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EFFECTIVELY TRANSFORMING OUR ELECTRIC

DELIVERY SYSTEM TO A SMART GRID

HEARING

BEFORE THE

SUBCOMMITTEE ON ENERGY AND

ENVIRONMENT

COMMITTEE ON SCIENCE AND

TECHNOLOGY

HOUSE OF REPRESENTATIVES

ONE HUNDRED ELEVENTH CONGRESS

FIRST SESSION

JULY 23, 2009

Serial No. 111–46

Printed for the use of the Committee on Science and Technology

(

Available via the World Wide Web: http://www.science.house.gov

(II)

COMMITTEE ON SCIENCE AND TECHNOLOGY

HON. BART GORDON, Tennessee, Chair

JERRY F. COSTELLO, Illinois

EDDIE BERNICE JOHNSON, Texas

LYNN C. WOOLSEY, California

DAVID WU, Oregon

BRIAN BAIRD, Washington

BRAD MILLER, North Carolina

DANIEL LIPINSKI, Illinois

GABRIELLE GIFFORDS, Arizona

DONNA F. EDWARDS, Maryland

MARCIA L. FUDGE, Ohio

BEN R. LUJA ́ N, New Mexico

PAUL D. TONKO, New York

PARKER GRIFFITH, Alabama

STEVEN R. ROTHMAN, New Jersey

JIM MATHESON, Utah

LINCOLN DAVIS, Tennessee

BEN CHANDLER, Kentucky

RUSS CARNAHAN, Missouri

BARON P. HILL, Indiana

HARRY E. MITCHELL, Arizona

CHARLES A. WILSON, Ohio

KATHLEEN DAHLKEMPER, Pennsylvania

ALAN GRAYSON, Florida

SUZANNE M. KOSMAS, Florida

GARY C. PETERS, Michigan

VACANCY

RALPH M. HALL, Texas

F. JAMES SENSENBRENNER JR.,

Wisconsin

LAMAR S. SMITH, Texas

DANA ROHRABACHER, California

ROSCOE G. BARTLETT, Maryland

VERNON J. EHLERS, Michigan

FRANK D. LUCAS, Oklahoma

JUDY BIGGERT, Illinois

W. TODD AKIN, Missouri

RANDY NEUGEBAUER, Texas

BOB INGLIS, South Carolina

MICHAEL T. MCCAUL, Texas

MARIO DIAZ-BALART, Florida

BRIAN P. BILBRAY, California

ADRIAN SMITH, Nebraska

PAUL C. BROUN, Georgia

PETE OLSON, Texas

SUBCOMMITTEE ON ENERGY AND ENVIRONMENT

HON. BRIAN BAIRD, Washington, Chair

JERRY F. COSTELLO, Illinois

EDDIE BERNICE JOHNSON, Texas

LYNN C. WOOLSEY, California

DANIEL LIPINSKI, Illinois

GABRIELLE GIFFORDS, Arizona

DONNA F. EDWARDS, Maryland

BEN R. LUJA ́ N, New Mexico

PAUL D. TONKO, New York

JIM MATHESON, Utah

LINCOLN DAVIS, Tennessee

BEN CHANDLER, Kentucky

BART GORDON, Tennessee

BOB INGLIS, South Carolina

ROSCOE G. BARTLETT, Maryland

VERNON J. EHLERS, Michigan

JUDY BIGGERT, Illinois

W. TODD AKIN, Missouri

RANDY NEUGEBAUER, Texas

MARIO DIAZ-BALART, Florida

RALPH M. HALL, Texas

JEAN FRUCI Democratic Staff Director

CHRIS KING Democratic Professional Staff Member

MICHELLE DALLAFIOR Democratic Professional Staff Member

SHIMERE WILLIAMS Democratic Professional Staff Member

ELAINE PAULIONIS PHELEN Democratic Professional Staff Member

ADAM ROSENBERG Democratic Professional Staff Member

JETTA WONG Democratic Professional Staff Member

ELIZABETH CHAPEL Republican Professional Staff Member

TARA ROTHSCHILD Republican Professional Staff Member

JANE WISE Research Assistant

(III)

