The 50 States of Grid Modernization: 2022 Review and Q4 2022
February 2023 (North Carolina Clean Energy Technology Center)
2022 GRID MODERNIZATION ACTION
In 2022, 49 states plus DC took a total of 778 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 778 actions identified, the most common were related to deployment (181), followed by policies (139), and financial incentives (132)
TOP TEN MOST ACTIVE STATES OF 2022
Ten states taking the greatest number of particularly impactful actions are noted below.
The California Public Utilities Commission opened a new rulemaking to advance demand flexibility through rates and released a white paper on demand flexibility strategies and customer distributed energy resource compensation, while continuing work to develop its microgrid program. The Commission considered a variety of utility proposals to deploy energy storage and smart grid technologies, and additional funding was allocated to energy storage incentives for low-income customers.
The Connecticut Public Utilities Regulatory Authority (PURA) approved a non-wires alternative program design, a reliability and resilience framework, and an innovative energy solutions program during 2022. PURA also continued proceedings related to performance-based regulation and advanced metering infrastructure, while United Illuminating filed a rate case including new performance metrics, resiliency pilots, and projects to support distributed system planning.
In Massachusetts, regulators approved significant grid modernization plans for the state’s three major utilities – Eversource, National Grid, and Unitil – as well as Everousrce’s latest performance-based ratemaking plan with new scorecard metrics. State lawmakers enacted legislation requiring utilities to develop electric sector modernization plans and directing the Department of Energy Resources to study mid- and long-duration energy storage.
The Hawaii Public Utilities Commission approved additional performance incentive mechanisms for the HECO utilities in 2022, as well as an advanced rate design framework. The Commission approved a new smart dispatch program and the design for new distributed energy resource tariffs that focus on grid services. Regulators also continued efforts to implement a microgrid services tariff and opened a new proceeding on innovative pilots.
In Maine, state legislators enacted a bill requiring utilities to file grid plans including near-term grid investments that are needed. The Public Utilities Commission approved energy storage rates for Central Maine Power and Versant Power and considered Central Maine Power’s proposed Grid Model Enhancement Project and energy storage projects. The Governor’s Energy Office also created a quarterly energy storage forum.
The Illinois Commerce Commission approved new performance metrics for Ameren Illinois and Commonwealth Edison and took steps to develop guidelines for the integrated grid planning process. The Commission also completed its energy storage program report, adopted revised interconnection rules, and approved solar-plus-storage rebates for Ameren and Commonwealth Edison.
The New Mexico Energy, Minerals, and Natural Resources Department released its grid modernization roadmap in 2022, while the Public Regulation Commission approved revised rules for integrated resource planning and interconnection. El Paso Electric requested approval to deploy an advanced metering system, PNM filed its Grid Modernization Implementation Plan, and Xcel Energy proposed several grid modernization investments.
In Colorado, regulators released proposed rules for organized wholesale markets, which require transmission utilities in the state to join a market by 2030. State legislators enacted bills establishing tax incentives for residential energy storage and a grant program to support microgrids for community resilience. Xcel Energy filed its first distribution system plan and a proposal to implement a resiliency service program (which was later withdrawn).
Michigan regulators formed a new workgroup on grid integration and considered participation of energy storage resources in wholesale markets. Regulators approved revised interconnection rules and a new time-of-use rate for DTE Electric, while evaluating utilities’ distribution system plans outlining planned grid investments. A workgroup on customer data access and privacy also filed their final report and recommendations during the year.
The Minnesota Public Utilities Commission accepted utilities’ integrated distribution plans and approved new load flexibility pilot programs focused on demand response and thermal energy storage for Xcel Energy. The Commission considered Xcel Energy’s proposal for a resiliency as a service program, while also addressing interconnection and data access rules during the year.
TOP GRID MODERNIZATION TRENDS OF 2022
Focusing on Resilience in Grid Modernization Activities
There was a central theme of resilience present in many of the grid modernization activities taking place in 2022. Several states enacted legislation making resilience improvements eligible for property assessed clean energy financing, and utilities proposed grid investments focused on improving resilience. Some states also considered new incentive programs for resilience investments like storage and microgrids, while others undertook studies or dedicated planning efforts related to grid resilience.
Undertaking Actions to Enhance Grid Management and Flexibility
An area of focus during 2022 was grid management and flexibility, with utilities planning investments in distributed energy resource management systems and battery storage and proposing new customer demand response programs and rate structures to shape load. A workgroup in Michigan is exploring grid integration of distributed energy resources, while a number of states have opened proceedings to consider demand response and flexibility practices, pursuant to a directive in the federal Infrastructure Investment and Jobs Act.
