[BETA] Fortnightly

It’s tempting to attribute the recent slowdown in electricity demand growth entirely to the Great Recession, but consumption growth rates have been declining for at least 50 years. The new normal rate of demand growth likely will be about half of its historic value, with demand rising by less than 1 percent per year. This market plateau calls for a new utility strategy.

As efficiency programs mature, utilities and regulators will be challenged to keep producing demand-side resources. A systems-oriented approach can yield cost-effective results.

State commissions can select from a toolkit of regulatory approaches to promote desired utility cybersecurity behavior. One approach is to allow the industry to selfregulate, and another approach is to leave the job to the federal government. But sofar, neither the industry nor the federal government have developed and implemented adequate standards for securing the smart grid. States can play a constructive role—albeit perhaps not in the form of traditional regulation.

Federal and state regulators play a critical role in the evolution of the smart grid. Lawmakers face a host of questions, from deciding who owns consumer data and how it can be used, to defining a new range of regulated and unregulated utility services and applications. How much regulation will be needed to manage the transformation to a smart grid? And how much regulation will be too much?

Smart grid technologies bring a host of cyber security considerations that need to be addressed throughout the transmission and distribution domain—and even into the customer’s home. In the second of two exclusive articles, Department of Energy authors team up with industry experts to provide a path forward for securing the smart grid.

New technologies—and new expectations—require taking a fresh look at the institutions and practices that have provided reliable electricity for the past century. Collective action is needed to define the key attributes of a future grid and then to take the more difficult next step—adapting our processes and institutions to align with that future vision. A thoughtful approach will allow America to capture the potential value that’s offered by sweeping changes in technologies and policies.

Four years ago, Congress made its wishes known: it tabbed the National Institute of Standards and Technology to develop a set of standards for the smart grid, and then instructed FERC, the Federal Energy Regulatory Commission “adopt” those standards, but only after finding a ”sufficient consensus,” and only “as may be necessary” to assure “functionality and interoperability.” Yet what is known is not necessarily clear. Who decides if consensus prevails? What does “interoperability” mean? Should FERC’s “necessary” finding extend to retail smart grid applications, arguably outside its purview? And the biggest dispute — must standards be mandatory? — finds PJM at odds with much of the utility industry.

Policy makers in the E.U. and the United States are taking different approaches to facilitating smart grid development. While both regions are setting standards that the rest of the world likely will follow, they also face difficult challenges in resolving issues around cost recovery, customer engagement and workforce preparedness.

Smart grid is a global phenomenon, but different countries are taking different approaches—for different reasons. For instance, utilities in Europe are more focused on laying the foundation for distributed generation and microgrids, while the United States is more concerned about creating standards for interoperability and security. Understanding the differences can help decision makers deploy smart grid technology effectively and economically.

Performance standards are a valid and necessary idea to drive conservation, but only if targets are realistic and achievable. So far, success has been determined by program rationality. A uniform, market-based approach would give retailers flexibility to spur innovation.