TODAY’S STUDY: Grid Modernization Right Now
The 50 States of Grid Modernization: 39 States and D.C. Took Grid Modernization Actions in 2017
January 31, 2018 (North Carolina Clean Energy Technology Center)
WHAT IS GRID MODERNIZATION?
Grid modernization is a broad term, lacking a universally accepted definition. In this report, the authors use the term grid modernization broadly to refer to actions making the electricity system more resilient, responsive, and interactive. Specifically, in this report grid modernization includes legislative and regulatory actions addressing: (1) smart grid and advanced metering infrastructure, (2) utility business model reform, (3) regulatory reform, (4) utility rate reform, (5) energy storage, (6) microgrids, and (7) demand response.
The purpose of this report is to provide state lawmakers and regulators, electric utilities, the advanced energy industry, and other energy stakeholders with timely, accurate, and unbiased updates about how states are choosing to study, adopt, implement, amend, or discontinue policies associated with grid modernization. This report catalogues proposed and enacted legislative, regulatory, and rate design changes affecting grid modernization during the most recent quarter. The 50 States of Grid Modernization report series provides regular quarterly updates and annual summaries of grid modernization policy developments, keeping stakeholders informed and up to date.
The authors identified relevant policy changes and deployment proposals through state utility commission docket searches, legislative bill searches, popular press, and direct communications with industry stakeholders and regulators. Questions Addressed This report addresses several questions about the changing U.S. electric grid:
• How are states adjusting traditional utility planning processes to better allow for consideration of advanced grid technologies?
• What changes are being made to state regulations and wholesale market rules to allow market access for distributed energy resources?
• How are states and utilities reforming the traditional utility business model and rate designs?
• What policy actions are states taking to grow markets for energy storage and other advanced grid technologies?
• Where and how are states and utilities proposing deployment of advanced grid technologies, energy storage, microgrids, and demand response programs?
This report focuses on cataloguing and describing important proposed and adopted policy changes related to grid modernization and distributed energy resources, excluding policies specifically intended to support only solar technologies. While some areas of overlap exist, actions related to distributed solar policy and rate design are tracked separately in the 50 States of Solar report series, and are generally not included in this report.
In general, this report considers an “action” to be a relevant (1) legislative bill that has been introduced or (2) a regulatory docket, utility rate case, or rulemaking proceeding. Only statewide actions and those related to investor-owned utilities are included in this report. Specifically, actions tracked in this issue include:
Studies and Investigations
Legislative or regulatory-led efforts to study energy storage, grid modernization, utility business model reform, or alternative rate designs, e.g., through a regulatory docket or a cost-benefit analysis.
Planning and Market Access
Changes to utility planning processes, including integrated resource planning, distribution system planning, and evaluation of non-wires alternatives, as well as changes to state and wholesale market regulations enabling market access.
Utility Business Model and Rate Reform
Proposed or adopted changes to utility regulation and rate design, including performancebased ratemaking, decoupling, time-varying rates, and residential demand charges. Time-varying rate and residential demand charge proposals are only documented if they are being implemented statewide, the default option for all residential customers of an investorowned utility, or a notable pilot program. Actions related to inclining or declining block rates are not included in this report.
Grid Modernization Policies
New state policy proposals or changes to existing policies related to grid modernization, including energy storage targets, energy storage compensation rules, interconnection standards, and customer data access policies.
Financial Incentives for Energy Storage and Advanced Grid Technologies
New statewide incentives or changes to existing incentives for energy storage, microgrids, and other advanced grid technologies.
Deployment of Advanced Grid Technologies
Utility-initiated requests, as well as proposed legislation, to implement demand response programs or to deploy advanced metering infrastructure, smart grid technologies, microgrids, or energy storage.
This report excludes utility proposals for grid investments that do not include any specific grid modernization component, as outlined above, as well as projects that have already received legislative or regulatory approval. Actions related exclusively to pumped hydroelectric storage or electric vehicles are not covered by this report. While actions taken by municipal utilities and electric cooperatives are not comprehensively tracked in this report, particularly noteworthy or high-impact actions will be covered. The report also excludes changes to policies and rate design for distributed generation customers and changes related to electric vehicles; these changes are covered in the 50 States of Solar and 50 States of Electric Vehicles quarterly reports, respectively.
2017 GRID MODERNIZATION ACTION
In 2017, 39 states plus DC took a total of 288 policy and deployment actions related to grid modernization, utility business model and rate reform, energy storage, microgrids, and demand response. Table 1 provides a summary of state and utility actions on these topics. Of the 288 actions catalogued, the most common were related to deployment (63), followed by policies (61), and planning and market access (45).
TOP TEN MOST ACTIVE STATES OF 2017
Ten states taking the greatest number of actions related to grid modernization, or some of the most impactful actions, are noted below.
New York’s Reforming the Energy Vision proceeding, which continued throughout 2017, addresses many different aspects of grid modernization, including distribution system planning, non-wires alternatives, and storage compensation rules. The Governor signed into law a bill creating an energy storage target, as well as a property tax exemption for electric energy storage.
California regulators addressed distribution system planning, the state’s energy storage target, a grid modernization investment proposal from Southern California Edison, and several other topics during 2017. Modifications were made to the state’s Self-Generation Incentive Program, and stakeholders worked with the California Independent System Operator to address rules for demand response and storage participation in the wholesale market.
The state of Rhode Island initiated its Power Sector Transformation Initiative in 2017, an expansive grid modernization proceeding addressing several topics, including data access, distribution system planning, utility business models, and transportation electrification. National Grid filed its Power Sector Transformation investment plan later in 2017. The state also addressed evaluation of non-wires alternatives and solar-plus-storage compensation.