C O N T E N T S

July 23, 2009

Page

Witness List ............................................................................................................. 2

Hearing Charter ...................................................................................................... 3

Opening Statements

Prepared Statement by Representative Bart Gordon, Chairman, Committee

on Science and Technology, U.S. House of Representatives ............................. 9

Statement by Representative Brian Baird, Chairman, Subcommittee on Energy and Environment, Committee on Science and Technology, U.S. House

of Representatives ................................................................................................ 7

Written Statement ............................................................................................ 7

Statement by Representative Bob Inglis, Ranking Minority Member, Subcommittee on Energy and Environment, Committee on Science and Technology, U.S. House of Representatives ............................................................... 8

Written Statement ............................................................................................ 9

Prepared Statement by Representative Jerry F. Costello, Member, Subcommittee on Energy and Environment, Committee on Science and Technology, U.S. House of Representatives ............................................................... 9

Witnesses:

Ms. Patricia Hoffman, Acting Assistant Secretary, Office of Electricity Delivery and Energy Reliability, U.S. Department of Energy

Oral Statement ................................................................................................. 10

Written Statement ............................................................................................ 12

Biography .......................................................................................................... 17

Ms. Suedeen G. Kelly, Commissioner, Federal Energy Regulatory Commission

Oral Statement ................................................................................................. 18

Written Statement ............................................................................................ 19

Biography .......................................................................................................... 24

Dr. George W. Arnold, National Coordinator for Smart Grid Inter-operability,

National Institute of Standards and Technology, U.S. Department of Commerce

Oral Statement ................................................................................................. 25

Written Statement ............................................................................................ 26

Biography .......................................................................................................... 32

Mr. Paul De Martini, Vice President of Advanced Technology, Southern California Edison

Oral Statement ................................................................................................. 32

Written Statement ............................................................................................ 34

Biography .......................................................................................................... 39

Mr. Jeffrey L. Ross, Executive Vice President, GridPoint, Inc.

Oral Statement ................................................................................................. 39

Written Statement ............................................................................................ 41

Biography .......................................................................................................... 47

Mr. Michael A. Stoessl, Group President, Cooper Power Systems

Oral Statement ................................................................................................. 47

Written Statement ............................................................................................ 51

Biography .......................................................................................................... 52

Page

IV

Discussion

Anticipated Development Timeline .................................................................... 53

Features of Smart Meters ................................................................................... 54

Flexibility and Pace of Standards Development ................................................ 54

Net Metering ........................................................................................................ 56

Inter-operability Standards ................................................................................. 56

National Security Concerns ................................................................................. 58

Energy Storage ..................................................................................................... 60

The Purpose of the Smart Grid ........................................................................... 62

First Steps to a Smart Grid ................................................................................ 63

Potential Energy Production Savings ................................................................. 66

Potential Energy Savings .................................................................................... 68

Financial Benefit to Consumers .......................................................................... 68

Job Creation and Workforce Development ......................................................... 69

Incorporating Social Behavioral Aspects ............................................................ 72

Electromagnetic Pulses ........................................................................................ 74

Superconduction ................................................................................................... 75

Public Education .................................................................................................. 76

Interagency Coordination .................................................................................... 77

Appendix 1: Answers to Post-Hearing Questions

Ms. Patricia Hoffman, Acting Assistant Secretary, Office of Electricity Delivery and Energy Reliability, U.S. Department of Energy .................................. 80

Ms. Suedeen G. Kelly, Commissioner, Federal Energy Regulatory Commission ........................................................................................................................ 82

Dr. George W. Arnold, National Coordinator for Smart Grid Inter-operability,

National Institute of Standards and Technology, U.S. Department of Commerce ..................................................................................................................... 83

Appendix 2: Additional Material for the Record

Statement of Katherine Hamilton, President, The GridWise® Alliance ............ 86

Statement of Gordon W. Day, Ph.D., 2009 President, the Institute of Electrical and Electronics Engineers—United States of America (IEEE–USA) .... 90

(1)

EFFECTIVELY TRANSFORMING OUR ELECTRIC DELIVERY SYSTEM TO A SMART GRID

THURSDAY, JULY 23, 2009

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON ENERGY AND ENVIRONMENT,

COMMITTEE ON SCIENCE AND TECHNOLOGY,

Washington, DC.

