it
has to be discussed with the utilities, in terms of what the
danger of stranded costs might be, so that they can be
addressed as part of a--an agreement of a--an agreement that is
reached by the utility and the public utility commission, in
terms of moving forward, that if there is a potential for
stranded costs, that that be worked into the process.
I know, when you go back to restructuring, when utilities
were divesting themselves of their generation assets, there
were provisions for stranded costs worked into those agreements
between those utilities and their State commission. So, it's
not something that hasn't been done before, and it certainly
would be something that commissioners would be willing to
discuss.
Senator Cantwell. I see my time is expired, Mr. Chairman,
but, yeah, I'd love to ask--to follow up more about that
particular policy, because I think--without more robust
discussion of rate recovery on these projects, I think the
incentive here, for job creation and energy savings, whether we
get a--some sort of more fair cost on carbon or not, is going
to keep pushing this technology out there. Otherwise, the
Federal Government will look at a larger role. So, I'd love to
explore that later with you, Mr. Butler.
Mr. Butler. Yes.
Senator Cantwell. Thank you, Mr. Chairman.
The Chairman. Let me ask Mr. Gaddis--you say, at the end of
your testimony here, ``What we need today is a green light from
the government to get the consensus process underway and
assurances that our efforts would be fruitful and adopted.''
What you're saying, more precisely, is, you want some agency in
the government--either NIST or FERC, I guess; and you can
clarify that--to tell you that NEMA should go ahead and develop
certain standards, and give you a timeframe for the development
of those. Is that right?
Mr. Gaddis. Yes, Senator, that's--I would say, Department
of Energy or NIST. Yes, once you designate the standards-
writing organization--we're one of them--you'll find that the
companies will rally around this. All the stakeholders will
rally around this, and they'll come together so that we can
write that standard and begin building whatever the product is.
The Chairman. Now, do you have a list of the standards that
you believe NEMA is most appropriately situated to establish?
Mr. Gaddis. Oh, I could easily provide that for you, but
obviously we're experts in the electrical industry. Some of the
things that come to mind are meters, energy storage, plug-in
cars. So, the answer is, we have a wide array, but I'd be happy
to, before----
The Chairman. If you could give us that, that would be
useful, because then we could perhaps go to Dr. Gallagher or to
Secretary Chu, if those are the two people in the government,
and say, What do they think? I mean, is it appropriate for them
to designate NEMA to do that, or is there somebody they think
is better? Maybe you could also indicate how long you think it
would take to establish some of those standards.
Mr. Gaddis. Yes, sir. I should say that I've already had
talks with Dr. Gallagher, and I think he agrees that NEMA and
other standards-writing organizations should be writing these
things. It really depends on the standard, how long it would
take; but, I would say, on average, 9 months to a year,
depending on what the standard is, to get a standard out. I'll
be happy to submit, for the record, a list of the things that
NEMA would recommend.
The Chairman. You also say in your testimony that,
``Congress should condition the release of the 50-percent smart
grid matching fund on the development of NIST-endorsed
standards.'' Now, one of the drumbeats around here when we were
passing the so-called stimulus bill was that we needed to get
jobs created right away, and that we weren't interested in
things that were going to take a lot of planning and a lot of
delay. How does that concern square with what you're suggesting
here? You're saying that, of the money that was provided, we
should say, ``Hold on, don't spend any of that until we get
these NIST-endorsed standards established,'' as I'm
understanding what you're saying. Is that right?
Mr. Gaddis. Mr. Chairman, what I'm saying is--you know, I
realize, like everybody else, NEMA realizes, like everybody
else--we've got to get jobs going. I believe we could do this
process much quicker. Over a year ago, in EISA 2007, NIST was
designated to put this roadwork out there and to start writing
the standards. In fact, NEMA has been pushing this, quite
honestly, to get that done. We should have it done right now.
We should be able to get these standards out in very quick
time. At least the ones we need to start so that we've got
interoperability, the really important standards. We can do
this, and we can start building at the same time.
The Chairman. OK.
Mr. Lu, let me just ask about the device that you folks
have developed, or the software that you folks have developed,
to allow people to monitor their energy use--the power meter. I
would think that if you have this on this Google Power Meter,
it would be appropriate to have all the smart meters that we
are paying for getting installed all around the country here as
part of this stimulus effort, have them contain some device to
communicate with the Google Power Meter so that anyone who's
got a smart meter could access that smart meter by looking at
their cell phone or their computer or whatever. Am I thinking
about that right?
Mr. Lu. There's two ways to get the data, either directly
off the meter, if you're at home; and then you can get very,
very high-quality data, because you're close to the meter, and
the meter can send data to you very, very frequently. Now, the
other way to get the data is through a partnership with your
utility, who is pulling the data back anyhow for their purposes
of running the grid. That's how it operates today.
We'd like to see various ways of getting the data. In fact,
we actually are--we want to be sort of somewhat agnostic about
this. This is our solution; it isn't necessarily the best
solution, and we'd like to encourage that the data be made
available. We think that the consumers have a right to see
their data. We have a way that we think is very good to do
that, but, you know, we certainly don't want to say that this
is, far and away, the best, or this is the only way to do that,
because more competition is better.
The Chairman. But, you're basically saying that--I guess,
that utilities, perhaps, should--if they put in these various
systems, they should have this on the Internet so that it is
compatible with your power meter software.
Mr. Lu. Yes, we'd like to see it be compatible. We'd like
to see it be in an open format, an open, nonproprietary format,
so that anyone can use it, and we could use it, too.
The Chairman. Right. OK. All right.
Senator Murkowski, do you have additional questions?
Senator Murkowski. Not necessarily a question, Mr.
Chairman, just a comment about where we are.
I was just looking through the background memo here and
appreciating what we did under EISA-07 in outlining the
expectations at that time as to what we anticipated with a
smart grid. We created a Smart Grid Advisory Committee to
advise the government on the deployment, created the Smart Grid
Task Force of Federal Agencies to coordinate the grid policies,
established an R&D and demonstration program, tasked NIST with
the development of an interoperability framework, established
Federal Matching Grant Program, directed States to do smart
grid considerations. A number of reporters, none of which I
understand, have actually been released. We did this back in
2007.
Now, I appreciate that it's--always comes down to money and
the fact that NIST wasn't given the dollars to do it, but now
that we're at ``go,'' and we've got $4 and a half billion out
there on the table, it seems like we're playing more than just
a little bit of catch-up, here. This is too important for us to
get it wrong. So, I would just urge expediency at the same time
as, just, real oversight and review that we are getting as
close to where we need to get as possible. I think we saw the
vision several years ago, and now we're moving with it, but we
haven't laid that framework quite yet.
The Chairman. Senator Shaheen, did you have additional
questions?
Let me thank this panel. I think this has been a useful
hearing, and very useful testimony. Thank you very much.
[Whereupon, at 12:02 p.m., the hearing was adjourned.]
[The following statement was received for the record.]
Statement of Thomas R. Standish, Group President, Regulated Operations,
CenterPoint Energy, Inc.
Mr. Chairman and Members of the Committee. My name is Tom Standish
and I am submitting this statement on behalf of CenterPoint Energy,
Inc., an investor-owned utility which includes an electric transmission
and distribution subsidiary serving the metropolitan area of Houston,
Texas. CenterPoint, in collaboration with other industry leaders, has
been actively pursuing a Smart Grid strategy entitled the ``Intelligent
Utility Network,'' which links electricity with communications and
computer controls to create a highly automated, responsive and
resilient power system.
In the American Recovery and Reinvestment Act of 2009 (``ARRA''),
the Congress allocated $4.5 billion to the Department of Energy's
``Electricity Delivery and Energy Reliability'' account. The ARRA
provides that approximately $200 million of this amount should be used
for certain worker training, resource assessment, and technical
development activities. We recommend that a substantial majority, if
not all, of the remaining funds should be used to make grants to enable
the commercial deployment of projects under Section 1306 of the
existing Smart Grid Program which the Congress created in the Energy
Independence and Security Act of 2007.
The Smart Grid Program supports a combination of technologies
deployed throughout the electricity generation, transmission and
distribution systems that will turn today's antiquated electric
transmission and distribution grid into a more modern, efficient,
technologically advanced, economically smart, and environmentally
focused infrastructure, with real-time, two-way communication
capabilities throughout. The technology, including devices and
communication networks that can make this happen, exists today and is
awaiting immediate commercial deployment.
The Smart Grid is, and always will be, an evolving concept. The
question is how best to encourage it to evolve more rapidly and
efficiently. We submit that the best way is to rapidly get into the
field those Smart Grid elements which are in existence today.
CenterPoint is a perfect example of the benefits of this approach. As
we deploy our smart meter system, we encourage the development of a
technological supply chain. As we begin operation of that system, we
encourage the development of complementary technologies--both IT and
smart appliances. And as we enhance that system with our Intelligent
Grid system, we will facilitate the wider use of renewable energy and
advanced technologies like plug-in electric hybrid vehicles
(``PHEVs'').
There are four reasons why use of ARRA funds for the commercial
deployment of eligible Smart Grid projects and investments should be
encouraged.
First, the physical deployment of commercial Smart Grid
infrastructure will preserve and create jobs, inside and outside the
electricity sector. Commercial Smart Grid implementation requires
numerous hardware products that must be manufactured and installed at
every end-user's facility or home. When implemented at the commercial
level, this will require a vast, labor-intensive work force. The
evolution of these products will create a sustainable job market. Smart
Grid also utilizes computer hardware and innovative software. The
development, implementation, and technical assistance required for this
advanced technology will create many sustainable positions throughout
the IT sector. Only the large-scale, commercial deployment of Smart
Grid--not isolated research and development--has the ability to create
these direct and indirect employment benefits. For instance, we
estimate that implementation of CenterPoint's proposed Smart Grid
initiative on its current schedule will create up to 8,000 new jobs
over the next 5 to 7 years. Our obtaining a DOE grant could accelerate
the creation of these 8,000 jobs in a much shorter timeframe, which has
the dual benefit of creating jobs now and speeding up the
implementation of a key component of our new energy future. These jobs
will fall across a broad spectrum of the labor force--factory employees
will be hired or retained to manufacture more meters and transmission
switching gear, software and computer hardware output will increase in
sales, and a large number of new employees will be needed in a very
short amount of time to install these meters and new relay systems for
the transmission grid.
Second, the commercial deployment of a modern and expanded Smart
Grid will provide the enabling technology necessary for inventing,
developing, and implementing renewable energy systems and PHEVs. The
two-way electricity transfer capability of Smart Grid is vital to the
expansion and use of renewable energy systems such as solar and
windpower. Smart Grid will also provide the technological change needed
to accommodate the battery storage and energy redistribution potential
that is vital to efficient utilization of distributed renewable energy.
If PHEVs are to be used as a source of power to discharge the batteries
during peak times, then a Smart Grid will be needed to control and
account for power flows. Thus, the Smart Grid enables the use of PHEVs
to contribute both to demand reduction and peak energy production, with
environmental benefits resulting from both. Furthermore, the mere
commercial availability of Smart Grid is likely to spur the creation
and development of future technologies that will serve to further the
nation's electricity delivery efficiency and energy reliability. There
is simply no way with the existing grid to fully exploit these
renewable sources of energy because the grid as currently designed and
operated cannot readily accommodate and measure the two way flow of
electricity.
Third, the commercial deployment of smart metering systems, capable
of two-way communication, will lead to more efficient electricity
generation, transmission, and demand-side use, which will create
electricity cost savings for all end-use consumers. Computerized
metering systems measure, collect, and analyze energy usage for each
individual consumer. The two-way communication capability of the smart
metering system allows for the distribution of real time information to
customers, service providers, utility companies, and electricity
generators. This enables electricity providers to efficiently manage
their energy supplies, provides customers with information on how to
alter their energy consumption to achieve more efficient and cost-
effective energy usage habits and allows the power provider and the
consumer to communicate directly as to the consumer's consumption
choices. Thus, by connecting smart metering systems to the Internet,
consumers will have the ability to immediately increase the efficiency
of their energy use by remotely accessing and controlling their homes'
energy intensive appliances. The commercial deployment of these smart
metering systems will also increase the number of end-use consumers who
are able to alter their energy consumption habits through time-of-day
pricing, thereby increasing the Nation's overall energy efficiency and
cutting into the demand for new power plants.
Fourth, directing ARRA funds to immediately deployable commercial
Smart Grid projects will allow DOE to obligate and expend funds
promptly, with full transparency, to projects that can obtain specific,
tangible results. Several energy providers are either in the process of
implementing or are ready to implement Smart Grid projects. No further
research is needed for this implementation to occur. Smart Grid is
ready for commercial deployment and its benefits are known, obvious,
and desired. Investor owned energy providers also operate under the
financial monitoring of Public Utility Commissions, which can assure
that the funds will be spent prudently and directed as intended.
In summary, the Smart Grid provides THE enabling technology that
must be commercially available if the Nation hopes to increase its
utilization of clean, secure, and reliable renewable energy. By
financially supporting immediately deployable Smart Grid projects, DOE
can accelerate the attainment of the Congress's and the
Administration's goals that are set forth in the ARRA. The Committee
should encourage DOE to prioritize its award of grants to those
commercially deployable Smart Grid Projects that are immediately ready
to be implemented.
APPENDIX
Responses to Additional Questions
----------
Responses of Evan R. Gaddis to Questions From Senator Bingaman
Question 1. One of the often stated key benefits of Smart Grid is
in its ability to integrate large quantities of intermittent renewable
resources into the grid and to efficiently route this power where it is
needed. To achieve this will clearly require both the build-out of new
transmission to renewable resource rich locations as well as upgrading
our current grid to have the intelligence to handle these intermittent
resources. In order to achieve the benefits that we want from Smart
Grid, how much new transmission do you foresee being needed? And how do
we prioritize the building of new transmission vs. upgrading our
current grid?
Answer. Reliability and efficiency benefits can be achieved within
existing transmission corridors. Reliability, in terms of reduced
outage duration and occurrences, can be improved through monitoring
devices and replacement of mechanical controls with digital controls.
Smart appliances and controls can shut down or delay usage with minimal
inconvenience to the consumer, resulting in lower energy bills. Demand
response technologies can optimize use of existing transmission by
reducing peak demand. Real time transmission line rating technologies
and high temperature conductors can be used to expand capacity along
existing transmission corridors.
Integration of renewables will require both new transmission
corridors and a grid that can adapt to their intermittent nature,
including incorporation of storage. The amount of transmission will
increase in relation to the quantity of renewables or carbon reduction
required.
Question 2. ``Smart Metering'' projects for residential consumers
have become the poster-child of the Smart Grid. However, some studies
have found that the majority of the benefits of the Smart Grid will
result from investments in grid transmission and distribution system
upgrades and optimization, with only a small percentage of energy
savings and emission reductions coming from smart metering programs.
Could you comment on this? And how should we take these findings into
consideration when prioritizing which Smart Grid demonstration projects
to fund?
Answer. NOTE: as a data point, the Climate Group SMART 2020 Report
estimates that 85 percent of the carbon reduction benefits of a Smart
Grid come from Grid Optimization and Renewables Integration, and only
15 percent will come from End-User Energy Management.
