NewEnergyNews: TODAY’S STUDY: THE PROGRESS OF GRID MODERNIZATION

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YESTERDAY

THINGS-TO-THINK-ABOUT THURSDAY, September 21:

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    Tuesday, February 02, 2016

    TODAY’S STUDY: THE PROGRESS OF GRID MODERNIZATION

    3rd Annual Grid Modernization Index

    January 2016 (GridWise Alliance)

    Executive Summary

    The transformation of the electric grid in the United States continues to proceed at an unprecedented rate. The proliferation of advanced metering infrastructure (AMI), utility-scale renewable generation, distributed energy resources (DERs), energy storage, electric vehicles, and other technologies is changing the way electric power is transmitted, distributed, and managed, in both large and small ways. These changes affect the full range of grid stakeholders – utilities, regulators, policymakers, grid operators, electric service providers, and customers – in all 50 states and the District of Columbia.

    This third annual Grid Modernization Index (GMI), published by the GridWise Alliance in collaboration with Clean Edge, ranks and assesses the states and D.C., based upon the degree to which they have moved toward a modernized electric “Grid of the Future.” This GMI, based on survey data collected in June-October 2015, benchmarks states on a wide range of grid modernization policies, investments, and activities. The report also provides insights into some of the relationships and connections between state policies and regulations, customer engagement, and utility investments in modernizing the grid.

    The GMI ranking system uses a clearly defined set of criteria to evaluate and convey the progress and impacts of this transformative set of improvements to the states’ electricity infrastructure. The GMI rankings consist of three broad categories:

    • STATE SUPPORT, which is based on plans and policies that support grid modernization

    • CUSTOMER ENGAGEMENT, which ranks states on their rate structures, customer outreach, and data collection practices

    • GRID OPERATIONS, which benchmarks the deployment of grid modernization technologies such as sensors and smart meters, as well as the advanced capabilities they enable

    Major Developments

    • CALIFORNIA now requires its major investorowned utilities (IOUs) to submit distributed resource plans (DRPs) that detail how they will value DERs as distribution grid assets.

    • NEW YORK’s landmark Reforming the Energy Vision (REV) proceeding recognizes the need for advanced metering functionality (such as smart meters). Advanced metering functionality is one of the foundational investments that will allow New York to achieve its ultimate goal: reforming the retail market to leverage DERs to optimize the electric system. The state’s utilities are already proposing plans to provide smart meters to those customers who do not yet have them.

    • In 2015, HAWAII increased its Renewable Portfolio Standard (RPS, i.e. the amount of renewable energy required) to 100 percent by 2045. Its utilities have struggled to integrate more solar photovoltaic (PV) (as well as storage and other DERs), which have grown rapidly as a result of net metering (the policy that allows customers with solar PV to be compensated for the electricity their solar panels add to the grid). In October 2015, the Public Utility Commission eliminated net metering in favor of two new rate options. (See sidebar on page 18.)

    • MASSACHUSETTS required its utilities to submit grid modernization plans by September 2015. Utilities’ proposals include additional smart meters, experiments with time of use and critical peak pricing tariffs, and DER management systems.

    • MINNESOTA has finished Phase I of its e21 Initiative, which aims to help utilities recognize the new role that customers play in electricity production and consumption, and offer new services and rates that reflect this emerging reality. In March 2014, it also created the country’s first-ever formula, or method, that helps value solar energy for utilities to use to compensate solar customers for the excess electricity they send back to the grid.

    • ARIZONA has been experiencing a major debate over net metering. To address this challenge, in October 2015, the state decided to consider both the costs and values of solar together in one Commission proceeding. Doing so is an important step, especially given that utilities and solar companies had previously been discussing whether to consider the value of solar power at all.

    Leading State Scores

    California is the highest-ranked state in this year’s GMI, with a score of 88, more than six points higher than its score in 2014. The state ranks first in the Customer Engagement category (as it did in the previous GMI), and second in both State Support and Grid Operations. California has a nearly seven-point lead over second-place Illinois, while Texas (which tied California for the top score in the previous GMI) ranks third. Maryland and Delaware (two of four states in the top 10 that lie fully within the PJM Interconnection territory) each move up a spot to fourth and fifth, respectively. This year, the top states have started to pull away from the rest of the field: in the previous GMI, the difference between first place and fifth was 15 points; now it is almost 28 points.

    The bottom half of the top 10 has gone through some significant shifts. The District of Columbia increases its ranking by two places to sixth, followed by Oregon, which adds 11 points to its overall score with big improvements in Customer Engagement and Grid Operations. Arizona and Pennsylvania are tied for eighth; the latter fell 19 points, though its ranking only fell four places. Finally, Georgia ranks 10th; Georgia’s score is the same as in the previous GMI, but it places in the top 10, due to big declines by other states. North Carolina is worth watching: It has added 10 points to its overall score and just misses ranking in the top 10.

    The top 10 states have an average overall score of 64 points. For the states ranked 11 through 20, the average is 41 points, representing a 36 percent decline from the top 10; for states ranked 21 through 30, the decline reaches nearly 58 percent (27 is the average score). These gaps between the highest-scoring states and the next two tiers are larger than they were in the previous GMI.

    Key Takeaways

    • Continuing to fund investments in grid modernization is a challenge for both utilities and regulators due to pressure to keep rates low, making the internal competition for capital more challenging.

    • A wide gap generally exists with respect to progress achieved in modernizing the grid between the leading states and those that have not yet started to make significant investments.

    • Key factors associated with high GMI scores currently include AMI penetration, electric market deregulation, and the presence of demand response programs.

    • Deployment of grid modernization technologies, such as AMI infrastructure, has progressed, but the full potential range of benefits that such technologies could provide has yet to be realized, particularly around customer education and empowerment.

    • States and utilities need to consider dynamic rate structure reforms to fully unlock the benefits offered by the smart grid.

    • The source of leadership of grid modernization efforts varies widely from state to state, including between regulators, legislatures, governors, utilities, and customers. There is no one-sizefits-all approach, but collaboration among stakeholders is essential.

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