NewEnergyNews: Monday Study – The Booming Debate On Grid Modernization


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    Monday, May 17, 2021

    Monday Study – The Booming Debate On Grid Modernization

    The 50 States of Grid Modernization: Q1 2021 Policy Quarterly Update

    April 2021 (North Carolina Clean Energy Technology Center (NCCETC])

    Executive Summary


    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…

    Actions Included

    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.

    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 modern 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.

    Actions Excluded

    This report excludes utility proposals for grid investments that do not include any specific grid modernization component, as outlined above, as well as specific 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 (a separate report series available from the NC Clean Energy Technology Center covers electric vehicle actions). Time-varying and residential demand charge proposals are only documented if they are being implemented statewide, the default option for all residential customers of an investor-owned utility, or a notable pilot program. Actions related to inclining or declining block rates are not included in this report. While actions taken by municipal utilities and electric cooperatives are not comprehensively tracked in this report, particularly noteworthy or high-impact actions are included. The report also excludes changes to policies and rate design for distributed generation customers; these changes are covered in the 50 States of Solar quarterly report.


    In the first quarter of 2021, 47 states plus DC took a total of 502 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 502 actions catalogued, the most common were related to policies (133), deployment (94), and financial incentives (82).


    Five of the quarter’s top policy developments are highlighted below.

    North Carolina Regulators Approve Deferral Treatment for Duke Energy Grid Spending

    The North Carolina Utilities Commission issued a decision in March 2021, authorizing Duke Energy Carolinas to defer approximately $800 million in grid improvement investments from June 2020 through 2022, including costs associated with self-optimizing grid, distribution automation, transmission system intelligence, and a distributed energy dispatch tool. The decision also approves a rate design study and a climate risk and resilience working group.

    Maine Public Utilities Commission Launches Grid Modernization Proceeding

    Maine regulators opened a new proceeding in February 2021 to conduct a comprehensive examination of the design and operation of the state’s distribution system to accommodate the increasing integration and operation of distributed energy resources and the potential for substantial load increases resulting from climate policies and initiatives designed to encourage building and transportation electrification.

    National Grid Files Advanced Metering and Grid Modernization

    Proposals in Rhode Island In January 2021, National Grid filed its updated advanced metering functionality business case, as well as its grid modernization plan. The advanced metering plan proposes AMI deployment with a budget of $224 million and includes a customer engagement plan and a data governance plan. The grid modernization plan envisions grid modernization investments out to 2030 and includes different budget scenarios based on high and low distributed energy resource scenarios.

    Virginia Lawmakers Enact Series of Energy Storage Bills

    Virginia Lawmakers enacted a series of bills related to energy storage in March 2021. The enacted bills include property and sales tax incentives for energy storage systems, special permitting guidelines for storage facilities, and a requirement that storage projects constructed to comply with the state’s storage procurement target use equipment and components from a Virginia or U.S. based manufacturer, if available.

    Connecticut Regulators Release Energy Storage Incentive Straw Proposal

    The Connecticut Public Utilities Regulatory Authority released its straw proposal for an electric storage incentive program in January 2021. The nine-year program calls for a total deployment of 580 MW (290 MW residential and 290 commercial and industrial), which would be achieved with an upfront declining block incentive and performance-based incentives for dispatching the system during peak events. The upfront incentive would begin at $280 per kWh, with low to moderate income customers eligible for an additional incentive


    The most common types of actions across the country related to energy storage deployment (62), utility business model reforms (31), energy storage interconnection rules (30), smart grid deployment (29), and data access policies (27). Q1 2021 was the busiest quarter yet for grid modernization, with activity increasing in nearly every category.

    The states taking the greatest number of actions related to grid modernization in Q1 2021 can be seen in Figure 4. New York, Texas, California, Minnesota, and New Jersey saw the most action during the quarter, followed by Illinois, Hawaii, and North Carolina. Overall, 47 states, plus DC, took actions related to grid modernization in Q1 2021.


    States Focusing on Improving Grid Resilience

    States across the country are showing increased focus on improving grid resilience, particularly in the wake of the extreme winter weather event occurring in February 2021. In Texas, the Public Utilities Commission opened proceedings to investigate the event, while state legislators introduced numerous bills focused on grid resilience. Among these are bills establishing a grid security commission, a critical infrastructure resiliency fund, and a solar and energy storage resilience grant and loan program. Other states, including Arkansas and South Carolina, have also launched proceedings regarding extreme weather event response. Legislation introduced in Florida would create a Resilient Schools Pilot and an Energy Security and Disaster Resilience Pilot, while Xcel Energy has requested approval for resiliency as a service pilot programs in multiple states.

    State Lawmakers Considering Financial Incentives for Grid Modernization

    State legislators have introduced significantly more bills related to financial incentives for energy storage, microgrids, demand response, and other grid modernization technologies so far in 2021 than in previous years. Lawmakers in at least 29 states considered grid modernization incentive bills during Q1 2021, with the majority of these related to property tax incentives, grant programs, and Property Assessed Clean Energy (PACE) financing. The Virginia General Assembly enacted legislation establishing property and sales tax incentives for energy storage systems, while Colorado and Massachusetts lawmakers also passed bills establishing property tax incentives for energy storage. In many of these cases, property tax incentives currently exist for solar and other renewable energy technologies and are being extended to also apply to storage facilities.

    States Examining Permitting, Decommissioning, and Recycling Requirements for Energy Storage Facilities

    As energy storage deployment continues to increase, more states are examining permitting, decommissioning, and recycling requirements for energy storage facilities. Virginia lawmakers enacted legislation allowing energy storage facilities under 150 MW to qualify for special permitting, review, and inspection requirements. In North Carolina, the Environmental Management Commission is in the process of developing rules governing end-of-life management for battery storage, and in Nevada, regulators determined that standalone energy storage systems are not considered utility facilities and, therefore, do not require Utility Environmental Protection Act permits. In Maine, a concept draft of a bill proposes measures to address the recycling of clean energy equipment, including battery storage systems. Legislation introduced in Vermont directs the Public Utility Commission to establish rules related to certificates of public good for energy storage projects, including decommissioning and application requirements.


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