The Subcommittee met, pursuant to call, at 10:08 a.m., in Room

2318 of the Rayburn House Office Building, Hon. Brian Baird

[Chairman of the Subcommittee] presiding.

2

3

HEARING CHARTER

SUBCOMMITTEE ON ENERGY AND ENVIRONMENT

COMMITTEE ON SCIENCE AND TECHNOLOGY

U.S. HOUSE OF REPRESENTATIVES

Effectively Transforming Our Electric

Delivery System to a Smart Grid

THURSDAY, JULY 23, 2009

10:00 A.M.–12:00 P.M. 2318 RAYBURN HOUSE OFFICE BUILDING

Purpose

On Thursday, July 9, 2009 the Subcommittee on Energy and Environment will

hold a hearing entitled: ‘‘Effectively Transforming Our Electric Delivery System to

a Smart Grid.’’

The hearing will explore the roles of both the Federal Government and industry

in transitioning our aging power generation and distribution infrastructure into a

smart grid. A smart grid will function as a two-way communication system offering

utilities and consumers more information regarding electricity supply, consumption,

and price which would ultimately modify patterns of electricity usage. Continued efforts to research and develop innovative smart grid technologies and establish the

appropriate inter-operability standards to enable all these devices and systems to

communicate with each other are necessary to make this transformation and realize

significant efficiency, reliability, security and environmental benefits. Today, our

massive interconnected power grid is a century old and over-burdened. It is imperative that we modernize our electric delivery system so that our economy can thrive

and growing power needs will be met efficiently and reliably.

Witnesses

• Ms. Patricia Hoffman is the Acting Assistant Secretary for the Department of Energy, (DOE) Office of Electricity Delivery and Energy Reliability. Ms. Hoffman briefly will describe the Department’s vision for development of a smart grid and offer testimony on the current research, development

and demonstration activities at DOE to achieve widespread use of innovative

smart grid technologies. She will discuss the challenges associated with a successful transition to a smart grid and how DOE is working with other federal agencies

and stakeholders to address these issues. She also will describe the Department’s

strategy and timeline for distributing funds available under the American Recovery and Reinvestment Act for smart grid demonstrations, investment grants,

transmission planning and other related initiatives.

• Ms. Suedeen Kelly is a Commissioner at the Federal Energy Regulatory

Commission (FERC). She will provide a brief overview of FERC’s actions and

programs designed to modernize our electric delivery system and the issues that

we must address to ensure we have a successful transition to a smart grid. She

will describe FERC’s collaboration with NIST to develop inter-operability standards for smart grid devices and systems. In addition, she will explain the important role of the states in this transition and the tools FERC has available to help

the states implement smart grid strategies.

• Dr. George Arnold is the National Coordinator for Smart Grid Inter-operability at the National Institute of Standards and Technology (NIST). Dr.

Arnold will offer testimony regarding NIST’s progress toward facilitating the development of a framework for standards and protocols to achieve inter-operability

of smart grid devices and systems. He will discuss some of the technical challenges presented with standards development and how NIST will address those

issues. In addition, he will describe how NIST is working with other federal agencies and interested stakeholders to achieve widespread use of innovative smart

grid technologies.

• Mr. Paul De Martini is Vice President of Advanced Technology at Southern California Edison (SCE). SCE is the largest subsidiary of Edison InterVerDate 11-MAY-2000 13:37 Jan 22, 2010 Jkt 050954 PO 00000 Frm 00007 Fmt 6633 Sfmt 6621 C:\DWORK\E&E09\072309\50954 SCIENCE1 PsN: SCIENCE1
4

1The Smart Grid: an Introduction. Prepared by Litos Strategic Communication for the U.S.