Regulators considered a grid modernization proposal from Hawaii’s three investor-owned utilities in 2017, as demand response and energy storage proposals. The Public Utilities Commission also addressed compensation for solar-plus-storage systems, and a study of alternative utility regulatory models is underway. Several bills were under consideration during the year, including legislation to create an energy storage tax credit and facilitate microgrid development.
The Maryland Public Service Commission continued with its broad grid modernization proceeding in 2017, addressing several topics, including data access, electric vehicles, energy storage, interconnection, and rate design. The state legislature also initiated an energy storage study and adopted the nation’s first state tax credit for energy storage systems.
Massachusetts regulators established an energy storage target, addressed compensation rules for solar-plus-storage, and considered grid modernization investment proposals from all three investor-owned utilities in 2017. Several bills were introduced during the year that would create new incentives for energy storage, grid modernization planning processes, and rate design guidelines.
Pursuant to legislation enacted in late 2016, the Michigan Public Service Commission undertook a number of grid modernization activities in 2017, including studies addressing demand response, alternative utility business models, and solar-plus-storage compensation. The Commission also addressed integrated resource planning rules, and two utilities – Consumers Energy and DTE Electric – filed draft grid modernization investment proposals.
In 2017, the Nevada state legislature enacted legislation creating an energy storage incentive program and initiating an energy storage study to consider whether or not the state should adopt an energy storage procurement target. Voters and regulators are considering restructuring of the state’s electric industry in advance of a second ballot vote, and integrated resource planning and time-varying electricity rates were also addressed during the year.
The Vermont Public Utility Commission opened a broad investigatory proceeding in 2017, addressing grid modernization and utility business models. The state’s Department of Public Service also published an energy storage study and policy recommendations, as directed by Act 53. Green Mountain Power filed applications for approval of three energy storage projects during the year and announced a new program to deploy battery storage systems at customer homes.
Arizona regulators issued a decision requiring Arizona Public Service to consider energy storage options in integrated resource planning and as alternatives to transmission and distribution investments. Regulators also considered special rate tariffs for energy storage owners, residential time-varying electricity rates, interconnection rules for energy storage systems, and adoption of a clean peak standard.
Honorable Mention: North Carolina
The North Carolina state legislature initiated an energy storage study in 2017, while the Utilities Commission considered interconnection rules for emerging technologies and data access rules. Duke Energy announced plans for a $13 billion grid investment package, which includes AMI and self-optimization investments, and received approval to develop a microgrid in western North Carolina.
TOP GRID MODERNIZATION TRENDS OF 2017
States Taking Diverse Approaches to Grid Modernization
Throughout 2017, states took a wide variety of approaches to grid modernization. Some states focused heavily on studies, while others took greater action on deployment and pilot projects, took several different types of action. Furthermore, some states placed a greater emphasis on technology, while others keyed in on policy or rate design. In line with a trend toward comprehensive approaches, many states considered technology, policy, rate design and utility business model reforms simultaneously.
Gathering Information through Studies and Pilots
A major trend present throughout 2017 was that of states and utilities working to gather information on various aspects of grid modernization through studies, investigations, and pilot projects. Studies and investigations were undertaken on both broad and narrow topics during the year, while most pilot projects related to time-varying rates or deployment of energy storage and microgrids.
Energy Storage Taking Focus
As 2017 progressed, state and utility action related to energy storage climbed. At least 31 states took actions related to energy storage during the year. A wide variety of actions were taken, including conducting studies, amending resource planning and interconnection rules, considering incentives for storage systems, adopting procurement targets, and deploying storage facilities.
Comprehensive and Coordinated Approaches to Grid Modernization
Several states – including Illinois, Ohio, Rhode Island, and Vermont – initiated broad proceedings in 2017, addressing many different elements of grid modernization in a coordinated fashion. Similar proceedings also continued in Maryland, New Hampshire, and New York. A common element of these comprehensive approaches is stakeholder engagement, with working groups and workshops frequently utilized.
Evaluating Storage as Part of Integrated Resource Planning
A growing trend among states is consideration of the way in which energy storage is evaluated within the integrated resource planning process. Regulators in New Mexico and Washington amended statewide integrated resource planning rules to require the evaluation of storage alternatives, while regulators adopted similar rules for individual utilities in Arizona and Louisiana.
Rate Reforms Center on Time-Varying Rates
In 2017, time-varying electricity rates was by far the most frequently considered type of utility rate reform. Policymakers and regulators in 11 states took statewide action related to timevarying rates, or considered utility proposals related to default or mandatory time-varying rates. Time-varying rates were also considered as part of tariffs designed specifically for battery storage owners.
Questions Emerge Over Utility and Third-Party Technology Ownership
In several states, questions related to technology ownership were considered. In Maine and Texas, utility requests to own microgrid (including a solar PV array and battery storage system) and battery storage assets, respectively, came into focus as regulators considered whether the utilities (both in restructured states) are permitted to own these assets. In Arkansas, the Public Service Commission is considering utility ownership versus third-party ownership of DERs as part of a generic proceeding on DERs and data access.
Grid Modernization Investment Costs Often a Point of Contention
In several proceedings considering utility grid modernization investment proposals, the issue of cost became a major point of contention among parties during 2017. In Hawaii, regulators directed the utilities to revise their original plan because of its high cost, while plans in California and North Carolina have also received criticism over cost and which specific investments should be prioritized.