Policy objectives must be clearly articulated in order to
prioritize correctly the demonstration projects. For example, if the
primary objective is carbon reduction, then transmission and
distribution systems should receive substantial funding. These systems
need upgrades to handle new intermittent resources. However, if the
primary objective is to reduce consumer utility bills, then smart meter
projects would be more applicable than transmission projects. Many
advanced meter pilot projects have already demonstrated substantial
savings for end users. Since there are likely to be multiple
objectives, including reduced carbon emissions, reduced utility bills,
and reduced dependence on foreign energy, it is likely that projects in
all domains will need to be pursued.
Question 3. After the Department of Energy has spent out its nearly
$4.5 billion on Smart Grid Investments, how do we measure whether that
money has been spent effectively? How soon and what improvements in our
grid should we expect to see?
Answer. NEMA has proposed a metric called the ``Levels of
Intelligence,'' which measures the integration of logic and
communication into grid devices. The Department of Energy has also
developed its seven smart grid characteristics, which can be used to
measure the outcomes or capabilities of a modernized grid as a whole.
Both measures could be used to determine how much modernization has
occurred as a result of the stimulus investment.
We are already beginning to see service quality improvements as a
result of advanced meter deployments. Improvements throughout the
system will be continuous as new technologies are developed,
demonstrated, standardized, and deployed across the nation.
Responses of Evan R. Gaddis to Questions From Senator Murkowski
Question 1. Is NIST the right agency to develop consensus-based
standards and protocols?
Answer. NIST is an objective and technically capable organization
to develop a Smart Grid roadmap and to coordinate the development of
consensus-based standards. However, NIST itself should not develop
standards. The tasks of developing new standards or assembling
consensus on existing standards should be delegated to accredited
standards development organizations.
Question 2. What is a realistic time-frame for establishing an
Interoperability Framework?
Answer. Based on the work over the last year, NEMA is hopeful that
NIST can establish the framework, which includes prioritization of
standards areas, by June 2009. The NIST framework may also incorporate
specifications or requirements of standards changes that need to be
incorporated into existing standards by various standards development
organizations. Once standards development organizations are identified
to establish consensus around a new or existing standard area, NEMA
anticipates the process taking from 9-12 months.
Question 3. Do you agree with NEMA that Congress should condition
the release of Smart Grid funds on the development of NIST endorsed
standards? If we proceed without an Interoperability Framework are we
just building ``custom projects''--which is really just a nice way of
saying projects that will soon become obsolete?
Answer. To clarify, NEMA advocates conditioning only the 50 percent
investment matching fund on the NIST standards, with the understanding
that NIST will produce the standards framework in a timely fashion.
Demonstration projects can and should be put into place immediately,
which will generate both jobs and technical expertise. The information
from these demonstrations will help the industry refine and improve
standards in preparation for widespread deployment. The matching funds
should be used to encourage the regulators, utilities, and
manufacturers to follow a nationwide approach.
There are some standards that are ready or almost ready for
implementation today. The industry needs a recommendation from NIST for
FERC to make those standards the law. Projects that use these standards
would be eligible for the matching fund immediately.
Question 4. A smarter grid is supposed to enhance our system's
security but technologies like smart meters, sensors and advanced
communications networks can actually increase the vulnerability of the
grid to cyber attacks. How do we address these cyber security concerns?
Do the agencies have sufficient authority or is additional Federal
legislation needed?
Answer. Communications protocols must incorporate security concerns
from the ground up, and the standards development organizations are
aware of this concern. For example, smart meter standards already
incorporate mechanisms for authentication and encryption. Equally
important is ensuring that operational practices incorporate security
criteria. Even the most hardened grid device is vulnerable if the
installer does not change the default password. In this arena, NERC has
the appropriate lead on cyber security.
Question 5. In your testimony, you note that in 1968 President
Lyndon Johnson issued an Executive Order that directed the Federal
Government to purchase only computers that complied with a certain
standard in order to `` minimize costly incompatibility.'' Are you
suggesting an Executive Order for Smart Grid standards?
Answer. Certainly, the President could order that the Federal
Government only purchase energy systems that complied with the NIST
framework. The example was given to show that the government can use
multiple policy levers to encourage the industry to converge on one or
a suite of standards. In addition to an Executive Order, the current
policy incentives of matching funds and potential FERC mandates are
suitable mechanisms to encourage interoperability.
Question 6. How far away are we from so-called ``smart'' appliances
that can interface with the grid? Do you need standards and protocols
in place first?
Answer. At the level of individual components, smart appliances and
end user controls, such as thermostats, are already here. It is not
difficult to design a thermostat that shuts off during certain periods
of the day. It is not difficult to design a system that communicates
with the thermostat. The difficulty lies in the non-uniform nature of
the utility industry. It is difficult to design one communicating
thermostat that will talk to every utility system in the country,
because not every utility uses the same communications methods.
We could install smart appliances today, as many pilot projects
have done. But each pilot has involved some degree of customization to
the host utility, and we do not yet have a common home area network
standard. If we want to attract businesses to fund research, product
development, and manufacturing of smart appliances, we must create a
market large enough to offset the upfront investment costs. We need
nationwide standards in order to create nationwide markets.
Responses of Evan R. Gaddis to Questions From Senator Stabenow
Question 1. As we know, Smart Grid can promote electric
transportation technologies, particularly plug-in hybrid electric
vehicles (PHEVs). A PHEV connected to the grid will enable consumers to
charge up during the overnight hours when electricity is cheaper, and
then wake up to a car ready for their morning and evening commutes.
Some people have proposed that the smart grid (someday) could allow
energy providers to draw power from a PHEV battery during the day. Do
you think this is possible? If so, what timeframe would you forecast
that it is possible?
Answer. Yes. We will see mass deployment of one-way smart charging
(i.e. only drawing power during low-cost periods) within a few years.
However, mass deployment of charging and discharging technologies in
plug-in hybrids will take some time. Two-way energy flow to and from
stationary batteries is possible and is in commercial operation in
several markets across the nation. Two-way energy flow with mobile
automotive batteries has been demonstrated, but there are unresolved
questions over battery wear and end user safety. In addition, the
utility's distribution system must also be reconfigured to handle two-
way power flows. Many protective devices are only set up to detect
short circuits and faults when power flows toward the home. We are
likely several years away from a national system that can support two-
way charging and discharging from PHEVs.
Question 2. What can we be doing to ensure that the manufacturing
of this equipment leverages as many American jobs as possible?
Answer. Congress can start by establishing steady funding for
domestic energy research and demonstration programs to attract the
brightest scientists and engineers. Businesses that commercialize new
technologies tend to locate near their inventors. Congress should also
promptly establish long term policies, such as renewable energy
standards, carbon pricing, or production tax credits, which demonstrate
a predictable market for clean technologies. If there is domestic
demand for new domestic technologies, those products will tend to be
made in the U.S.
______
Responses of Edward Lu to Questions From Senator Bingaman
Question 1. One of the often stated key benefits of Smart Grid is
its ability to integrate large quantities of intermittent renewable
resources into the grid and to efficiently route this power where it is
needed. To achieve this will clearly require both the build-out of new
transmission to renewable resource rich locations as well as upgrading
our current grid to have the intelligence to handle these intermittent
resources.
In order to achieve the benefits that we want from Smart Grid, how
much new transmission do you foresee being needed? And how do we
prioritize the building of new transmission vs. upgrading our current
grid?
Answer. A broad smart grid vision includes new transmission lines
able to carry clean, renewable power from remote areas to population
centers where it is needed. Google has developed a ``Clean Energy
2030'' proposal that envisions 300 GW of onshore wind and 80 GW of
concentrating solar power generation, an amount that would require
20,000 miles of new transmission lines to support (currently there are
200,000 miles of high-voltage lines in the U.S.). Our Clean Energy 2030
plan is available at: http://knol.google.com/k/-/-/15x31uzlqeo5n/
1#Electricity_Sector.
Question 2. ``Smart Metering'' projects for residential consumers
have become the poster-child of the Smart Grid. However, some studies
have found that the majority of the benefits of the Smart Grid will
result from investments in grid transmission and distribution system
upgrades and optimization, with only a small percentage of energy
savings and emission reductions coming from smart metering programs.
Could you comment on this? And how should we take these findings into
consideration when prioritizing which Smart Grid demonstration projects
to fund? NOTE: as a data point, the Climate Group SMART 2020 Report
estimates that 85 percent of the carbon reduction benefits of a Smart
Grid come from Grid Optimization and Renewables Integration, and only
15 percent will come from End-User Energy Management.
Answer. Significant energy savings can result from smart metering
programs--studies show that just being aware of energy consumption in
real-time can lead to individual reductions of 5 to 15 percent. If just
half of U.S households cut their demand by 10 percent, the electricity
savings would be greater than today's total U.S. wind and solar power
output. The CO2 emissions avoided would be equal to taking
approximately off the road. Moreover, additional savings would result
if real-time, consumer-centric smart meters are combined with real-time
pricing incentives that reward consumers for reducing their consumption
during peak demand. Of course, if smart meters are not enabled to
provide real-time information to consumers then their benefits could be
small indeed. Smart meters should provide information to consumers in a
timely fashion and useful format.
Question 3. After the Department of Energy has spent out its nearly
$4.5 billion on Smart Grid Investments, how do we measure whether that
money has been spent effectively? How soon and what improvements in our
grid should we expect to see?
Answer. We should consider actual reductions in electricity
consumption that can be measured with deployed smart grid equipment,
including smart meters and home energy management devices. We should
expect to see more accurate projections of future demand requirements,
which will mean more cost-effective planning and likely deferrals of
investments in new generation before it is actually needed. President
Obama has said he wants to jump start the deployment of 40 million
smart meters in American homes.
Responses of Edward Lu to Questions From Senator Murkowski
Question 1. Is NIST the right agency to develop consensus-based
standards and protocols?
Answer. NIST has a role, but it should not delay the private sector
from reaching a consensus on standards and protocols, a risk to keep in
mind given NIST's former lack of funding and time required to act.
Question 2. What is a realistic time-frame for establishing an
Interoperability Framework?
Answer. We have no position on the time-frame for the
Interoperability Framework generally (except that it should be
established as soon as possible), but we do think that consumer-facing
data formats specifically could be developed very quickly.
Question 3. Do you agree with NEMA that Congress should condition
the release of Smart Grid funds on the development of NIST endorsed
standards? If we proceed without an Interoperability Framework are we
just building ``custom projects''--which is really just a nice way of
saying projects that will soon become obsolete?
Answer. No, Smart Grid funds should not be thus delayed--
particularly since Congress clearly addressed the issue of standards
for funds when it required that stimulus projects utilize ``open
protocols and standards (including Internet-based protocols and
standards) if available and appropriate'' a precondition for winning
stimulus dollars. (ARRA, Sec. 405). This provision in the American
Recovery and Reinvestment Act also removes the danger that proceeding
without a NIST-blessed Interoperability Framework will lead to Federal
funding of projects that will soon become obsolete. To the extent that
utilities move forward with large scale meter deployments based on open
standards and protocols, such delay will not be necessary. Moreover, to
the extent that the meters deployed have a way to communicate with
devices inside of consumers homes (as contemplated by Section 1301 of
EISA-07) that is based on open standards and protocols there will be
less reason to be concerned about obsolescence.
Question 4. A smarter grid is supposed to enhance our system's
security but technologies like smart meters, sensors and advanced
communications networks can actually increase the vulnerability of the
grid to cyber attacks. How do we address these cyber security concerns?
Do the agencies have sufficient authority or is additional Federal
legislation needed?
Answer. Agencies have authority now as well as direction provided
in Title 13 of the Energy Independence and Security Act of 2007 (EISA-
07). The smart grid should be deployed with cyber security in mind.
Question 5. You tout the potential cost-saving benefits of Smart
Grid but isn't it true that customers will need to act in response to
their price signals in order to realize the benefits?
Answer. The benefits of having information about electricity
consumption do not depend on price signals. An increasing awareness of
consumption will help consumers find ways to reduce consumption. One
review of research on the effects of providing immediate feedback on
electricity usage found that overall demand reductions generally ranged
from 5 to 15 percent. See Sarah Darby, The Effectiveness of Feedback on
Energy Consumption: A Review for DEFRA of the Literature on Metering,
Billing and Direct Displays (2006), available online at: http://
www.defra.gov.uk/environment/climatechange/uk/energy/research/pdf/
energyconsump-feedback.pdf. Price signals will further increase the
benefits of simply having realtime information about electricity
consumption, which is possible if smart meters are required to provide
consumers with such information (or if consumers otherwise have access
to such consumption information, for example through a home energy
management device).
Question 6. Do we need to do some kind of public outreach or
marketing to get consumers comfortable with this new technology? Do you
see any particular problems associated with Smart Grid technology for
low-income consumers?
Answer. Yes, public outreach or marketing may be important but the
need for such efforts can be reduced if meter deployments support
robust Home Area Networks that give consumers information and easy to
use tools. This could be as simple as a display on the kitchen counter,
or a software tool on a computer or telephone. With low income
consumers, the importance of communicating the value of Smart Grid may
require special efforts but all consumers should be given as many
options as possible when it comes to information and tools. Google and
others in the private sector (for example, our Smart Grid policy
partner General Electric) are engaging in such educational efforts
concerning smart meters and the smart grid more generally--our
PowerMeter announcement is part of that effort.
Question 7. I understand Google is currently developing a
PowerMeter that will provide consumers with the ability to monitor
their energy consumption in a meaningful way. When do you expect this
to be released in the market?
Answer. Yes, we're working on a home energy monitoring tool called
Google PowerMeter that provides near real-time energy information right
on your computer. This is an internal project only at this time, but we
are working with utilities and device manufacturers around the world to
gradually roll out programs for their customers sometime this year.
Responses of Edward Lu to Questions From Senator Stabenow
Question 1. A number of utilities already have begun modernizing
their grids by installing digital electric meters and technologies that
enable two-way communication capabilities between the utilities and
their customers. This transformation to a ``smart grid'' should benefit
the companies and their customers. How will the smart grid enable
entities to detect and repair outages faster, hookup customers quicker,
and give consumers the capability to manage their homes' appliances
more efficiently?
Answer. The Smart Grid is essentially an Energy Internet and
consists of three things: sensors, software and two-way communications.
The more high-speed the communications component of a smart grid, the
more capable it will be. In fact, Title 13 of the Energy Independence
and Security Act of 2007 (EISA-07) suggests that to qualify as a smart
grid communications should be capable of real-time connection with
consumers. For example, Section 1301 of the EISA-07 states lists among
the characteristics of a Smart Grid: ``Deployment of `smart'
technologies (real-time, automated, interactive technologies that
optimize the physical operation of appliances and consumer devices) for
metering, communications concerning grid operations and status, and
distribution automation.'' The same section also lists, ``Provision to
consumers of timely information and control options.'' (emphasis
added).
Question 2. Although Smart Grid does not require new transmission
lines, utilities will still need to implement lots of changes and
upgrades, the costs of which will be borne ultimately by ratepayers.
In-home devices will also be expensive up-front investments, although
their long-term value for energy savings is clear. When will these
investments in Smart Grid become cost effective for consumers and what
can government do to help?
Answer. Given the potential energy savings, smart grid investments
will be cost effective. Moreover, investments in Smart Grid will also
become more cost-effective as the cost of in home devices fall as a
result of more purchases and the inevitable improvements in information
and communications technology reduce costs, just as has happened with
other consumer electronics like mobile phones. Also, stimulus funds
will help to make some investments in Smart Grid cost-effective that
would not otherwise have been at this time.