Department of Energy, 2008, page 5.

national and supplies electricity to eleven million people in southern California.

Mr. De Martini will testify about SCE’s research, development and pilot programs

related to advancing smart grid technologies and modernization of our electric

grid. He also will give an overview of SCE’s strategy to deploy innovative smart

grid technologies, their work with DOE and NIST, provide a utility perspective

on integrating these new technologies with existing technologies, and discuss

some of the benefits anticipated for the company and consumers as that strategy

is implemented.

• Mr. Jeff Ross is the Executive Vice President at GridPoint. GridPoint is a

technology company engaged in the development of innovative smart grid platform that enables utilities to optimize electrical grid management. Mr. Ross will

discuss GridPoint’s technology portfolio to illustrate the type of innovation that

will facilitate the modernization and advancement of the Nation’s electricity system, as well as some of the challenges encountered along the way. He will also

describe GridPoint’s experience in the smart grid demonstration in Boulder, CO.

• Mr. Michael A. Stoessl is the Group President for Cooper Power Systems.

Cooper Power Systems engineers and manufactures medium and high-voltage

electrical equipment, components, and systems that deliver reliable electric power

to homes, industries, businesses, and institutions worldwide. The company is a

member of the National Electrical Manufacturers Association (NEMA) and he will

testify on NEMA’s behalf. Mr. Stoessl will provide a brief overview of NEMA and

its history in developing standards for power equipment and the grid. He will discuss how the association is fulfilling its Congressionally-directed role to work with

federal agencies and accelerate the deployment of innovative smart grid technologies. In addition, he will describe the technical challenges of integrating new

smart grid technologies with the current grid and provide examples of successful

deployment.

Background

In the 20th century, widespread electrification brought power to our homes, busi- nesses, farms and cities, changing our lives dramatically. In 1935 President Roosevelt established the Rural Electric Administration (REA) and directed the agency

to electrify the continent. As part of that massive undertaking, innovations were undertaken that included standardized designs for distribution lines, mass production

and construction techniques, system protection and wide area distributed power

planning. Now, nearly seventy-five years since the REA was created, we still consider electrification one of the greatest engineering achievements of the 20th century. Electricity has to be used the moment it is generated. While this system has worked for decades, it is not very efficient. Demand for power varies greatly

throughout the day and throughout the year as demands for lighting, heating and

cooling fluctuate through the seasons. Because the capacity for generation of power

matches the consumption of power, the electricity supply system must be sized to

generate enough electricity to meet the maximum anticipated demand (e.g., peak demand). This inefficiency becomes more evident when considering that it is possible

the peak electricity demand for any given year could be for a very short period—

a few days or even hours. The deployment of innovative smart grid devices is intended to reduce this inefficiency.

Our century-old power grid is the largest interconnected machine on Earth consisting of more than 9,200 electric generating units with more than one million

megawatts of generating capacity connected to more than 300,000 miles of transmission lines.1 Currently, our electric grid is a centralized, generator-controlled network where electrons and information flow in one direction, from generator to enduser. The transition to a smart grid will change this completely. A modern power

grid is envisioned to operate more like an energy internet with a two-way flow of

electricity and information that will be capable of monitoring everything from power

plants to customer preferences to individual appliances. This transformation will

give utility operators and customers the proper tools and information so that electricity generation is better-managed and consumer choices are exercised to control

costs and lower electric bills.