Utilities Proposing New Performance Incentive Mechanisms
Regulators in several states considered the adoption of new performance incentive mechanisms (PIMs) during 2022. The Illinois Commerce Commission approved a variety of new PIMs for Ameren and Commonwealth Edison, while Duke Energy Progress filed its plans for new PIMs with North Carolina regulators. In Hawaii, regulators approved additional PIMs for the HECO companies related to reliability, interconnection, and cost control.
States Considering Wholesale Market Participation
Wholesale markets continued to be a major area of attention for many states during 2022, with states generally moving toward wholesale markets. The Colorado Public Utilities Commission issued a decision requiring transmission utilities in the state to join organized wholesale markets, while regulators in Arizona and South Carolina have been considering joining a market. Florida utilities also received approval to join the Southeast Energy Exchange Market.
Establishing Formal Distribution System Planning Processes
Across the country, more states are establishing formal processes for distribution system planning. In 2022, state lawmakers in Maine and Massachusetts enacted legislation requiring utilities to undertake such grid planning processes. Illinois regulators also took steps to implement a new grid planning process. Other states with formal distribution system planning requirements include Colorado, Michigan, Minnesota, and Oregon.
Utilities Pursuing Resiliency as a Service Programs
A growing number of utilities are filing proposals to offer “resiliency as a service” programs, where utilities deploy battery storage systems at customer locations in order to provide resiliency benefits, especially to critical facilities. Regulators approved Georgia Power’s resilience asset service tariff, while regulators in California and Colorado considered utility plans for customer resiliency programs. Utilities in Connecticut, Minnesota, and Vermont also proposed investments focused on customer resilience.
Utilities Designing New Battery Storage Demand Response Programs
A number of utilities filed plans to offer new battery storage demand response programs during the year, which typically offer a performance-based incentive or bill credit for energy discharged during certain times. Idaho regulators approved a new battery demand response program for PacifiCorp, while Entergy New Orleans and Green Mountain Power were among the utilities filing plans for new programs. Michigan regulators denied DTE’s proposed program, instead expressing interest in exploring the design further.
States Allowing Cost Sharing for Grid Upgrades Needed for Interconnection
Regulators around the country considered interconnection rule revisions that would allow for the sharing of costs among generation owners for grid upgrades necessary for interconnection. The Connecticut Public Utilities Regulatory Authority opened a proceeding to investigate cost sharing proposals for distributed energy resource interconnection upgrades, while regulators in Minnesota, New Mexico, Vermont, and other states also considered cost sharing for grid upgrades
Incorporating Critical Peak Pricing into Rate Structures
As more utilities continue to offer time-of-use (TOU) rate options, an increasing number of these rates are incorporating critical peak pricing periods. The North Carolina Utilities Commission approved new dynamic rate designs for Duke Energy that include critical peak pricing elements, while Tennessee regulators approved a new TOU rate for Kingsport Power that includes a critical peak charge.
Examining Battery Storage Decommissioning and Recycling
Several states initiated efforts to address the decommissioning and recycling of battery storage facilities. South Carolina legislators enacted a bill to develop regulations managing the decommissioning of larger solar and storage facilities, and Virginia lawmakers created a task force to analyze the life cycle of energy facilities including energy storage. In Tennessee, legislators initiated a study that will examine end-of-life management for battery storage systems.
LOOKING BACK: 2017 to 2022
Total grid modernization action decreased somewhat in 2022 compared to last year, while remaining at a very high level of activity. States and utilities took approximately 778 actions in 2022, compared to 823 actions in 2021, compared to 658 actions in 2020, 612 actions in 2019, 460 actions in 2018, and 288 actions in 2017. In 2022, activity increased slightly in the areas of studies and investigations, rate and utility business model reform, and financial incentives. The number of states taking actions held relatively steady in most categories from 2021 to 2022.
Q4 2022 GRID MODERNIZATION ACTION
In the fourth quarter of 2022, 47 states plus DC took a total of 422 policy and deployment actions related to grid modernization, utility business model and rate reform, energy storage, microgrids, and demand response. Table 2 provides a summary of state and utility actions on these topics. Of the 422 actions identified, the most common were related to deployment (91), followed by policies (88), and utility business model and rate reform (72)…