______
Responses of Katherine Hamilton to Questions From Senator Bingaman
Question 1. One of the often stated key benefits of Smart Grid is
in its ability to integrate large quantities of intermittent renewable
resources into the grid and to efficiently route this power where it is
needed. To achieve this will clearly require both the build-out of new
transmission to renewable resource rich locations as well as upgrading
our current grid to have the intelligence to handle these intermittent
resources. In order to achieve the benefits that we want from Smart
Grid, how much new transmission do you foresee being needed? And how do
we prioritize the building of new transmission vs. upgrading our
current grid?
Answer. The GridWise Alliance as an organization advocates for
deploying smart grid technologies holistically on the existing grid to
improve the efficiency, reliability, and security of the grid. We
understand, however, that even with a fully optimized grid, additional
transmission lines will be needed to access remote renewable energy
resources and integrate those resources onto the existing grid. We
defer to experts in utilities and Regional Transmission Organizations
to quantify the amount of new transmission needed to fully access areas
rich in renewable resources.
While we do not take a position on how many of these new lines will
need to be built, we do advocate that, wherever feasible, smart grid
technology be embedded into additions to the transmission system.
Different approaches should be taken for transmission and distribution
since the priorities of each are different (for example, on the
transmission side, regional operations and renewables access may be the
highest priorities). Extending the use of existing transmission could
mean upgrading existing lines to carry additional capacity offered to
the transmission system. This upgrading could occur more quickly and
would not require new rights of way.
Once smart grid technologies are considered best practice for
building and optimizing both transmission and distribution, we can
achieve benefits from both central and distributed renewable energy,
system and consumer energy efficiency, power reliability, and
operational cost reduction.
Question 2. ``Smart Metering'' projects for residential consumers
have become the poster-child of the Smart Grid. However, some studies
have found that the majority of the benefits of the Smart Grid will
result from investments in grid transmission and distribution system
upgrades and optimization, with only a small percentage of energy
savings and emission reductions coming from smart metering programs.
Could you comment on this? And how should we take these findings into
consideration when prioritizing which Smart Grid demonstration projects
to fund?
Answer. The GridWise Alliance as an organization does not advocate
for specific technologies, but rather for a host of technologies and
applications that will make our electric grid smarter. The benefits of
each component of the smart grid--advanced metering, infrastructure and
smart meters, distribution and transmission grid operations, demand
response programs, distributed energy resources--must be fully
integrated to provide the greatest benefits.
Smart metering is one such technology that, with accompanying
customer data and interaction, can help in determining distribution
system upgrade and optimization needs. More frequent time-based
information at the service delivery point provides data that can assist
in determining distribution system upgrade and optimization needs. Data
from smart meters can help assess deployment maintenance schedules,
demand response, asset utilization, and work force management.
Delivering this information to end users will allow them to understand
and interact with the grid in real time so they can make informed
choices to control their carbon footprint and employ energy efficiency
and demand response technologies. Even more importantly, the marriage
of smart metering to Home Area Networks (HAN) portends a future where
demand reductions can occur automatically when intermittent renewable
generation ceases, increasing the value of renewables and reducing the
need for fossil-based generation to act as ``back-up''. While smart
metering is only part of the smart grid, a metering program in
combination with distribution smart grid technologies can generate more
benefits than any one program individually.
Additionally, smart grid technologies can support improved
reliability and help mitigate the societal impact from severe weather
damage to transmission and distribution systems. Societal impacts are
generally measured in the billions of dollars; for example, in Houston
the societal cost of Hurricane Ike was estimated at $5.4 billion. With
smart grid communication, restoring power 2 days sooner could have
saved the city millions of dollars. A challenge utilities and customers
face is the inability to have real time data regarding the actual
condition of the system; a smart grid can provide that data.
Thus, the GridWise Alliance advocates that demonstration funding
should go to a variety of technologies and applications without
singling out any one as having higher preference.
Question 3. After the Department of Energy has spent out its nearly
$4.5 billion on Smart Grid Investments, how do we measure whether that
money has been spent effectively? How soon and what improvements in our
grid should we expect to see?
Answer. Projects selected for funding should readily provide data
on a variety of benefits including economic stimulus (including, but
not limited to, job creation and/or retention), increased renewable
energy integration, increased clean distributed energy systems,
increased energy efficiency, demand response, overall system
optimization, better reliability and increased security. The GridWise
Alliance is prepared to collaborate with the Department of Energy to
recommend specific metrics that would be a suitable proxy by which
benefits can be ascertained. Indeed, developing the relative certainty
of these metrics today would enable more effective disbursement of the
funds currently available. GridWise Alliance may be providing input to
the Department of Energy's Notice of Intent for investment grant
projects during the public comment period. If the funding is disbursed
efficiently and effectively, depending on the specific application, we
should begin to see immediate results from smart grid applications on
our electricity system.
Question 4. Ms. Hamilton, you state in your testimony that a
critical issue for funding of smart grid projects is establishing
minimum smart grid standards for other energy infrastructure projects
that are undertaken pursuant to provisions of the Recovery Act apart
from those that contain specific smart grid language. Could you expand
on this point and suggest how we in Congress might address this?
Answer. In my testimony I was referring to transmission system
expansion. Any transmission bill should include language that such
expansion incorporates smart grid capabilities where feasible and cost
effective. In addition, it is important for Congress to encourage the
continual integration of smart grid technologies through energy policy.
Smart grid applications are critical to enable stable and effective
management of intermittent sources. Without the integration of smart
grid technologies we will not realize the full potential of energy
produced from renewable resources, even to the levels being discussed
in many of the proposed renewable portfolio standards. Congress should
consider how smart grid deployment could enhance the implementation of
a renewable portfolio standard, an energy efficiency standard, or a
reliability standard.
Responses of Katherine Hamilton to Questions From Senator Murkowski
Question 1. Is NIST the right agency to develop consensus-based
standards and protocols?
Answer. As the National Institute of Standards and Technology, NIST
has the appropriate mission, experience, and skills for coordinating
the development of consensus-based standards and protocols in domains
like building systems automation. These skills should transfer easily
to smart grid interoperability standards with the funding now in place.
NIST has coordinated well with the DOE GridWise Architecture Council as
well as other organizations and individuals during this first year of
activity. NIST has received no funding for this mandate prior to the
stimulus bill and, as a result, is just now able to devote more
resources to focus on the standards. While NIST has coordinated well
with the DOE GridWise Architecture Council as well as other
organizations, NIST needs to accelerate its outreach efforts to bring
in the work of these groups and drive convergence in the industry.
Although we believe that continued oversight is important, simply
removing the activity from NIST would only delay the process.
Question 2. What is a realistic time-frame for establishing an
Interoperability Framework?
Answer. Once NIST's outreach to the existing efforts is completed,
it should support work like that of the GridWise Architecture Council
that is already underway, while initiating any new efforts within the
context of standards development organizations. With the communities
working in parallel, the mapping of each point of interoperability
between the various smart grid systems should between 3-6 months of
focused effort. NIST's domain expert work groups are a positive start
to this activity. Once the mapping is complete, development and
approval of consensus standards for each point of interoperability
could take anywhere from 2 months to 2 years, depending on the
technical complexity of the issues.
Question 3. Do you agree with NEMA that Congress should condition
the release of Smart Grid funds on the development of NIST endorsed
standards? If we proceed without an Interoperability Framework are we
just building ``custom projects''--which is really just a nice way of
saying projects that will soon become obsolete?
Answer. The GridWise Alliance does not agree with NEMA that
Congress should condition release of the smart grid stimulus funds. We
can make significant progress on making our grid smarter prior to the
completion of the standards process. Much of the work is already quite
far along-or even complete--on achieving interoperability between
systems that make up the smart grid. Emphasis should be placed on rapid
progress of work in areas that will benefit smart grid projects that
are already being proposed by industry.
The interoperability process will benefit from and be accelerated
by stimulus funding for projects. Since utilities and others deploying
smart grid technologies do not want stranded assets, they are driving
early interoperability standards development in work groups that can
feed into the NIST process. They are also designing deployment such
that software could be revised rather than entire equipment investments
changed out. This is common practice for other industries and is an
effective means of driving deployment without excessive redeployment
cost once the standards are finalized.
Moreover, the stimulus bill requires that demonstration initiatives
and Federal matching grants use open protocols and standards if
available and appropriate. We feel that this direction from Congress,
as well as the activities listed above, will ensure that expeditious
disbursement of stimulus funds is money well-spent.
Question 4. A smarter grid is supposed to enhance our system's
security but technologies like smart meters, sensors and advanced
communications networks can actually increase the vulnerability of the
grid to cyber attacks. How do we address these cyber security concerns?
Do the agencies have sufficient authority or is additional Federal
legislation needed?
Answer. We agree that cyber-security issues are paramount when
installing intelligent two-way communication devices on the grid. Best
practices exist for segmenting different business functions such as
generation, transmission, distribution, customer operations, and
corporate IT to ensure grid reliability. Strong access control, secure
authentication and confidentiality mechanisms have existed for many
years and can be applied to securing the smart grid.
Utilities and other industry partners are developing a consensus
process around specifications for security around some technologies
that should be applicable to other smart grid technologies across the
grid. Further, security for smart grid technologies is being ``baked-
in'' from the start instead of ``bolted on'' as in the past; the
security of the grid will benefit from this up-front, holistic
approach. Digital devices exist already in transmission substations;
smart grid investments will serve to upgrade cyber security for these
systems. The GridWise Alliance supports the coordination of FERC, NERC,
and NARUC with the Department of Homeland Security and industry efforts
as critical to the development of cyber security standards.
Question 5. You testified that commercial deployment of Smart Grid
technologies is the most effective tool to encourage private sector
product research and development. In our rush to spend the money
provided in the Stimulus bill, are we getting ahead of ourselves by
putting the ``cart before the horse'' like Commissioner Butler claims?
Answer. As with all technology development, the business case
associated with commercial success often drives continued research and
development. While we have substantial smart grid technology today that
creates benefits for our grid, we can continue to enhance these
applications through research and development. Research and development
does not end when commercialization begins, but can continually improve
performance, price, and other benefits from any given technology. The
smart grid demonstration projects could serve to both spur widespread
investment in these technologies as well as to provide greater clarity
of the need for any additional research and development.
Question 6. The recent Stimulus bill imposing a new requirement
that demonstration projects must use ``open protocols and standards
(including Internet-based protocols and standards) if available and
appropriate.'' Please explain this new requirement and tell the
Committee whether or not you support it. Opponents of this requirement
argue that internet-based standards can be slow and therefore are not
appropriate to address reliability concerns.
Answer. The GridWise Alliance is fully supportive of open protocols
and standards which would allow all technologies to compete without
picking a winner at this stage. Technology choice should not be
legislated, but should be left to the industry to make choices based on
the best technology for the situation as well as the interoperability
standards enforced by the appropriate Federal and state regulators. We
believe legislative language should maintain technology neutrality--
that open interface specifications are important, that competition
between solution providers encourages innovation while driving down
cost, and that performance-based measures can remain technology-
neutral.
Question 7. You testified that since a smarter grid is a ``means to
an end, additional smart grid policies need to be included when energy
or climate legislation is considered that involves our electricity
system.'' For example, you suggest that smart grid could become an
element of an RPS. Please elaborate.
Answer. The GridWise Alliance strongly believes that smart grid
technologies enable the rapid and effective deployment of other clean
energy technologies and, as such, should be considered when policies to
incentivize those technologies are developed. The electric system and
all of its components need to be thought of holistically and
interactively when designing energy or climate legislation. In an
energy efficiency standard, for example, smart grid could be included
in the definition of distribution efficiency (by specifying reduced
line losses, for example). In climate legislation, smart grid bonus
allowances could be included much the way bonus allowances for demand
response activities were included in the Clean Air Act Amendments of
1990.
Question 8. In your written testimony, you note that ``most
consumers will not change behavior without price signals, education,
and technological assistance. Despite GE's Smart Grid Superbowl ad,
what do consumers know about Smart Grid today?
Answer. Consumers have varying degrees of understanding of smart
grid based on whether they live in an area served by a utility that has
started to deploy those technologies. To a large percentage of the
population, the concept of smart grid may be misunderstood; they will
equate the grid with transmission towers and high voltage lines but
will have little sense that these elements need to be made more
intelligent. With first-hand knowledge, consumers will begin to
understand what a smart meter is and how this technology impacts their
life and their pocketbook. For the majority of the people in this
country, however, a scarecrow on a power line, while creative, does not
help them understand what the smart grid will do for them. It will take
an increased level of education on the part of all stakeholders--our
businesses, government, utility commissions, and consumer groups--to
help consumers understand how they can benefit from more information
about and control over their energy use. The GridWise Alliance is in a
position to provide much of that education. We are already working with
the National Energy Education Project to develop curriculum materials
for K-12. We are also working with states--through state energy
offices, utilities, and Governors--to provide information for
commissioners and state legislators.
Response of Katherine Hamilton to Question From Senator Stabenow
Question 1. We understand that smart grid will give customers more
choices--and during certain times in the summer for example, a customer
may be able to opt in or opt out and get certain benefits from their
providers. Would low-income customers be able to plug-in the amount of
energy that they want to spend and how would the smart grid benefit low
income customers or residents on fixed incomes?
Answer. Low or fixed income consumers certainly stand to benefit
from smart metering applications. Ultimately, a consumer could set up
the amount he or she could spend in a given month and the energy
management program would then indicate how the consumer should use
their energy to meet that goal (for example, thermostat setting, plug
load management, etc.). As the month unfolds, the system would alert
them to high demand times and give them opportunities to adjust their
use and prevent increased bills, eliminating surprises at the end of
the month. By utilizing the smart grid and smart metering technologies,
many creative programs could be formed to address this market. For
example, customers unable to make these decisions could elect to have
their energy consumption sent to caretakers or other support groups.
Those consumers who are able to make lifestyle changes based on smart
grid information defer capacity requirements which benefit all
consumers, regardless of their desire or ability to participate in or
opt out of a specific program.
______
Responses of Suedeen G. Kelly to Questions From Senator Bingaman
Question 1. One of the often stated key benefits of Smart Grid is
in its ability to integrate large quantities of intermittent renewable
resources into the grid and to efficiently route this power where it is
needed. To achieve this will clearly require both the build-out of new
transmission to renewable resource rich locations as well as upgrading
our current grid to have the intelligence to handle these intermittent
resources. In order to achieve the benefits that we want from Smart
Grid, how much new transmission do you foresee being needed? And how do
we prioritize the building of new transmission vs. upgrading our
current grid?
Answer. In response to your first question, the North American
Electric Reliability Corporation (NERC) has determined that significant
new, extra high-voltage transmission facilities are essential in order
to deliver power from the remote renewable resources. This
``transmission superhighway'' would be overlaid on the existing grid.