Smart grid technologies, including energy storage technologies will offer operators

new opportunities for managing distributed power production and zero-emission

power generation from solar and wind sources. Also pushing modernization of our

electric infrastructure is the increasing demand for electricity driven by population

5

2 Ibid, page 7. 3The Smart Grid: An Introduction. Prepared by Litos Strategic Communication for the U.S.

Department of Energy, 2008, page 7. 4 Keeping the Lights On in a New World, Electricity Advisory Committee, January 2009, page

84.

growth, bigger homes, and greater appliance use. While our electric grid is considered one of the most reliable in the world, there have been five massive blackouts

over the past forty years, three of those occurring in the past nine years. The recent

Northeast blackout of 2003 resulted in a $6 billion economic loss to the region.2 Further compounding the reliability risks is the trend in our economy to become evermore digital and to be more reliant upon electronic equipment and automated manufacturing. These trends place increasing demand on our electric delivery system. Even as we anticipate continued rising demand for power, under-investment in the upgrading of our electric infrastructure has left the grid overburdened and inefficient. According to the Department of Energy, if the grid were just five percent

more efficient, the energy savings would equate to permanently eliminating the fuel

and greenhouse gas emissions from 53 million cars.3 The American Recovery and

Reinvestment Act (ARRA) authorized the Department of Energy to spend approxi- mately $4.5 billion on smart grid projects under programs established in Title XIII

of the Energy Investment and Security Act of 2007 to begin to address these needs. From the funds made available by the ARRA, the Department of Energy’s Office of Electricity Delivery and Energy Reliability (OE) has issued Funding Opportunity

Announcements for smart grid demonstrations, smart grid investment grants, and

a smart grid information clearinghouse. The goal of the demonstration projects is

to verify smart grid technology viability, quantify smart grid costs and benefits, and

validate new smart grid business models at a scale that can be readily adapted and

replicated across the Nation. These projects could fund different energy storage

technologies, including battery storage, compressed air energy storage and other

new promising storage options. In addition, these projects could demonstrate

synchrophasor measurement technologies and approaches to improve transmission

system reliability through large-scale deployment of synchrophasor technology.

These synchrophasors or ‘‘phasors’’ have the potential to significantly improve transmission reliability because they take data measurement with Global Positioning

System (GPS) timing. The gathered data allow grid operators to see dynamic conditions on the grid in a more real-time (time and location) manner and with greater

accuracy. As a result, the operators have better system control and earlier detection

of potential grid disturbances for better mitigation. The Smart Grid Investment Grant Program is intended to gain improvements in cost and performance of smart grid technology. The program will provide federal assistance to fund up to 50 percent of investments by electric utilities and other entities for projects that promote the goal of deployment of smart grid technologies. The

investments are designed to help implement the necessary digital upgrades to the

electric grid enabling it to work more efficiently and make it better able to effectively integrate power generated from renewable energy technologies, energy efficient technologies, and demand management practices. Demand Response or load

management is defined as the planning, implementation, and monitoring of utility

activities designed to encourage consumers to modify patterns of electricity usage,

including the timing and level of electricity demand. These practices or programs

refer only to energy and load-shape modifying activities that are undertaken in response to utility-administered programs and not the normal operation of the marketplace.4 Demand response practices are used today, but will be ever-more prevalent as we transition to a smart grid.

The Smart Grid Information Clearinghouse is intended to consolidate public technical, legislative, and other information on smart grid development and practices,

and direct web site users to additional information sources both in the United

States and internationally. The goal is to facilitate coordination among all smart

grid stakeholders to support the development and deployment of smart grid technologies.

EISA also authorized a federal Smart Grid Task Force that is led by DOE’s Office

of Electricity Delivery and Energy Reliabilty to coordinate federal activities related

to smart grid technologies and practices. The Task Force works closely with the Federal Energy Regulatory Commission and the National Institute of Standards and

Technology. The Department also established an Electricity Advisory Committee

which issued a report in January 2009 entitled: ‘‘Keeping the Lights On in the New

World.’’ The report discusses current trends for our electricity infrastructure related

to both power demand and supply, and it offers options for meeting future electricity

needs with recommendations for specific actions by DOE.

