(August 2011) Economic consultant Michael Rosenzweig challenges Constantine Gonatas’s proposal for ensuring FERC’s demand response rulemaking achieves its objectives. Also, Juliet Shavit...
Technology for the Masses
The consumer-centric smart grid and its challenge for regulators.
recovery period constraints.
Regulation is also somewhat uniquely situated to address the external cost of energy production and use. Governments will need to determine the future role of regulators and utility companies in ushering in the full potential of the new technology’s benefits for energy use. Regardless of the ultimate end game, some questions will need to be addressed and resolved. Quite likely the answers and speed of change will vary across the world. There are parallels with cellular phones and the various choices and competition. Unlike phone calls and communication, energy conservation is something that yields many benefits. This suggests there’s value in considering the potential role that regulated utilities would play in the evolution of new services and the use of the emerging technologies. Utility involvement alone might not be sufficient. Regardless, the incumbent pipes and wires utility companies and their state regulators will play a major role in what happens and how soon.
An Assist from the Feds
Two recently enacted federal statutes include specific support for developing the smart grid and energy efficiency and environmental improvements further downstream. The Energy Independence and Security Act 1 (EISA) called for modernizing electricity transmission and distribution, in part, to provide consumers with “timely information and control options” to become more energy efficient. The EISA made specific references to “digital information and controls technology” as well as “deployment of ‘smart’ technologies (real-time, automated, interactive technologies that optimize the physical operation of appliances and consumer devices).” In 2009, the American Recovery and Reinvestment Act (ARRA) 2 added federal funding to support the expanding smart grid investments and their use.
Federal regulators have also weighed-in with a show of support for using these new technologies to bring digital communication to customers’ premises to help them become more energy efficient and control energy using smart devices. In June 2009, the Federal Energy Regulatory Commission (FERC) issued its national assessment of demand response potential, 3 which found that residential energy users represent “the most untapped potential for demand response.” 4 The FERC complemented this with finding that “Ultimately, the Smart Grid will facilitate consumer transactions and allow customers to better manage their energy costs.” 5 The FERC findings all point to an end result in which consumers will experience smarter ratemaking or price signals in real-time and be able “to control their personal use of electricity.” 6 FERC expects that load shapes will be altered to shift use and save resources. 7 In addition, FERC stated that the end result would also include “the smart integration of changeable consumption with variable generation to enable the addition of new technologies such as wind farms and roof-top solar systems to utility systems.”
The Federal Communications Commission (FCC) has also added its support as part of its development of the National Broadband Plan. Specifically, the FCC supports the national purpose of energy independence and efficiency. In February 2010, the FCC supported improving broadband with electricity grid modernization to use advanced communication to address the “intermittency of renewable power and increased loads from electric vehicles.” 8 FCC estimates “A smart