NERC does not estimate the amount of new transmission facilities that
are necessary, and FERC has not undertaken any study to identify an
amount. The Department of Energy (DOE), in 2008, issued a study titled,
``20 percent Wind Energy by 2030.'' This study referred to a conceptual
plan by AEP, a large utility and transmission owner/operator, that
estimated that 19,000 miles of new 765 kV transmission line would be
required to meet the ``20 percent'' goal. FERC has not undertaken any
study to confirm or dispute the reasonableness of AEP's estimate. (NB:
AEP's estimate was only targeted to wind.) It is impossible to gauge
how much or the type of transmission (upgrades vs. new) is needed to
bring America's renewable resources to market without a sophisticated
transmission planning effort to analyze numerous alternatives. This
planning process must take into account the locations of the resources,
the locations of load centers, the nature of the demand for the
renewable resources, siting and cost allocation. Transmission planning,
siting, and cost allocation are interwoven and affect what actually
gets built. The Nation will require new transmission facilities.
However, to the extent the current grid is sited appropriately for the
transmission of renewables to load, and it can be upgraded cost-
effectively, that should be given priority over the building of new
transmission lines.
Question 2. ``Smart Metering'' projects for residential consumers
have become the poster-child of the Smart Grid. However, some studies
have found that the majority of the benefits of the Smart Grid will
result from investments in grid transmission and distribution system
upgrades and optimization, with only a small percentage of energy
savings and emission reductions coming from smart metering programs.
Could you comment on this? And how should we take these findings into
consideration when prioritizing which Smart Grid demonstration projects
to fund?
NOTE: as a data point, the Climate Group SMART 2020 Report
estimates that 85 percent of the carbon reduction benefits of a Smart
Grid come from Grid Optimization and Renewables Integration, and only
15 percent will come from End-User Energy Management.
Answer. Smart Grid involves a comprehensive plan of adding
intelligence to all aspects of the electricity system, from the
transmission operator's control room down to customer systems and
equipment, including household appliances. As such, application of
Smart Grid at all levels of the power system has the potential to
generate great benefits, bringing efficiency to utility operations, and
helping to manage the bulk power system, as well as enabling customers
to have more options in managing their electricity. FERC believes that
the portfolio of demonstration projects funded by DOE should include
projects on both the transmission and distribution system and should
include a range of technologies-not just meter installation. FERC would
like to see the funded demonstration projects include technologies such
as sensors on transmission and/or distribution equipment, digital
communications in substations, and/or high-speed communications
equipment. FERC would also like to see equipment that can accommodate a
variety of different communications protocols in order to increase the
range of devices that can participate in this effort, thereby
increasing the overall functionality of the smart grid system. Neither
smart metering nor grid optimization and renewables integration alone
will leverage all the potential benefits of a smart grid.
Question 3. After the Department of Energy has spent out its nearly
$4.5 billion on Smart Grid Investments, how do we measure whether that
money has been spent effectively? How soon and what improvements in our
grid should we expect to see?
Answer. FERC is hopeful that the information that DOE will require
from the smart grid grantees will show how effectively the money has
been spent. DOE is developing an Information Clearinghouse to be
populated with lessons learned from the Smart Grid pilot and
demonstration projects. Indeed, the American Recovery and Reinvestment
Act of 2009 (ARRA) authorizes DOE to require the grantees of these
projects to provide it with information to be put into the
Clearinghouse. FERC, along with the state members of the FERC-NARUC
Smart Grid Collaborative, has provided DOE with a proposed set of
information/data requirements that grantees should be required to
provide to DOE, including the following information:
a. Any internal or third party evaluations, ratings, and/or
reviews including all primary source material used in the
evaluation;
b. Detailed data and documentation explaining any improvement
in the accurate measurement of energy efficiency, energy
conservation or demand response resources;
c. Detailed data and documentation explaining the expansion
of the quantity of energy efficiency, energy conservation or
demand response resources that resulted from the project and
the resulting economic effects;
d. Detailed data and documentation for any improvements in
the ability to reliably integrate variable renewable generation
resources;
e. Detailed data and documentation that shows any achievement
of greater system efficiency through a reduction of
transmission congestion and loop flow;
f. Detailed data and documentation showing how the
information infrastructure supports distributed resources such
as plug-in electric vehicles;
g. Detailed data and documentation that shows how the project
resulted in enhanced utilization of energy storage;
h. Detailed data and documentation that shows reductions in
energy and demand associated with the project, and,
i. Detailed data and documentation that shows how the project
encouraged new business models, market innovation, and third
party and private capital participation.
FERC and the state members of the Collaborative also proposed to
DOE that the grantees be required to independently monitor and measure
customer response to the project and that this information be included
in the Clearinghouse. If the above information is required and
reported, FERC believes it will go far toward helping DOE measure
whether the money has been spent effectively.
Regarding how soon we can expect to see grid improvements, within
the past year, FERC has acted on several rate applications that
involved the deployment of transmission-level Smart Grid equipment. For
example, several utilities have identified the deployment of Phasor
Measurement Units (PMU), which, together with the dedicated
communications infrastructure and advanced microprocessor-based
controls needed to appropriately make use of high-quality PMU data,
will increase the accuracy and availability of critical system
information. This information is expected to lead to improved planning
and operations of the system as well as increased efficiency of the
relevant transmission facilities. These technologies are fairly well
developed and these proposals were not contingent upon ARRA grant
funding. Accordingly, some of the improvements envisioned for the Smart
Grid, particularly in the area of improved use of grid resources,
should begin to manifest themselves in the very near future. The more
ambitious improvements that will likely be the subject of ARRA grant
funded pilot projects will likely take longer to realize, depending
upon the lessons learned from each pilot/demonstration project.
Responses of Suedeen G. Kelly to Questions From Senator Murkowski
1. What does Smart Grid technology promise in terms of reliability?
A smarter grid is supposed to enhance our system's security but
technologies like smart meters, sensors and advanced communications
networks can actually increase the vulnerability of the gird to cyber
attacks. How do we address these cyber security concerns? Do the
agencies have sufficient authority or is additional Federal legislation
needed?
Answer. Cyber threats have been growing and continuously changing.
Currently, FERC's main tools for increasing cyber security are
reliability standards. In early 2008, FERC approved eight cyber and
physical security-related reliability standards as part of its
authority under section 215 of the Federal Power Act (FPA). These
mandatory reliability standards apply to the bulk power system in most
of the United States and will impose approximately 160 requirements and
subrequirements. The provisions of these standards phase-in over an
implementation period that ends by 2010. However, upon approval, FERC
found that the standards required significant modifications and
therefore directed the Electric Reliability Organization (ERO) to make
changes to the approved standards. The drafting of those modifications
is currently under way through the standards development process of the
ERO, NERC. Although NERC is expected to complete an interim filing that
addresses some of FERC's directives within the next few months, the
majority of FERC's directives are not scheduled to be revised until
sometime in 2010. Even though FERC gave considerable guidance on its
expectations for improved cyber security standards in January 2008, at
this point, we cannot predict the quality or timing of the revised
cyber security standards industry is currently working on. It should
also be noted that cyber security reliability standards are likely to
evolve over time as technology and threats change. Achieving cyber
security is not a one-time effort. However, at the very least, every
standard that is developed as part of NIST's interoperability framework
must be consistent with the overarching cyber security and reliability
provisions of the EISA as well as the existing FERC-approved
reliability standards.
Regarding the second part of this question, section 1305 of the
EISA, which is a stand-alone provision and does not amend the FPA,
requires FERC to promulgate interoperability standards, but does not
provide that the standards will be mandatory or provide any authority
or procedures for enforcing such standards. FERC's existing FPA
authority applies only to certain entities (i.e., public utilities
under its ratemaking authority in sections 205 and 206, or users,
owners and operators of the bulk power system under its reliability
authority in section 215). However, FERC's FPA authority excludes local
distribution facilities unless specifically provided. Its authority
under sections 205 and 206 applies only to public utilities, and its
section 215 authority does not authorize it to mandate standards but
rather only to refer a matter to NERC's standard-setting process. If
the intent of Congress is for the Smart Grid standards to be mandatory
beyond the scope of the, FPA, then additional legislation should be
considered.
FERC's legal authority is inadequate to respond quickly to protect
the grid against a cyber attack. Because of the tremendous disruption
that could result from a cyber attack, legislation should be considered
to allow the Federal Government to act promptly to protect against
cyber threats or other national security threats.
Question 2. The Stimulus bill provided an unprecedented $4.5
billion in Federal funds for smart grid activities. In your opinion,
what is the best way to allocate these funds--matching grants for
technology investments; research and development; pilot programs? Over
what timeframe? What are the necessary first steps?
Answer. Most Smart Grid technologies have moved beyond the pure R&D
stage, though not all to the same extent. Many transmission-level Smart
Grid technologies appear to be close to commercial viability already.
Other more ambitious Smart Grid technologies, particularly those at the
customer end, appear to require further testing through pilot projects.
The Department of Energy should remain flexible enough in its approach
to permit well-developed technologies to receive matching grants for
deployment while other less-developed technologies receive funding for
pilot programs. An important first step would be to survey the range of
Smart Grid technologies to determine their respective levels of
developmental maturity.
There is an urgent need to move forward quickly on developing Smart
Grid capabilities. The bulk power system faces reliability challenges
that Smart Grid technologies could address. Among these challenges are
the need to reliably and economically integrate large volumes of
variable generation, deal with the changes in fuel mix and generation
location that are likely to result from greenhouse gas control
measures, and possibly the advent of a potentially large new load class
in the form of electric vehicles.
Question 3. What capabilities and expertise in this area does each
of your agencies bring to the table?
Answer. One of FERC's primary responsibilities under the FPA is to
ensure that the rates, terms and conditions of transmission and sales
of electric energy at wholesale by public utilities in interstate
commerce are just, reasonable and not unduly discriminatory or
preferential. Thus, FERC has decades of experience regulating wholesale
energy transactions and markets and transmission. FERC also has a major
role under the FPA in the reliable operation of the bulk power system
in most of the Nation. FERC exercises this latter authority, which was
enacted as part of the Energy Policy Act of 2005, by approving and
enforcing mandatory reliability standards for the bulk power system
applicable to the United States other than Alaska and Hawaii. More
recently, EISA gave FERC the additional responsibility of instituting a
rulemaking proceeding to adopt standards and protocols to ensure Smart
Grid functionality and interoperability in interstate transmission of
electric power and in regional and wholesale electric markets.
Question 4. In your opinion, is additional legislative authority in
the Smart Grid area needed? In particular, is additional legislation
needed to address cost-effectiveness, upgradeability, and cyber
security concerns?
Answer. As discussed above in response to Question 1, Congress may
wish to consider additional legislation with respect to the enforcement
of Smart Grid standards if the standards are intended to be broadly
applicable, mandatory, and enforceable. A separate area in which
legislation is needed is with respect to authority to respond to an
emergency related to a cyber or other national security threat to the
transmission system.
Question 5. In order to realize the benefits of a smarter grid,
what rate structure changes need to be made at both the wholesale and
retail level?
Answer. Some Smart Grid capabilities, such as the efficiency gains
that should come from deploying advanced sensors and controls on the
transmission grid, likely need no rate structure changes at the
wholesale level to be realized. The efficiency and operational benefits
coupled with cost recovery through transmission rates, in some cases
including rate incentives, should be sufficient. The FPA provides FERC
needed flexibility to institute any rate structure changes necessary to
support Smart Grid development. For example, FERC just issued a
proposed Smart Grid Policy that would allow utilities to seek to
recover the costs of smart grid deployments that demonstrate system
security and compliance with FERC-approved Reliability Standards and
other criteria. The issue of rate structure changes at the retail level
is a major issue being addressed among the states and is being
discussed in the FERC-NARUC Smart Grid Collaborative.
Question 6. How can Smart Grid technologies reduce the need for
massive transmission infrastructure investments? What kind of savings
are we talking about? What are the impacts on transmission if we don't
get the Federal Smart Grid program right?
Answer. Smart Grid technologies can allow more efficient use of
existing and new transmission capacity thereby delaying the need for
improvements to existing infrastructure and for the construction of new
facilities. However, because most renewable generation will likely be
located far from load and from the existing grid, new and upgraded
lines will be needed. Smart Grid is unlikely to significantly reduce
the need for a large build-out of the interstate transmission grid.
It is important to get the Federal Smart Grid program right because
optimizing the design and operation of our transmission and
distribution system can yield great efficiencies in the use of
electricity, and enhance the ability to ensure the reliability of the
bulk power system. Ultimately, a smart grid will facilitate consumer
transactions and allow consumers to better manage their electric energy
costs. For these reasons, FERC, along with other Federal and state
agencies, as well as industry, is committed to developing and deploying
a smart grid for the Nation's electric transmission system.
Question 7. Pursuant to the 2007 energy bill, once NIST has reached
a sufficient consensus on an Interoperability Framework, FERC will
begin a rulemaking process for adopting standards and protocols. How
long do you expect that process to take? Should Congress legislate the
standards and protocols instead? Is an Executive Order an option?
Answer. Pursuant to ARRA, Congress has provided important measures
to move the process forward, including funding provisions, and a Smart
Grid Clearinghouse for information exchange. In addition, as referenced
above, FERC just issued a proposed Smart Grid Policy Statement which
prioritizes the development of key interoperability standards, provides
direction to the electric industry regarding cybersecurity requirements
for Smart Grid projects, and proposes that utilities be eligible to
seek to recover the costs of smart grid deployments under certain
circumstances. In setting these ``rules of the road,'' and providing
encouragement for utilities and industry to deploy cutting-edge
technology, coupled with the key provisions in ARRA, we are developing
much-needed traction to accelerate the rulemaking proceeding.
______
Responses of Frederick F. Butler to Questions From Senator Bingaman
Question 1. One of the often stated key benefits of Smart Grid is
in its ability to integrate large quantities of intermittent renewable
resources into the grid and to efficiently route this power where it is
needed. To achieve this will clearly require both the build-out of new
transmission to renewable resource rich locations as well as upgrading
our current grid to have the intelligence to handle these intermittent
resources.
In order to achieve the benefits that we want from Smart Grid, how
much new transmission do you foresee being needed? And how do we
prioritize the building of new transmission vs. upgrading our current
grid?
Answer. To me, one of the benefits of the Smart Grid is to make the
system as a whole more efficient, thereby reducing the need to build
more transmission. I don't think there is a ``magic number'' in terms
of how much new transmission is needed; while improvements to the
electric grid are certainly needed, ideally the less we need to build,
the better. This begs the importance of a smart planning and siting
process that gives ample consideration to non-wires alternatives to new
transmission, particularly if the grid becomes more efficient. One of
the most promising areas of potential for a ``smart'' grid is that it
improves the performance of the system already in place; from there
regulators and transmission providers can explore what new transmission
might be needed. You don't build first and plan later; we must
implement a bottom-up process that gives the States and regions the
lead in determining where we go: without this type of smart planning,
the Smart Grid may not look so smart after all.
Question 2. ``Smart Metering'' projects for residential consumers
have become the poster-child of the Smart Grid. However, some studies
have found that the majority of the benefits of the Smart Grid will
result from investments in grid transmission and distribution system
upgrades and optimization, with only a small percentage of energy
savings and emission reductions coming from smart metering programs.
Could you comment on this? And how should we take these findings into
consideration when prioritizing which Smart Grid demonstration projects
to fund?
NOTE: as a data point, the Climate Group SMART 2020 Report
estimates that 85% of the carbon reduction benefits of a Smart Grid
come from Grid Optimization and Renewables Integration, and only 15%
will come from End-User Energy Management.