6

5 Ibid, page 17.

The Recovery Act also included $10 million for NIST to conduct its work on interoperability standards for smart grid devices and systems. This standards development process covers the entire electricity system including generation, transmission,

distribution and end-user equipment and devices. These standards are essential to

ensure that all the different software and hardware components of a smart grid,

supplied from various vendors, will work together seamlessly and secure the grid

against disruptions. In other words, such standards will support the ability of different devices to exchange data, communicate, and participate in business activities

regardless of the operating systems or programming languages underlying those devices. NIST has established domain working groups and is identifying and evaluating existing standards and measurement methods to support the transformation

of our electric delivery system.

In mid-May, Secretaries Locke and Chu announced the initial batch of sixteen

NIST-recognized inter-operability standards. NIST is directed to issue a report to

Congress when it determines that the work is completed or that a federal role is

no longer necessary for standards development. EISA further calls on FERC to institute a rule-making proceeding to adopt such standards and protocols as may be necessary to insure smart-grid functionality and inter-operability in interstate transmission of electric power and regional and wholesale electricity markets. FERC has

authority to determine when NIST’s process has led to sufficient consensus of the

stakeholders.

A Smart Grid

There is a lot of talk about deploying smart meters, a process that is underway.

It is important to note that metering is just one of numerous possible applications

that make up a smart grid. The smart grid is far more than meters as it will function like an energy internet and innovative technologies will be empowered by the

two-way digital communication and plug-and-play capabilities that exemplify a

smart grid.

For consumers, the smart grid means they will have access to real-time pricing

and these price signals will help to educate consumers about energy consumption

and actively engage them in energy decisions. Ultimately, consumer participation

will result in reduced peak demand—when electricity demand is its greatest. Today

our electric bills provide little information about energy consumption patterns and

costs, and the bills come monthly, days after actual consumption takes place. New

smart grid technologies will allow consumers to see the price they are paying for

their energy in real-time, helping them to lower their electric bills as they use less

electricity during peak demand times when prices are high. This behavior in turn

benefits the utilities because shedding load at peak demand times will help to relieve stress on the grid and avoid costly infrastructure and maintenance costs. Reducing peak demand also allows utilities to reduce reliance on its least efficient generating plants that are necessary to meet peak demand.

It is estimated that smart grid enhancements will ease congestion on the grid and

increase capacity significantly, sending 50 to 300 percent more electricity through

existing energy corridors.5 Maximizing the efficiency of the electricity infrastructure

reduces the need for owners and operators to pay for additional generation capacity

to meet our nation’s growing demand for electricity. Transforming our power system

to a smart grid will save money, save energy, and lower emissions from the utility

sector making this transition a smart alternative to building more power plants,

substations, transformers and transmission lines.

In addition, a smart grid will increase reliability of the grid and enhance the

grid’s security. Today’s grid is dominated by central generation with many obstacles

for distributed energy resources interconnection. This centralized system can be vulnerable to disruptions from natural or human events. A modern grid would more

readily integrate distributed energy resources, such as electric vehicles and other

storage technologies, making our power supply less centralized and less vulnerable.

Smart grid technology will include an immense communications network and will

vastly improve the utilities’ ability to manage the grid under emergency conditions.

A smooth transition of our electricity delivery system to a smart grid is critical to

realize the benefits associated with a more efficient, reliable and secure electricity

infrastructure.

7

Chairman BAIRD. If our guests will take their seats, the hearing

will come to order.

Good morning to everyone, and welcome to today’s hearing on

‘‘Effectively Transforming Our Electric Delivery System to a Smart

Grid.’’ I would like to welcome our expert panelists who will discuss both the role of the Federal Government and industry stakeholders in transforming our power grid.

Even today with tremendous advancements in technology, electrification is considered the greatest engineering achievement of

the 20th century. However, parts of this infrastructure are nearly

a century old and our increased reliance on electrical power is

straining our system’s capacity.

In the past nine years, we have experienced three big blackouts.

It is estimated that the blackout of 2003 resulted in a $6 billion

economic loss to the region. In order to improve efficiency of power

delivery and incorporate renewable energy technologies, we need to

modernize our grid infrastructure.

