State regulatory commissions have significant impacts on their local economies through oversight of privately-owned electric, natural gas, water, telecommunications, and various transportation entities. The National Association of Regulatory Utility Commissioners (NARUC) organizes regular Committee meetings that help commissioners develop public policy and share best practices. Their recent Summer Committee meetings in Portland, Oregon focused on energy, water, and telecom plus consumer affairs and critical infrastructure. Each state regulatory commission faces unique challenges and opportunities based on infrastructure status, economic conditions, energy mix, and other factors. However, the Smart Grid presents one common set of issues to regulators – first in electricity, but also appearing in natural gas distribution grids and water/wastewater systems.
The convergences of Smart Grid technologies coupled with innovations in programs, markets, and business models are challenging existing regulatory policy frameworks for electricity. For instance, consider policies for connecting residential and commercial-scale solar generation to local distribution grids. The very helpful Freeing the Grid annual report identifies and evaluates state net metering and interconnection policies. These policies can serve as early indicators of how aggressively each state is encouraging power generation in distribution grids and embracing the full set of opportunities that Smart Grid technologies deliver. As has been pointed out in previous articles Smart Grid technologies that deliver and support distributed generation (DG) help improve grid resiliency and reliability.
Net metering is defined in the Smart Grid Dictionary as “the capability for residential and C&I (Commercial and Industrial) customers to generate electricity and sell back excess power to the utility.” California recently revised its cap on net metering to allow an increase of solar deployments to about 5.2 GW of DG on the distribution grid.
Interconnection refers to the policies and procedures that govern how bulk or retail generation connects to the power grid. Since these arrangements have traditionally been established for bulk power and handled at the transmission grid level, policies for interconnection at the distribution grid are far less common. One of the gotchas often inserted into legislation and regulatory policy in some states concerns a requirement for solar panel owners to purchase insurance, driving up installation costs and lengthening ROI timeframes. Use the Freeing the Grid guide to see how your state stacks up in pioneering policies that can be used to fully enjoy the benefits of a DG-based Smart Grid.
How should we define future regulatory policies in the advent of Smart Grid technologies that deliver clean, renewable and localized generation, energy storage, and vastly expanded remote monitor and control of assets? Let history to be our guide. Business sectors like telecom and computing both evolved from extremely centralized models to decentralized and distributed models. New technologies triggered new business models and new markets. How different would our world work today if laws had been enacted to protect mainframe computers from upstart technologies like PCs? What if we were required to include expensive insurance to protect against fires occurring in lithium-ion batteries in smart phones and laptops when we purchased these devices?
Regulators should consider that trendlines in telecom and computing show an evolution from centralized to decentralized, and from consolidated intelligence to distributed intelligence. Could electricity generation be modeled and managed as a cloud-based resource in the future? Smart Grid technologies can make that a reality, but regulatory policy will play a critical role in determining state roadmaps and speed to grid modernization.