Answer. As I said in my testimony, the smart meter should be one of
the last elements of the utility-deployed Smart Grid. That doesn't mean
it isn't important, but until we do the work on the back end of the
system, the smart meter will be meaningless. It may even be the case
that the smart meter is optional, but the updates and upgrades to the
backbone are most essential to the smart grid. I think we'll get a
better idea how customers respond to their smart meters when we see the
results of the Boulder, Colo., demonstration project. We need to see
how end-use consumers utilize these meters and build a ``buzz'' so
others will participate. If we can't prove the benefits of the smart
meter to the consumer, then we have an uphill battle.
At the end of the day, we may find out that the meter is not only
the last piece, but just an extra piece that is not an essential aspect
of the Smart Grid.
Question 3. After the Department of Energy has spent out its nearly
$4.5 billion on Smart Grid Investments, how do we measure whether that
money has been spent effectively? How soon and what improvements in our
grid should we expect to see?
Answer. The FERC-NARUC Smart Grid Collaborative is in the process
of drafting criteria that outline suggestions for how the Department of
Energy can best spend the ARRA money. We met on March 19, 2009 to
review and revise our draft and we submitted our criteria to the
Department of Energy on March 26, 2009. The list of criteria is
attached.
However, it's clear that measuring effectiveness will vary by what
kind of projects the money goes to. There is a continuum from
demonstration to deployment that may have varying levels of cost-
effectiveness. Without allowing for some demonstration projects to make
mistakes, we won't learn the lessons from those mistakes.
It is important to remember that the areas that are most likely to
bring benefits for consumers and the electric sector more broadly deal
with transforming the efficiency and operability of the distribution
system. If mass smart meter rollouts are not supported by other
improvements to the system that allow for these kinds of efficiency
improvements through omni-directional communications and control on the
grid, it is less likely that these investments will maximize the
benefits possible.
Responses of Frederick F. Butler to Questions From Senator Murkowski
Question 1. Is NIST the right agency to develop consensus-based
standards and protocols?
Answer. No response. While the establishment of one set of
consistent and implementable standards is of the highest importance,
numerous standard-setting bodies exist; State regulators must leave the
standard-setting process to those operating in that area of expertise.
Question 2. What is a realistic time-frame for establishing an
Interoperability Framework?
Answer. Again, no response. Those directly involved have the
expertise to respond.
Question 3. Do you agree with NEMA that Congress should condition
the release of Smart Grid funds on the development of NIST endorsed
standards? If we proceed without an Interoperability Framework are we
just building ``custom projects''--which is really just a nice way of
saying projects that will soon become obsolete?
Answer. First and foremost, interoperability should be built in as
much as possible to every deployment of Smart Grid technology. System
obsolescence creates higher costs for ratepayers that State regulators
are first in line to prevent. However, depending on the development of
the system being demonstrated or deployed, it is important to allow
some systems and approaches to succeed or fail in order to learn what
works best. Software and firmware upgradability should help bridge
improvements in interoperability, and that is a feature that is in the
interests of everyone. It will be important to balance room for
innovation with ensuring that our investments will have the longest
effective usefulness feasible. Moreover, many Smart Grid investments do
not require universal interoperability to improve the effectiveness and
efficiency of grid operation--particularly those operating on the
distribution system side of the meter.
Question 4. A smarter grid is supposed to enhance our system's
security but technologies like smart meters, sensors, and advanced
communications networks can actually increase the vulnerability of the
grid to cyber attacks. How do we address these cyber security concerns?
Do the agencies have sufficient authority or is additional federal
legislation needed?
Answer. Our Committee on Critical Infrastructure has begun to
investigate this issue, and it is of the highest importance. We need to
move beyond the guns-gates-and-guards analogs of password protection
and ``security through obscurity'' and move into a framework of maximum
system resilience and next-generation safeguards that allows the
network to be impregnable, even if devices connected to it are
compromised. Three areas are worth considering in principle:
Hardware improvements in performance shouldn't be mistaken
for improvements in security; likewise obscurity does not
provide security. Firmware must be updateable to prevent quick
obsolescence, but must be protected, for example with
encryption, certification and authentication; and software must
be deployed in a way so that even if an attack is successful,
it will be unproductive, unappealing, unprofitable, and
traceable. Even with these protections, the network must be
designed to assume data is interceptable, and have an overall
design with resilience as a core principle.
NERC has been setting cybersecurity standards for some time.
FERC has also asked for authority to set standards on an
emergency basis. While I would support action to close any
existing vulnerabilities arising from the integration of
communications networks with the electric grid, it is my sense
that greater authority at the federal level is not a panacea
for solving this issue. Improved communications within the
sector and with stakeholders that puts greater emphasis on the
network--the ``smart'' side of the Smart Grid--is even more
critical.
Question 5. Mr. Butler, in your written testimony you note that
within the next 3-10 years all electricity consumers will face higher
costs, in part due to an increase in fuel prices, but also due to the
``initial sticker shock of federal and State initiatives to increase
renewable generation and the anticipated costs associated with climate
change legislation.'' As you know, Xcel is currently undertaking a $100
million Smart City project in Boulder, CO and Southern California
Edison is moving out with $1.6 billion in Smart Grid initiatives--much
to the dismay of some consumer groups.
Given the current economic crisis, is it fair to ask consumers to
bear the costs of a nationwide RPS, climate change initiatives, and
advanced Smart Grid technologies? What is the impact to low-income
consumers?
Answer. This is certainly a fair question, which is why I suggested
that we start with the backbone of the transmission grid first and let
the companies pay for it before we start giving smart meters to
consumers along with the associated higher price tag. We are not
advocating that smart-grid developments be delayed because of the
economy, but rather that these developments be borne by those who
benefit.
We can avoid much of the consumer backlash if we take this route,
at least as far as it relates to the Smart Grid.
In terms of climate policy, NARUC supports federal action because
it will actually bring the financial and regulatory certainty that,
over time, will help reduce the cost of reducing carbon emissions. If
we do not act soon, the costs of compliance will only increase, and the
industry needs to know the rules of the road so we can finance the next
round of energy infrastructure.
Energy costs are going up regardless of whether we tackle climate
change or the Smart Grid. It is our hope that if we do this
deliberately and ensure that consumers can actually benefit, we can
stem the tide of these rising costs and share the benefits with end-use
customers.
Question 6. You caution that we need to get consumers on board with
Smart Grid in order for it to work or we could face a potential
backlash from consumers forced to pay for the privilege of getting new
gadgets installed in their homes that they don't necessarily know how
to use. How can we best move toward public acceptance of Smart Grid
technologies? Should we undertake some kind of public education or
outreach program?
Answer. Yes, public outreach is key. We can't order consumers to
take these smart meters and walk away. Doing so is a recipe for
ratepayer revolt. In my view, we need volunteers to participate in
pilots so they can be excited about the opportunity to see how the
Smart Grid works. If we see success, hopefully those consumers will
talk with their neighbors about it, and they'll demand to participate
as well. This really has to be a grassroots effort. The federal
government can use its bully pulpit and help fund this.
My main point here is that we want to bring consumers on board in a
way that they will feel like they are benefiting. No one benefits if
consumers don't know how to or want to use their smart meters.
Question 7. In order to realize Smart Grid benefits, States will
need to impose new rate structures, such as time-of-use rates. What are
the pros and cons to this type of retail rate structure? What other
models could be utilized?
Answer. I don't believe that States will need to impose time-of-use
rates to see benefits from Smart Grid deployments. In fact, while
demand response among consumers is touted as one of the key benefit-
drivers of Smart Grid adoption, more important is the value coming from
vastly improved outage detection and management, which does not require
rate changes.
With that in mind, time of use rates have some documented benefits
and some potential drawbacks. The benefits are well-described: pricing
electricity based on the value set by supply and demand uses price to
send a conservation signal when conservation is most needed, at times
of peak usage. Demand response facilitated by these rates could have a
large effect in mitigating high wholesale market prices by shaving the
most expensive peaks. Time-of-use charges may also free customers from
hidden charges and premiums paid by utilities to mitigate risk.
However, savings under time of use rates depends on consumer
response: during high price periods, consumers are expected to respond
to prices by conserving, either manually cutting back or by using
appliances and devices to automatically cut back on electricity
consumption. However, for a decent proportion of the population,
behavioral change is not an option (such as turning off the air
conditioning on the hottest days); and purchasing new appliances or
price-responsive devices adds new costs to already-strained bills,
simply to avoid the costs of higher peak prices under time of use
rates. Even inexpensive, high value, off-the-shelf devices such as
programmable thermostats generally only work for houses with central
HVAC systems, and only around 60% of houses have this in the United
States, disproportionately among middle-and upper-income ratepayers.
Under any circumstances, prices are rising for consumers, and
energy efficiency programs that target low-income communities are of
paramount importance. This is even more the case with time-of use-
rates. These rates may be an important piece of the puzzle, but a range
of technology options should be paired with existing or proposed rate
designs that are consistent with the needs of the projects proposed.
This may include dynamic rates along with other rate designs.
Question 8. IEEE 1547 describes how to connect distributed
generators to the grid, and under the 2005 Energy Policy Act, Congress
recommended that standard be adopted by all States. How many States
have fully adopted this interconnection standard? How can States
promote a nationwide Smart Grid if after four years, we still do not
have nationwide standard for small-scale connections?
Answer. By 2008, 33 States had adopted or had been in the process
of adopting an interconnection standard for distributed resources.
While a national standard may be helpful, it is important to allow for
States to have the flexibility to adopt the standards that work in
their situation, and IEEE 1547 is a very good and adaptable standard.
It's worth remembering that our electricity markets and
transmission systems are not nation-wide systems, they are regional
systems, and there are no national utilities. More important than a
nationwide Smart Grid is one that improves the efficiency and
resiliency of the local distribution systems that make up 85% of the
total grid infrastructure. As such, more than adopting national
standards, an approach that best serves distribution-level, State-
level, and regional-level systems, in a way that reflects the make-up
of the electric grid, is the key.
Responses of Frederick F. Butler to Questions From Senator Stabenow
Question 1. We understand that Smart Grid will give customers more
choices--and during certain times in the summer for example, a customer
may be able to opt in or opt out and get certain benefits from their
providers. Would low-income customers be able to plug-in the amount of
energy that they want to spend and how would the Smart Grid benefit low
income customers or residents on fixed incomes?
Answer. As I stated before, prices are rising for consumers, and
energy efficiency programs that target low-income communities are of
paramount importance whether the Smart Grid deploys successfully or
not. However, by focusing on components of Smart Grid that improve
system efficiency, outage management, network optimization and grid
resiliency, the cost of operating the system can be reduced and prices
can be lowered for all consumers. That is why the most urgent
investments are those made on the utility distribution-system side of
the meter, rather than on the customer side of the meter. Once we have
these components in place, greater focus can be placed on systems on
the customer-side of the meter that provide greater customer choice and
empowerment, without forcing ratepayers into new expenditures,
behaviors, and technology adoption that we may not have, as a society,
properly prepared ourselves for.
Question 2. A number of utilities already have begun modernizing
their grids by installing digital electric meters and technologies that
enable two-way communication capabilities between the utilities and
their customers. This transformation to a ``Smart Grid'' should benefit
the companies and their customers. How will the Smart Grid enable
entities to detect and repair outages faster, hook-up customers
quicker, and give consumers the capability to manage their homes'
appliances more efficiently?
Answer. This will benefit consumers by making the whole system more
efficient. But we can't lose sight of the fact that this will also
benefit utilities, and that is why we should start here, because they
can pay for it at first. If utilities have a real-time view of their
grid, they can identify problems before they get out of hand. They can
also prioritize repair efforts and have instant information on how many
houses have been restored after a damaging storm.
If a utility can see online that a specific transformer appears
irregular, but is not necessarily malfunctioning, they can determine if
that problem will become a bigger issue remotely before something
physically goes wrong.
Utilities can streamline their operations and save money. Consumers
can have the knowledge that reliability is improved and take heart in
knowing that utilities' response times will be faster.
Mr. Chairman and members of the committee, I wish to thank you for
giving me the opportunity to answer these questions. In addition, I'd
like to submit the following document for the record. It is a list of
criteria generated by the FERC-NARUC Smart Grid Collaborative for the
Department of Energy to consider when it starts providing grant and
other funding for Smart Grid projects under ARRA.
NARUC/FERC SMART GRID COLLABORATIVE PROPOSED FUNDING CRITERIA FOR THE
ARRA SMART GRID MATCHING GRANT PROGRAM\1\ AND THE ARRA SMART GRID
DEMONSTRATION PROJECTS\2\
---------------------------------------------------------------------------
\1\ 42 USC 17386, Energy Independence and Security Act (EISA) Sec.
1306, Federal Matching Fund for Smart Grid Investment Costs, as amended
by American Recovery and Reinvestment Act of 2009 (ARRA).
\2\ 42 USC 17384, EISA Sec. 1304, Smart Grid Technology Research,
Development, And Demonstration, as amended by ARRA.
---------------------------------------------------------------------------
The American Recovery and Reinvestment Act of 2009 (ARRA)\3\
includes the following language:
---------------------------------------------------------------------------
\3\ See, ARRA, http://frwebgate.access.gpo.gov/cgi-bin/
getdoc.cgi?dbname=111_cong_bills
&docid=f:h1enr.txt.pdf.
`(e) Procedures and Rules-(1) The Secretary shall, within 60
days after the enactment of the American Recovery and
Reinvestment Act of 2009, by means of a notice of intent and
subsequent solicitation of grant proposals----
`(A) establish procedures by which applicants can obtain
grants of not more than one-half of their documented costs;
The Collaborative submits the following funding criteria that the
Collaborative members would find helpful in carrying out their legal
responsibilities as they relate to Smart Grid. The Collaborative asks
the Department of Energy (DOE) to consider these criteria when
establishing procedures under which applicants can receive ARRA funding
for Smart Grid Matching Grants and for ARRA Smart Grid Demonstration
Projects.
FUNDING CRITERIA
1. Preconditions for Grants--Any application for grant
funding must address the following issues:
a. How the project will provide for interoperability
in the absence of approved standards (e.g., adherence
to existing open standards, secure upgradeability once
standards approved);
b. How the project will address cyber security issues
and ensure that it maintains compliance with Federal
Energy Regulatory Commission-approved reliability
standards during and after the installation of Smart
Grid technologies;
c. How the project has minimized the possibility of
stranded investment in Smart Grid equipment by
designing for the ability to be upgraded;
d. How the applicant proposes to share information
with the Department of Energy Smart Grid Clearinghouse,
as further described in the FERC Policy Statement;
e. How the project will maintain the reliability of
the grid;
f. How the project will preserve the integrity of
data communicated (whether the data is correct);
g. How the project will provide for authentication of
communications (whether the communication is between
the intended Smart Grid device and an authorized device
or person);
h. How the project will prevent unauthorized
modifications to Smart Grid devices and the logging of
all modifications made;
i. How the project will ensure the physical
protection of Smart Grid devices; and
j. How the project will address the potential impact
of unauthorized use of Smart Grid devices on the bulk-
power system.
