Bipartisan Policy Center report on digitizing the grid details policy opportunities

Published on December 11, 2017 by Scott Sowers


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In May, the Bipartisan Policy Center (BPC) hosted a forum on how digitization can improve the power sector, featuring input and commentary from utility industry leaders Steve Bolze, former president and CEO of GE Power; Christopher Crane, CEO of Exelon; and Gil Quiniones, president and CEO of the New York Power Authority.

Revelations from the event were incorporated into the recently published “Digitizing the Grid: Nest Steps on Policy,” a report co-authored by Judi Greenwald, principal of Greenwald Consulting based in Washington, and Erin Smith, policy analyst with the Bipartisan Policy Center.

“Grid digitization represents an island of bipartisanship in a sea of partisanship and BPC has a significant energy program,” Greenwald noted in a recent interview with Daily Energy Insider. While grid modernization efforts have been going on for years, Greenwald points to the process of digitization focusing on the marriage of information technology with physical technology.

Not only does digitization improve the reliability and resiliency of the electric grid, it has major economic benefits. The potential global value of grid digitization over the next 10 years totals $3.3 trillion, when combining the value to the electricity industry with societal benefits, according to the World Economic Forum.

The BPC report makes several observations backed up with recommendations about speeding the move towards a smarter and more interconnected power grid. Grid digitization is growing in importance as distributed generation, growth in renewables, smart grids and storage technology transform the grid, the report notes.

Included among the list of priorities highlighted in the report is the need for the Department of Energy (DOE) to establish a task force to address issues of utility regulation and cost recovery for digitization.

As with all things in the utility business, most of the leadership for digitization projects already underway is coming from the states by way of programs including New York’s Reforming the Energy Vision (REV) initiative.

“It’s uneven in that some of the states are more into it than others, which is why we need a national level convening,” Greenwald said. “DOE would be a good convener.”

Including investment in smart grid technology as part of national infrastructure legislation is another recommendation and a potential area for bipartisanship. “Smart infrastructure has not been a big part of the conversation yet, but it could be,” she said.

The report also recommends strengthening cyber security – a hot topic issue in any discussion about expanding the use of digital technology. Greenwald noted, “a lot of the benefits that come from digital also opens you up to cyber threats.”

The report calls for the Federal Energy Regulatory Commission (FERC) to play a stronger and more active role, especially regarding security concerns. “There are things that FERC could do with its existing authority,” she said. “They could do more and be given additional authority, especially in the cyber realm.”

The report addresses planning for the integration of a digital workforce and advancing opportunities for funding by incentivizing federal and private research and development efforts by tweaking the tax code.

Expanding the definition of “smart grid property,” a tax incentive that offers accelerated depreciation for digital components used in the distribution network is one of the suggestions. Conducting a U.S.-specific analysis of the potential public and private benefits of grid digitization is also recommended by the report.

Paying for grid modernization projects is always a bone of contention but the report contains analysis that highlights ways for the utilities to recover digital upgrade costs.

“The National Association of Regulatory Utility Commissioners is recommending that Public Utility Commissions (PUCs) specifically look at the rate-basing digital improvements as investment in information technology,” Greenwald said. “Some PUCs are treating cloud system investments the same way they treat on-system investments or as an operating expense.”