2. Overarching Criteria:
a. The DOE funded portfolio of projects should
include projects on both the transmission and
distribution system, and on the customer side of the
meter;
b. The DOE funded portfolio of projects should
include a range of technologies--not just advanced
meter installation (e.g., programmable communicating
thermostats, smart appliances, and other technologies
controlled by the end-use customer);
c. The DOE funded portfolio of projects should be
broad reaching and with broad application potential;
d. The DOE funded portfolio of projects should be of
sufficient scale that it will be able to apply
statistical tests on where and how it impacts
consumers, the grid, and technologies;
e. The DOE funded portfolio of projects should be
geographically diverse to the extent practicable. All
regions should be represented as well as projects in
urban, rural and suburban settings;
f. The DOE may consider providing a waiver from some
of the grant preconditions for a modest portion of the
funds (say 10%), or for applicants with sales below a
certain sales threshold (say 1-4 million MWH a year) in
order to provide funds to small utilities who would not
otherwise be able to comply with application
requirements in a timely manner;
g. The DOE funded portfolio of projects should intend
to provide benefits--which may include both customer
and system-wide benefits; and
h. Early-adopter States should not be disadvantaged--
existing projects can be eligible if they can show
additional benefits or expansion of knowledge that are
unique and not likely to be realized by other proposed
projects.
3. Technologies--must first meet the preconditions above
a. A range of technologies should be included such
as, but not limited to, sensors on transmission and/or
distribution equipment, digital communications in
substations, and/or communications equipment not just
focused on AMI (e.g., programmable communicating
thermostats, smart appliances, and other technologies
controlled by the end-use customer).
b. Projects can include replacement of legacy
equipment and systems such as old bulk meters and
capacitor banks with intelligent, Smart Grid capable
equipment and/or systems.
c. Different communications protocols should be
tested.
d. Physical and cybersecurity attributes of the range
of technologies should be highlighted and tested.
e. System integration performed as part of the
project should be based, to the extent practicable, on
existing broadly accepted industry standards.
f. Priority should be given to projects that have an
open architecture base that can become the basis for
interoperability with multiple applications.
4. Rate Designs
A range of technology options should be paired with existing or
proposed rate designs, including dynamic rates, consistent with the
purposes for which the project is designed.
5. Regulatory issues
a. Consider the regulatory climate in the State where
a project is proposed--is there legislative authority
for dynamic rates?
b. Is there coordination between a given project and
the RTO and/or system operator?
6. Information/data requirements.--to be eligible for funding
a grantee must agree to provide detailed data and documentation
of project results, including the following information, as
applicable to the project, to the DOE Clearinghouse\4\ [not
every project will deal with all the items listed]:
---------------------------------------------------------------------------
\4\ See, ARRA Sec. 405(3), amending EISA Sec. 1304(b)(3), 42 USC
17381.
a. Any internal or third party evaluations, ratings,
and/or reviews including all primary source material
used in the evaluation;
b. Detailed data and documentation explaining any
improvement in the accurate measurement of energy
efficiency, energy conservation, price responsive
demand, or demand response resources;
c. Detailed data and documentation explaining the
expansion of the quantity of energy efficiency, energy
conservation, price responsive demand, or demand
response resources that resulted from the project and
the resulting economic effects;
d. Detailed data and documentation that shows
reduction in both electric demand and energy
consumption associated with the project;
e. Detailed data and documentation for any
improvements in the ability to integrate non-
dispatchable renewable generation resources;
f. Detailed data and documentation that shows any
achievement of greater system efficiency through a
reduction of transmission congestion and loop flow;
g. Detailed data and documentation showing how the
information infrastructure supports distributed
resources such as plug-in electric vehicles;
h. Detailed data and documentation that shows how the
project resulted in enhanced utilization of energy
storage; and
i. Detailed data and documentation that shows how the
project encouraged new business models, market
innovation, and third party and private capital
participation.
j. All data on project results must be publicly
available while protecting individual customer privacy
and commercially sensitive data (See Below).
7. Protection of individual customer privacy and commercially
sensitive data. The fund recipient must provide a detailed
explanation of:
a. The types of customer-specific data it proposes to
collect;
b. How it plans to protect this data from unintended
disclosure;
c. The extent to which this data can be provided to
the DOE in summary or aggregate form and still be
responsive to report preparation requirements and the
policy of public transparency;
d. The process proposed for obtaining customer
permission to disclose private or commercially
sensitive data, if such data must be disclosed; and
e. Any State or local requirements that are relevant
to the disclosure of data specific to individual
electric customers.
8. Mechanisms to measure customer response must be included
as a requirement for funding
a. Grantees must include independent monitoring and
measurement of customer receptivity to the project.
1. This information must be made available to the
DOE Clearinghouse.
2. The DOE Clearinghouse will develop guidelines
for gathering and reporting this information
______
Responses of Patrick D. Gallagher to Questions From Senator Bingaman
Question 1. One of the often stated key benefits of Smart Grid is
in its ability to integrate large quantities of intermittent renewable
resources into the grid and to efficiently route this power where it is
needed. To achieve this will clearly require both the build-out of new
transmission to renewable resource rich locations as well as upgrading
our current grid to have the intelligence to handle these intermittent
resources.
In order to achieve the benefits that we want from Smart Grid, how
much new transmission do you foresee being needed? And how do we
prioritize the building of new transmission vs. upgrading our current
grid?
Answer. NIST will defer to DOE and FERC on estimating ``how much
new transmission'' is needed. However, it is clear that there is a need
to build out new transmission to renewable resource-rich locations and
to upgrade the grid to better handle these resources if our nation is
to fully realize the benefits of Smart Grid. In addition, better and
more storage and power conversion technologies are needed to make best
use of these large-scale intermittent resources. NIST is working to
develop the interoperability framework to coordinate and prioritize
standards development to ensure that the Smart Grid devices and systems
that will accommodate these large renewable power sources will be
interoperable, and beyond that, allow for and encourage customers to
adjust their energy usage.
Question 2. ``Smart Metering'' projects for residential consumers
have become the poster child of the Smart Grid. However, some studies
have found that the majority of the benefits of the Smart Grid will
result from investments in grid transmission and distribution system
upgrades and optimization, with only a small percentage of energy
savings and emission reductions coming from smart metering programs.
Could you comment on this? And how should we take these findings into
consideration when prioritizing which Smart Grid demonstration projects
to fund?
NOTE: as a data point, the Climate Group SMART 2020 Report
estimates that 85% of the carbon reduction benefits of a Smart
Grid come from Grid Optimization and Renewables Integration,
and only 15% will come from End-User Energy Management.
Answer. The Smart Grid addresses several goals, each of which is
important. Renewable energy generation leads to the greatest impact for
carbon reduction, and efficiency improvements in transmission and
distribution lead to less wasted energy and greater reliability. Smart
Metering addresses a different goal, reducing energy use by customers
and smoothing load shape to improve grid utilization. Testing and
validating Smart Grid standards interoperability is a key aspect of
NIST's program. We are working closely with DOE, and anticipate testing
and validation will be a key aspect as the Smart Grid standards move
forward.
Question 3. After the Department of Energy has spent out its nearly
$4.5 billion on Smart Grid Investments, how do we measure whether that
money has been spent effectively? How soon and what improvements in our
grid should we expect to see?
Answer. We defer to the Department of Energy on this question.
Question 4. Dr. Gallagher, in your testimony you state that NIST,
as directed by EISA, will develop suites of standards for different
Smart Grid aspects, including distributed energy resources, demand
response devices/appliances, electric vehicles, wide area measurement
systems, and other parts of the Smart Grid vision. Furthermore, during
the hearing you stated that you expect that by this summer, NIST will
have completed a road map to prioritize the order in which Smart Grid
standards need to be developed.
As Senator Bingaman requested in the hearing, please submit to us:
1) an inventory of the suites of standards to be developed;
2) Each standard, that to the best of your current knowledge,
will need to be developed; and
3) For each standard, a list of the standards development
organizations that would logically be involved in the
development of such standard.
Answer. To clarify, I stated at the hearing that NIST would, by
this summer, have completed an initial version of a roadmap to
prioritize the selection and/or development of standards. The roadmap
will include an architecture and framework that will evolve to
incorporate new technologies and requirements. Once this initial
version of the roadmap is developed, it will be continuously updated
and be used as a basis for developing priority actions in support of
developing the standards framework.
The appended document lists suites of Smart Grid standards under
development in different organizations.
It is important to note that there are several ``suites'' of
standards as well as hundreds of individual standards that are key for
Smart Grid interoperability. These suites are in different stages of
maturity and cover many Smart Grid devices and functionality. There are
also overlaps among them that require harmonization, some of which are
already being addressed.
Some of the existing standards have not yet undergone extensive use
and conformity testing that would reveal whether they are truly
interoperable, so it is not fully known what the weaknesses are in
these standards and where they may need to be modified.
As the roadmap is developed and evolves and as new standards are
published, more of these standards issues will be identified and
addressed. The attached document lists some of the suites of Smart Grid
standards under development in the various Standards Developing
Organizations (SDOs). The list is not prioritized, nor is it exhaustive
since NIST is continuing to develop the roadmap and standards from
other industries such as networking, telecommunications and end use
equipment are expected to play key roles in the development of the
Smart Grid infrastructure. Input from these industries will be included
as the interim roadmap and Smart Grid standards move forward.
Question 5. Dr. Gallagher, we have heard from many parties, most
recently Secretary Chu, that standards and protocols development is
lagging behind industry needs, and may soon hinder Smart Grid
deployment. While I understand that your agency has lacked appropriated
funds up until very recently (when $10 million was appropriated in the
American Recovery and Reinvestment Act), how do you plan to ensure that
you now will move expeditiously? Can you provide us an approximate
timeline for when you expect to begin releasing consensus standards?
Answer. Standards are developed for industry, by industry, through
an established consensus process in which government participates.
Thus, NIST as an organization will not be releasing consensus
standards. However, NIST has and will play an important role, working
alongside industry participants, providing both technical expertise and
coordination to facilitate the development of consensus standards by
the appropriate standards organizations. The recognition of Smart Grid
as an urgent national priority, and especially the funding provided by
the American Reinvestment and Recovery Act, makes it imperative to
develop the standards more rapidly, requiring new approaches. NIST has
recently taken several steps to accelerate progress.
We have committed to delivering an interim interoperability
standards roadmap by June and are working to expedite this effort using
ARRA funding. We are also planning to use the ARRA funding to
accelerate the establishment of a public-private partnership, modeled
on the most successful elements of the Health Care IT interoperability
effort, to select and/or coordinate the development of new standards
based on the roadmap. We will focus initially on the selection of
existing standards to meet the highest priority needs, while working to
develop new or harmonized standards where necessary to meet other
needs. We anticipate that initial standards will be selected in 2009.
Question 6. Dr. Gallagher, in your opinion, is it a hindrance to
industry and to Smart Grid evelopment that NIST has not yet begun
releasing consensus standards andprotocols? At what point would you
consider a lack of NIST approved standards a indrance?
Answer. To clarify, consensus standards in the U.S. are developed
by the private sector through standards development organizations
(SDOs) and do not normally require formal recognition or approval by
NIST. For example, the internet, a network about as complex as the
Smart Grid, was established and continues to evolve based entirely on
private-sector, voluntary standards. NIST's role is to support this
process by working closely with industry and stakeholders as a third
party technical expert. NIST and industry believe that this process
produces the most effective and widely accepted standards. From that
perspective, lack of NIST-approved standards for Smart Grid is not a
hindrance to industry.
However, some standards for the Smart Grid may need to be mandated
via adoption in regulation to ensure the reliability and security of
the Smart Grid, which is one of the nation's critical infrastructures.
Please note that even if standards were adopted in regulation, the
private sector would continue to play a crucial role in their
development, since OMB Circular A-119 and the National Technology
Transfer and Investment Act oblige agencies to use existing private
sector, voluntary standards as the basis for regulations. EISA
specifically tasks NIST to coordinate development of an
interoperability framework including protocols and model standards,
which is appropriate for this reason. The steps NIST is taking will
accelerate the availability of NIST-approved standards to support
regulation so that they do not become a hindrance to industry.
Responses of Patrick D. Gallagher to Questions From Senator Murkowski
Question 1a. What does Smart Grid technology promise in terms of
reliability? A smarter grid is supposed to enhance our system's
security but technologies like smart meters, sensors and advanced
communications networks can actually increase the vulnerability of the
grid to cyber attacks.
Answer. There are many ways that Smart Grid technologies will
improve the overall reliability of the Nation's electric distribution
system, including greatly increased capabilities for controlling,
monitoring and restoring system performance. While it is true that some
aspects of Smart Grid technologies involve greater interconnectivity
and potential vulnerability, proactive measures will be implemented to
ensure cyber security. Currently, many components of the grid are
interconnected to the Internet, either directly, or via the business
component of a company. This has increased the potential for cyber
attacks that could compromise the availability and/or integrity of the
existing grid. This requirement to address potential vulnerabilities
has been acknowledged by the Department of Homeland Security (DHS),
through the Critical Infrastructure Protection (CIP) Program. They have
a vulnerability assessment program that is available to critical
infrastructures. Also, DHS is working with the critical infrastructures
to promote reporting of potential incidents through the US--Computer
Emergency Readiness Team (US-CERT) program. In addition, the Department
of Energy, as the Sector Specific Agency for Energy, has a cyber
vulnerability assessment program specifically for the electric grid.
There are also several current initiatives to develop cyber security
standards for components of the existing grid. These standards are
intended to address existing vulnerabilities. Finally, the IT and
telecom sectors have cyber security standards to address
vulnerabilities, conformity assessment programs to evaluate cyber
security products, and assessment programs to identify known
vulnerabilities in systems.
Question 1b. How do we address these cyber security concerns?
Answer. One of the important lessons from the IT and telecom
sectors is that network security must be inherently designed into the
architecture of the network; it cannot be ``bolted on'' later. NIST is
applying its extensive expertise in both computer security and advanced
network technology to systematically assess risk and ascertain security
requirements for the Smart Grid architecture.
There are a number of cyber security standards that are being
developed that are applicable to the Smart Grid:
The North American Electric Reliability Corporation (NERC)
Critical Infrastructure Protection (CIP) Cyber Security
Standards CIP-002 through CIP-009 provide a cyber security
framework for the identification and protection of Critical
Cyber Assets to support reliable operation of the Bulk Power
System
The ANSI/ISA-99/IEC 62443 suite of standards for Industrial
Automation and Control System Security
The Advanced Metering Infrastructure (AMI) has formed a
Security task force (AMI-SEC) to define common requirements and
produce standardized specifications for securing AMI system
elements
NIST Special Publication (SP) 800-53, Recommended Security
Controls for Federal Information Systems, which provides
security controls for Federal agencies, including those who are
part of the Bulk Power System (e.g., Tennessee Valley
Authority, Bonneville Power Authority). This Special
Publication is incorporated by reference in Federal Information
Processing Standards (FIPS) 200, Minimum Security Requirements,
making it mandatory for Federal agencies.
Although these standards are being developed by different standards
bodies, there is significant interaction among the working groups. For
example, there are current efforts to harmonize the NERC CIP, ISA99/IEC
62443, and NIST Special Publication 800-53, Recommended Security
Controls for Federal Information Systems.
The important objective is to assess the standards for
applicability and interoperability across the domains of the Smart
Grid, rather than develop a single set of cyber security requirements
that is applicable to all elements of the Smart Grid. That is, the
cyber security requirements of different domains, such as home-to-grid
or transmission and distribution, may not be the same. There are
significant cyber security requirements to ensure the confidentiality
of Personally Identifiable Information (PII) that may not be required
at the transmission and distribution domain.
In addition, the cyber security standards will require conformance
testing. Conformance testing verifies that products adhere to the
specifications defined in the standards. NIST intends to develop a
conformance testing framework for the Smart Grid.
Question 1c. Do the agencies have sufficient authority or is
additional ederal legislation needed?
Answer. NIST has the necessary authority under the National
Technology Transfer and Advancement Act (PL 104-113), the Energy
Independence and Security Act (EISA), and other legislation, to carry
out its role to coordinate the development of an interoperability
framework for the Smart Grid.
Question 2. The Stimulus bill provided an unprecedented $4.5
billion in federal funds for Smart Grid activities. In your opinion,
what is the best way to allocate these funds--matching grants for
technology investments; research and development; pilot programs? Over
what timeframe? What are the necessary first steps?
Answer. NIST defers to the Department of Energy on this question.
Question 3. What capabilities and expertise in this area does each
of your agencies bring to the table?
Answer. Ensuring interoperability of the Smart Grid requires
capabilities in numerous disciplines. NIST brings 1) extensive
knowledge of the electric utility industry through its research in
supporting measurement technology and testing; 2) expertise in advanced
networking technology; 3) expertise in computer and network security;
4) expertise in industrial controls and their interfaces to the
electrical infrastructure; 5) expertise in the technology of buildings
and their interfaces to the electric grid; 6) expertise in the
consensus standards development process; and 7) expertise in conformity
assessment.
Question 4. What is the role of the Standards Development
Organizations (SDOs), such as NEMA, in the NIST framework? When will
NIST be ready to utilize the expertise that the SDOs have available?
Answer. SDOs have an essential role in the NIST framework, as
standards are developed by SDOs. The large majority of Smart Grid
standards are already under development in an SDO. SDOs bring the
stakeholder community together (via company supported volunteers and
representatives of other stakeholder groups working in standards
committees) to develop standards. NIST is already working with the
technical experts who are developing Smart Grid standards, and already
actively engaged with SDOs in developing the Smart Grid roadmap.
National Electrical Manufacturers Association (NEMA) was named in the
2007 EISA for NIST to coordinate with and plays an important role
representing a large vendor community. NIST will continue to work with
NEMA and other stakeholders to coordinate the development of the
interoperability framework.
Question 5. You testified that there should be no single standard
for Smart Grid devices and systems because a smarter grid needs to be
evolutionary. How can we best ensure that interoperability standards
continue to evolve?
Answer. EISA requires the interoperability framework ``to be
flexible to incorporate regional and organizational differences, and
technological innovations.'' Attributes which will support this goal
include, among others, technology neutrality, standards which are
performance based rather than design specific, and a layered
architecture. The ``public-private partnership'' entity (referred to in
my answer to Senator Bingaman's question) will provide an ongoing
mechanism to evolve the interoperability standards.
Question 6. When will NIST have a Director in place?
Answer. The process to fill the NIST Director position is ongoing.
Question 7. You caution that it is difficult and time consuming to
create good consensus-based standard--particularly if the resulting
standards need to be applicable domestically and internationally. Don't
standards need to be applied nationwide, in a seamless fashion, or are
you suggesting we could consider a more regional approach?
Answer. The standards absolutely need to be applied nationwide to
ensure interoperability and they should ultimately be harmonized with
international standards. The ability to dynamically move load to match
demand and utilize distributed energy sources on a national electrical
grid demands a national solution. Furthermore, the interconnection of
the US grid with Canada and Mexico requires North American, not just
U.S. standards. Finally, the equipment in the network is produced by
global suppliers who want international standards so they can address
multiple markets around the world.
Addendum
Smart Grid Families of Standards
(response to sen. bingaman q#4)
The following list contains leading industry families of standards
that will enable the vision of the Smart Grid. The NIST roadmapping
process is intended to reveal areas in the standards where weaknesses,
gaps, and overlaps exist and will evolve as new standards are developed
and new implementations deployed and tested. The list is not exhaustive
since standards from other industries such as networking,
telecommunications and end use equipment are expected to play key roles
in the development of the Smart Grid infrastructure.
The families listed below include some standards that are have not
yet been completed, released, or published. These families will have to
be further developed to ensure that gaps covering additional Smart Grid
functions, devices, and systems are addressed. Further analysis is
needed to ensure that the standards are harmonized and conformance
testing of implementations of these standards is needed to reveal where
interoperability issues exist.
INTERNATIONAL ELECTROTECHNICAL COMMISSION (IEC) 61968 FAMILY OF
STANDARDS FOR DISTRIBUTION SYSTEMS
IEC 61968-1 (2003-10) Application integration at electric
utilities--System interfaces for distribution management--Part
1: Interface architecture and general requirements
IEC/TS 61968-2 (2003-11) Application integration at electric
utilities--System interfaces for distribution management--Part
2: Glossary
IEC 61968-3 (2004-03) Application integration at electric
utilities--System interfaces for distribution management--Part
3: Interface for network operations
IEC 61968-4 (2007-07) Application integration at electric
utilities--System interfaces for distribution management--Part
4: Interfaces for records and asset management
IEC 61968-14-1: Mapping between MultiSpeak 4.0 and IEC
61968, parts 3 through 10
IEC 61968-14-2: A CIM profile for MultiSpeak 4.0, one
profile for IEC 61968 parts 3 through10
international electrotechnical commission (iec) 61970 family of
standards for transmission
IEC 61970 Energy management system application program
interface (EMS-API)--Part 301: Common Information Model (CIM)
Base'', IEC, Edition 1.0, November 2003
IEC 61970-1 (2005-12) Energy management system application
program interface (EMS-API)--Part 1: Guidelines and general
requirements
IEC/TS 61970-2 (2004-07) Energy management system
application program interface (EMS-API)--Part 2: Glossary
IEC 61970-301 (2005-03) Energy management system application
program interface (EMS-API)--Part 301: Common Information Model
(CIM) base
IEC/TS 61970-401 (2005-09) Energy management system
application program interface (EMS-API)--Part 401: Component
interface specification (CIS) framework
IEC 61970-404 (2007-08) Energy management system application
program interface (EMS-API)--Part 404: High Speed Data Access
(HSDA)
IEC 61970-405 (2007-08) Energy management system application
program interface (EMS-API)--Part 405: Generic Eventing and
Subscription (GES)
IEC 61970-407 (2007-08) Energy management system application
program interface (EMS-API)--Part 407: Time Series Data Access
(TSDA)
IEC 61970-501 (2006-03) Energy management system application
program interface (EMS-API)--Part 501: Common Information Model
Resource Description Framework (CIM RDF) schema
american national standards institute (ansi)--c12 metering standards
ANSI C12.19 2008: Utility Industry End Device Data Tables
(Revenue Metering) (note: not yet formally released)
ANSI C12.22 2008: Protocol Specification for Data
Communication Networks (note: not yet formally released)
AMERICAN SOCIETY OF HEATING, REFRIGERATING, ND AIR-CONDITIONING
ENGINEERS (ASHRAE)--BACNET STANDARD
ANSI/ASHRAE Standard 135-2004: BACnet--A Data Communication
Protocol for Building Automation and Control Networks
international electrotechnical commission (iec)--61850 family of
standards for field devices
IEC/TR 61850-1 (2003-04) Communication networks and systems
in substations--Part 1: Introduction and overview
IEC/TS 61850-2 (2003-08) Communication networks and systems
in substations--Part 2: Glossary
IEC 61850-3 (2002-01) Communication networks and systems in
substations--Part 3: General requirements
IEC 61850-4 (2002-01) Communication networks and systems in
substations--Part 4: System and project management
IEC 61850-5 (2003-07) Communication networks and systems in
substations--Part 5: Communication requirements for functions
and device models
IEC 61850-6 (2004-03) Communication networks and systems in
substations--Part 6: Configuration description language for
communication in electrical substations related to IEDs
IEC 61850-7-1 (2003-07) Communication networks and systems
in substations--Part 7-1: Basic communication structure for
substation and feeder equipment--Principles and models
IEC 61850-7-2 (2003-05) Communication networks and systems
in substations--Part 7-2: Basic communication structure for
substation and feeder equipment--Abstract communication service
interface (ACSI)
IEC 61850-7-3 (2003-05) Communication networks and systems
in substations--Part 7-3: Basic communication structure for
substation and feeder equipment--Common data classes
IEC 61850-7-4 (2003-05) Communication networks and systems
in substations--Part 7-4: Basic communication structure for
substation and feeder equipment--Compatible logical node
classes and data classes
IEC 61850-7-410 (2007-08) Communication networks and systems
for power utility automation--Part 7-410: Hydroelectric power
plants--Communication for monitoring and control
IEC 61850-7-420 (2008-02) DER Logical Nodes, Final Draft
International Standard (FDIS)
IEC 61850-8-1 (2004-05) Communication networks and systems
in substations--Part 8-1: Specific Communication Service
Mapping (SCSM)--Mappings to MMS (ISO 9506-1 and ISO 9506-2) and
to ISO/IEC 8802-3
IEC 61850-9-1 (2003-05) Communication networks and systems
in substations--Part 9-1: Specific Communication Service
Mapping (SCSM)--Sampled values over serial unidirectional
multidrop point to point link
IEC 61850-9-2 (2004-04) Communication networks and systems
in substations--Part 9-2: Specific Communication Service
Mapping (SCSM)--Sampled values over ISO/IEC 8802-3
IEC 61850-10 (2005-05) Communication networks and systems in
substations--Part 10: Conformance testing
IEEE 1547 Family of Standards for Distributed Energy
Resources
IEEE 1547 STANDARD FOR INTEGRATING DISTRIBUTED ENERGY RESOURCES WITHIN
THE ELECTRIC POWER SYSTEM
IEEE-P1547.1 standard for interconnection test procedures
IEEE-P1547.2 guide to 1547 standard
IEEE-P1547.3 guide for information exchange for DR
interconnected with EPS
IEEE-P1547.4 guide for DR island systems
zigbee specification (based on ieee 802.15.4)
Zigbee Smart Energy
CYBER SECURITY STANDARDS
Advanced Metering Infrastructure (AMI) System Security Requirements
ANSI/ISA-99/IEC 62443 suite of standards for Industrial
Automation and Control System Security
FIPS PUB 140-2, Security Requirements for Cryptographic
Modules (also ISO ISO/IEC 19790:2006)
FIPS PUB 180, Secure Hash Standard
FIPS PUB 186, Digital Signature Standard (DSS)
FIPS PUB 197, Advanced Encryption Standard (AES)
FIPS PUB 199, Standards for Security Categorization of
Federal Information and Information Systems
IEC/TS 62351-1 (2007-05) Power systems management and
associated information exchange--Data and communications
security--Part 1: Communication network and system security--
Introduction to security issues
IEC/TS 62351-2 Power systems management and associated
information exchange--Data and communication security--Part 2:
Glossary of terms
IEC/TS 62351-3 (2007-06) Power systems management and
associated information exchange--Data and communications
security--Part 3: Communication network and system security--
Profiles including TCP/IP
IEC/TS 62351-4 (2007-06) Power systems management and
associated information exchange--Data and communications
security--Part 4: Profiles including MMS
IEC TS 62351-5 Power systems management and associated
information exchange--Data and Communication Security--Part 5:
Security for IEC 60870-5 and Derivatives
IEC/TS 62351-6 (2007-06) Power systems management and
associated information exchange--Data and communications
security--Part 6: Security for IEC 61850
IEC 62443 Industrial communication networks--Network and
system security (DRAFT)
IEC 62443-1 Terminology, concepts and models
IEC 62443-2 Establishing an industrial automation and
control system security program
IEC 62443-3 Operating a manufacturing and control systems
security program
IEC 62443-4 Specific security requirements for
manufacturing and control systems
IEC 62443-5 Security technologies for industrial
automation and control systems
ISA-99: Manufacturing and Control Systems Security
IEEE P1689 Trial Use Standard for Retrofit Cyber Security of
Serial SCADA Links and IED Remote Access
ISO 27001 information security management system (an ISMS)
which replaced the old BS7799-2 standard
ISO 27002 This is the 27000 series standard number of what
was originally the ISO 17799 standard (which itself was
formerly known as BS7799-1)
ISO 27003 guidance for the implementation of an ISMS (IS
Management System)
ISO 27004 information security system management measurement
and metrics
ISO 27005 This is the methodology independent ISO standard
for information security risk management
ISO 27006 guidelines for the accreditation of organizations
offering ISMS certification
North American Electric Reliability Corporation (NERC)
Critical Infrastructure Protection (CIP) CIP-001-1 Sabotage
Reporting
NERC CIP-002-1 Critical Cyber Asset Identification
NERC CIP-003-1 Security Management Controls
NERC CIP-004-1 Personnel & Training
NERC CIP-005-1 Electronic Security Perimeter(s)
NERC CIP-006-1 Physical Security of Critical Cyber Assets
NERC CIP-007-1 Systems Security Management
NERC CIP-008-1 Incident Reporting and Response Planning
NERC CIP-009-1 Recovery Plans for Critical Cyber Assets
NIST Special Publication (SP) 800-53, Recommend Security
Controls for Federal Information Systems NIST SP 800-82, DRAFT
Guide to Industrial Control Systems (ICS) Security
The role concept in SCL: 2nd draft, ABB AN-PSTD07002WW, 29
August 2007
international electrotechnical commission (iec) and ieee standards
integration for synchrophasor measurements
IEC and IEEE are proposing ``Dual Logo'' standards
development in this area that anticipates integrating related
standards from both organizations. These include:
IEEE C37.118-2005 Standard for Synchrophasors for Power
Systems and IEC 61850.
sae best practices and use cases for electric vehicle communications
SAE J2836, Recommended Practice for Communication between
Plug-in Vehicles and the Utility Grid (2009 ballot)
SAE J2847--Information Report for Use Cases for J2836 (2009
ballot)
GLOSSARY OF SMART GRID PRIVATE SECTORTANDARDS DEVELOPMENT ORGANIZATIONS
LISTED ABOVE
ANSI--The American National Standards Institute
ANSI is a private non-profit organization that oversees the
development of voluntary consensus standards for products, services,
processes, systems, and personnel in the United States. The
organization also coordinates U.S. standards with international
standards so that American products can be used worldwide. ANSI
accredits standards that are developed by representatives of standards
developing organizations, government agencies, consumer groups,
companies, and others. These standards ensure that the characteristics
and performance of products are consistent, that people use the same
definitions and terms, and that products are tested the same way.
ASHRAE--American Society of Heating, Refrigerating, nd Air-Conditioning
Engineers
ASHRAE is an international technical society for all individuals
and organizations interested in heating, ventilation, air-conditioning,
and refrigeration (HVAC&R). The Society allows exchange of HVAC&R
knowledge and experiences for the benefit of the field's practitioners
and the public. ASHRAE provides many opportunities to participate in
the development of new knowledge via, for example, research and its
many Technical Committees.
IEC--International Electrotechnical Commission
The IEC is a not-for-profit, non-governmental international
standards organization that prepares and publishes International
Standards for all electrical, electronic and related technologies--
collectively known as ``electrotechnology''. IEC standards cover a vast
range of technologies from power generation, transmission and
distribution to home appliances and office equipment, semiconductors,
fiber optics, batteries, solar energy, nanotechnology and marine energy
as well as many others. The IEC also manages three global conformity
assessment systems that certify whether equipment, system or components
conform to its International Standards.
IEEE--(IEEE does not use a associated name)
IEEE is an international non-profit, professional organization for
the advancement of technology related to electricity. It has the most
members of any technical professional organization in the world, with
more than 365,000 members in around 150 countries.
NERC--North American Electric Reliability Corporation
NERC oversees eight regional reliability entities and encompasses
all of the interconnected power systems of the contiguous United
States, Canada and a portion of Baja California in Mexico. NERC's major
responsibilities include working with all stakeholders to develop
standards for power system operation, monitoring and enforcing
compliance with those standards, assessing resource adequacy, and
providing educational and training resources as part of an
accreditation program to ensure power system operators remain qualified
and proficient. NERC also investigates and analyzes the causes of
significant power system disturbances in order to help prevent future
events.
SAE--Society of Automotive Engineers
SAE is a professional organization for mobility engineering
professionals in the aerospace, automotive, and commercial vehicle
industries. The Society is a standards development organization for the
engineering of powered vehicles of all kinds, including cars, trucks,
boats, and aircraft.
______
Responses of Patricia Hoffman to Questions From Senator Bingaman
Question 1. One of the often stated key benefits of Smart Grid is
in its ability to integrate large quantities of intermittent renewable
resources into the grid and to efficiently route this power where it is
needed. To achieve this will clearly require both the build-out of new
transmission to renewable resource rich locations as well as upgrading
our current grid to have the intelligence to handle these intermittent
resources.
In order to achieve the benefits that we want from Smart Grid, how
much new transmission do you foresee being needed? And how do we
prioritize the building of new transmission vs. upgrading our current
grid?
Answer. Integrating large quantities of intermittent renewable
resources into the grid and efficiently routing the power where it is
needed can be accomplished in a number of ways. Methods currently being
used to successfully integrate increasingly larger amounts of wind and
solar include geographic diversity, which includes expanding the
geographic size of utility balancing areas; improving markets for grid
ancillary services; using storage or flexible low carbon generation
such as existing hydro or natural gas plants; improving regional
planning and grid operations; and better wind and solar forecasting.
The Department has been working diligently to facilitate the
discussion and development of regional transmission interconnection-
wide planning. In the coming year, the various transmission planning
efforts in the West, such as that by the DOE-funded Western Renewable
Energy Zone process of the Western Governors Association at the
Interconnection level, are likely to provide realistic estimates of
needed new transmission for renewables. Furthermore, the 2009 American
Recovery and Reinvestment Act provides $80 million to conduct a
resource assessment and analysis of future demand and transmission
requirements that will help accelerate the and better enable the
nation's transition to a clean energy future in the electricity sector.
Question 2. ``Smart Metering'' projects for residential consumers
have become the poster-child of the Smart Grid. However, some studies
have found that the majority of the benefits of the Smart Grid will
result from investments in grid transmission and distribution system
upgrades and optimization, with only a small percentage of energy
savings and emission reductions coming from smart metering programs.
Could you comment on this? And how should we take these findings into
consideration when prioritizing which Smart Grid demonstration projects
to fund?
NOTE: as a data point, the Climate Group SMART 2020 Report
estimates that 85% of the carbon reduction benefits of a Smart Grid
come from Grid Optimization and Renewables Integration, and only 15%
will come from End-User Energy Management.
Answer. The Smart Grid involves a number of technologies and
functionalities with various levels of benefits. The Department is
interested in conducting a comprehensive evaluation of the Smart Grid,
including applications on the customer-side-of-the meter, within the
distribution system, and at the transmission level. One of the primary
objectives of the regional demonstrations is to collect the data that
is needed to make such an assessment and the Department will request a
benefits analysis from applicants applying for Recovery Act funding.
Question 3. After the Department of Energy has spent out it's
nearly $4.5 billion on Smart Grid Investments, how do we measure
whether that money has been spent effectively? How soon and what
improvements in our grid should we expect to see?
Answer. The Department recognizes the importance of measuring the
outcomes and resulting benefits of the investments made with Recovery
Act dollars. DOE is working closely within the Administration to
develop meaningful performance measures and sound methodologies to
evaluate the effectiveness of our investments, focusing in particular
on the smart grid initiatives that will receive most of the $4.5
billion. We hope to see improvements immediately as smart grid
technologies are deployed, but will need to measure progress to
determine actual improvements in performance of the transmission and
distribution system.
Question 4. Ms. Hoffman, during the past several years, the Office
of Electricity Delivery and Energy Reliability has subsisted on a
budget of roughly $130-$180 million. We have just given the Office over
an order of magnitude increase in their budget to roughly $4.5 billion.
What are DOE's plans regarding scaling up the size and expertise of the
Office in order to spend these funds judiciously?
Answer. Managing the increase in appropriations is a significant
challenge for the Office of Electricity Delivery and Energy Reliability
(OE), given the current program level. Moreover, we understand that
this is a one-time increase for the program, and therefore are
cognizant that any growth in the program to administer the funds must
be short-term, or accommodated within much lower program funding levels
in the outyears.
OE has been evaluating its requirements for administering the
distribution of funds and overseeing implementation of the Recovery Act
funding. We plan to hire additional Federal employees on a limited-term
basis to assist in implementation, emphasizing areas such as contract
management that are uniquely Federal activities, and have already
posted several job announcements. We will supplement Federal staff
through technical support contractors that will perform less sensitive
tasks. OE also plans to leverage expertise and resources within the
Department and the national labs. For example, OE will use contract
administration resources in Headquarters procurement and at the
National Energy Technology Laboratory to manage grant solicitations and
awards and plans to make use of expertise at the National labs to
evaluate grant proposals.
Question 5. How does the office plan to allocate, percentage-wise,
the funds provided in ARRA towards smart grid R&D and energy storage
R&D vs. simply maintaining the integrity of our current grid?
Answer. The Department will evaluate the benefits provided by smart
grid projects and energy storage projects applicable to Section 1306 of
the Energy Independence and Security Act of 2007 (EISA), the smart grid
regional demonstrations provision in Section 1304 (b), and smart grid
R&D activities, including energy storage, demand response, and wide
area measurement and control, as authorized in Section 1304 (a).
Funding for these activities will be administered through a competitive
procurement.
Question 6. Ms. Hoffman, do you foresee the current lack of
protocols and standards hindering your timely funding of Smart Grid
investments and demonstration projects and their progress?
Answer. At this time the Department believes there is sufficient
effort underway to develop cyber security safeguards and
interoperability standards to begin smart grid deployments without
delay. The Department is proceeding with implementing smart grid
deployments and standards development in parallel.
Responses of Patricia Hoffman to Questions From Senator Murkowski
Question 1. What does Smart Grid technology promise in terms of
reliability? A smart grid is supposed to increase our system's security
but technology like smart meters and advanced communication networks
can actually increase the vulnerability of our grid to cyber attacks.
How do you plan to address these cyber security concerns? Do the
agencies have sufficient authority or is additional federal legislation
needed?
Answer. The Smart Grid offers a number of opportunities to improve
grid reliability. For example, through the use of AMI (advanced
metering infrastructure) with two-way communications at the
distribution level, utilities can remotely identify, locate, isolate,
and restore power outages more quickly without having to send field
crews on trouble calls. At the transmission level, phasor measurement
units synchronized with global-position systems can provide enhanced
situational awareness across wide areas of the power grid to detect and
deter grid disturbances much faster than existing systems. In addition,
the Smart Grid will enable greater use of distributed resources and
technologies to control load to enhance reliability.
The Department has been working with the private sector for several
years to enhance cyber security in the energy sector through the
implementation of the Roadmap to Secure Control Systems in the Energy
Sector. The Department has conducted cyber security assessments of more
than 20 supervisory control and data acquisition (SCADA) systems, which
represent over 90 percent of the current market offerings in the
electricity sector. As a result, vendors have developed next-generation
``hardened'' systems that are now being deployed in the market.
In addition, the Department is partnering with the AMI Security
Task Force organized under the UCA International User's Group to
develop cyber security requirements for AMI--a foundational smart grid
application. The Task Force is comprised of utilities, security domain
experts, standards body representatives and industry vendors. On March
10, 2009, the Task Force published the AMI System Security
Requirements, which provides critical guidance for vendors and
utilities to help design and procure secure and reliable AMI systems.
The Task Force will also produce a vendor catalog of smart meters, an
implementation guide, and procurement guidelines. Because of the
success of this industry-government partnership, the Department is
expanding the scope of the project to develop comprehensive cyber
security specifications (including penetration testing) for all
critical Smart Grid applications.
At this time, we do not foresee the need for additional federal
legislation to accomplish our goal through public-private partnerships.
The Department will continue to work with the National Institute of
Standards and Technology to accelerate the development of a framework
for the complete suite of interoperability standards. Once a standard
is completed by the applicable standards development organization, the
Federal Energy Regulatory Commission will issue a rulemaking to adopt
the standard as required under the Energy Independence and Security Act
of 2007.
Question 2. The Stimulus bill provided an unprecedented $4.5
billion in federal funds for smart grid activities. In your opinion,
what is the best way to allocate these funds--matching grants for
technology investments; research and development; pilot programs? Over
what timeframe? What are the necessary first steps?
Answer. The Department is in the process of finalizing the
allocation of funds it received in the American Recovery and
Reinvestment Act of 2009 to initiatives that will most effectively
achieve the Act's objectives of modernizing the electricity grid,
enhancing energy security, conducting energy storage R&D, improving
grid resiliency and efficiency, and implementing the Smart Grid
programs authorized under Title XIII of Energy Independence and
Security Act of 2007 (P.L.110-140) (EISA).
We anticipate that the bulk of the $4.5 billion for Electricity
Delivery and Energy Reliability will support programs authorized by the
EISA. This includes the Smart Grid Investment program that provides
matching federal funds for qualifying investments (Section 1306) and
Smart Grid Regional Demonstration projects (Section 1304), as well as
the development of the interoperability framework that is so critical
to the effective application of smart grid technologies. We will also
support initiatives that assist regional transmission planning and
analysis, as well as workforce development.
Almost all of the funds will be distributed through a competitive
process, generally through competitive grants or other financial
assistance vehicle. The process begins with publication of a Notice of
Intent alerting potentially interested parties of an upcoming
opportunity, followed by a solicitation for proposals. The proposals we
receive go through a structured evaluation process, and then grants are
awarded.
We are working to expedite the distribution of funds so that the
dollars can go where they are most needed and support the creation of
jobs. That being said, a competitive process takes more time than a
formula or block grant process, since proposals must be solicited and
evaluated.
Question 3. What capabilities and expertise in this area does each
of your agencies bring to the table?
Answer. The Department brings extensive capabilities to conduct R&D
in grid modernization and advanced electric transmission and
distribution technologies. For example, the Department has been
conducting studies, analysis, and technology development activities for
about a decade in advanced measurement, communications, and control
systems to determine the potential for strengthening the integration of
information technologies with the electric power system. The Department
also has considerable experience, expertise, and capabilities in the
development and analysis of cyber security technologies for power grid
applications.
Since 2007, we have taken initial steps to begin implement our new
smart grid responsibilities under Title XIII of the Energy Independence
and Security Act of 2007 (EISA) by planning research and development
for the next generation of smart grid technologies, establishing a
Federal Smart Grid Task Force and Advisory Committee, providing
assistance to the National Institutes of Standards and Technologies
(NIST) and the Federal Energy Regulatory Commission (FERC) in the
development of a national framework for smart grid interoperability
standards, and planning for potential programs in regional
demonstrations and Federal matching grants. In addition, Title XIII
requires that we conduct a ``Smart Grid System'' report which is to be
published every two year and provide information on the status of smart
grid deployments nationwide and any regulatory or government barriers
to continued deployment and a study of the security attributes of smart
grid systems including a determination of smart grid deployments on the
security of the electric system.
The Department is implementing a comprehensive approach to the
integration of renewable and distributed resources with the electric
transmission and distribution system. For example, studies and analysis
have been conducted to assess the technical and economic issues
associated with operating large numbers of wind turbines,
interconnecting them with the grid, and integrating their operations
with system planning and operations. These studies have pointed to the
need for expanding the capacity of the electric transmission system to
accommodate greater numbers of wind installations, and to develop
better operating data on system conditions and wide-area visibility so
grid operators can address fluctuations in the wind and match them to
system requirements.
Question 4. Your office has received an unprecedented amount of
funding in the Stimulus Bill. Does your office have the ability to
utilize these funds in a targeted and meaningful way? How will DOE
undertake its work? Will all the money be spent on matching grants or
will DOE use some of the funding to perform R&D work and undertake
demonstration projects?
Answer. Managing the increase in appropriations is a challenge for
the Office of Electricity Delivery and Energy Reliability (OE), given
the current program level but we are committed to applying the funds to
initiatives that will most effectively achieve the Recovery Act's
objectives of modernizing the electricity grid, enhancing energy
security, and improving grid resiliency and efficiency. Recognizing
that this is a one-time increase for the program, we plan to increase
Federal staff on a limited-term basis, supplementing with technical
support contractors as appropriate. OE also plans to leverage expertise
and resources within the Department and the national labs as much as
possible.
Almost all of the funds will be distributed through a competitive
process, generally through competitive grants or other financial
assistance vehicle. While the bulk of the funding will support Smart
Grid Investment and Regional Demonstration projects, we will also
support initiatives that assist regional transmission planning and
workforce development.
Question 5. Energy storage technologies (plug-in-hybrid electric
vehicles, large scale lithium ion batteries, flywheels, etc.) can
provide many benefits: improved grid reliability, increased utilization
of intermittent renewables, and deferred transmission investments.
Unfortunately, market rules and interconnection requirements for
storage devices are far from standardized. How can your agency
accelerate the integration and the benefits of energy storage as part
of the Smart Grid?
Answer. The Department's Office of Electricity Delivery and Energy
Reliability (OE) will continue to provide national leadership in the
development and deployment of a wide range of energy storage
technologies and applications for the power grid. Current work includes
cost-shared projects with the California Energy Commission, the New
York State Energy Research and Development Authority, and utilities.
These projects will help determine the feasibility, efficiency, and
carbon footprint of storage technologies. OE will also continue to work
with the Federal Energy Regulatory Commission (FERC), Independent
Systems Operators, State Agencies, utilities, and vendors to accelerate
acceptance of energy storage as an essential tool of smart grid
technology and adoption of appropriate market rules to enable
widespread application. Since energy storage is an integral part of a
smart grid, we anticipate supporting applications for a wide range of
energy storage technologies under the American Recovery and
Reinvestment Act. These demonstrations with integration into the grid
infrastructure will greatly accelerate the development and widespread
adoption of energy storage. With respect to standards, the Department
works closely with organizations such as the National Electric
Manufacturers Association to establish standardization and
interconnection requirements.
Response of Patricia Hoffman to Question From Senator Stabenow
Question 1. I am very pleased that the Recovery Package includes
$100 million for workforce training. Could you explain how these funds
may be used to start and leverage private investments? Also, will
workforce training programs be necessary and at what point could we
begin implementing training programs?
Answer. The Department is still in the process of defining how the
$100 million for workforce training provided in the American
Reinvestment and Recovery Act will be implemented to build America's
energy workforce in support of the Nation's grid modernization. DOE
expects to release a solicitations to support the workforce training
initiative within the next few months.