A smart grid is a sophisticated, two-way communication system

for managing our electric infrastructure. It will operate more efficiently and reliably and empower consumers to more actively engage in energy use decisions. The technology to encourage their

participation in these decisions will be at their fingertips. Accurate

and timely price signals will help consumers reduce energy consumption during peak demand when prices are highest. This shaving off of the peak load, in turn, offers power plant operators the

opportunity to avoid investment costs for new generation capacity.

In addition, utilities will be better equipped to manage their systems and integrate energy from renewable sources, plug-in-electric

vehicles and other storage technologies.

Also, there is growing recognition that a smart electric grid is extremely important for responding to environmental problems such

as ocean acidification and lethal overheating of our planet. More efficient energy production and increased use of renewable energy resources will help to set us on a course to address these environmental challenges.

I would like to thank the witnesses for their participation today,

and I am looking forward to your testimony. I am sincerely excited

and interested in this as I think so many of us are as it is going

to be central to solving our nation’s energy problems, and we have

an outstanding panel of experts.

With that, I yield to our distinguished colleague and my friend,

Mr. Inglis, for an opening statement.

[The prepared statement of Chairman Baird follows:]

PREPARED STATEMENT OF CHAIRMAN BRIAN BAIRD

Good morning and welcome to today’s hearing on ‘‘Effectively Transforming Our

Electric Delivery System to a Smart Grid.’’

I would like to welcome our expert panelists who will discuss both the role of the

Federal Government and industry stakeholders in transforming our power grid.

Even today with tremendous advancements in technology, electrification is considered the greatest engineering achievement of the 20th century. However, parts of

this infrastructure are nearly a century old, and our increased reliance on electrical

power is straining this systems’ capacity.

In the past nine years, we have experienced three big blackouts. It is estimated

that the blackout of 2003 resulted in a $6 billion economic loss to the region. In

8

order to improve efficiency of power delivery and incorporate renewable energy technologies we need to modernize our grid infrastructure.

A smart grid is a sophisticated, two-way communication system for managing our

electric infrastructure. It will operate more efficiently and reliably and empower

consumers to more actively engage in energy usage decisions. The technology to encourage their participation in these decisions will be at their fingertips.

Accurate and timely price signals will help consumers reduce energy consumption

during peak demand when prices are highest. This shaving of the peak load, in

turn, offers power plant operators the opportunity to avoid investment costs for new

generation capacity. In addition, utilities will be better-equipped to manage their

systems and integrate energy from renewable sources, plug-in-electric vehicles, and

other energy storage technologies.

Also, there is growing recognition that a smart electric grid is extremely important for responding to environmental problems such as ocean acidification and lethal

over-heating of the planet. More efficient electricity production and increased use of

renewable energy resources will help to set us on a course to address these environmental challenges.

Again, I would like to thank the witnesses for their participation today, and I look

forward to your testimony.

Mr. INGLIS. Thank you, Mr. Chairman, and thank you for this

very important hearing.

In our last hearing, we discussed obstacles in getting renewable

energy, wind and solar in particular, into the electricity market in

a meaningful way. One of the biggest gaps we heard about was getting renewable energy onto a grid designed for centralized generation from conventional power plants. In order to move away from

fossil fuels, we need to upgrade the grid. A smart grid presents

many exciting opportunities. First, we will be able to use distributed generation to supply our population centers, enabling a shift

toward renewable power. Second, we will improve efficiency and increase capacity on the electricity grid. Finally, we will create a new

model of consumer participation. With the two-way communication

made possible by smart grid technologies, consumers will have access to new information about their energy use and prices and get

more involved in how they use electricity.

So now we have to figure out how to get to a modern electricity

grid. I am looking forward to hearing from our witnesses about

where we are now and where we have to go. Governments and professional associations will certainly play an important role in the

research and development of smart grid technologies and in setting

the standards that will govern the new electricity delivery system.

Private enterprise will step in with cutting-edge technology designed to integrate the grid, better manage peak loads, and give

consumers the tools they need to make informed decisions.

I have several questions about smart grid. We are working on developing a new grid and a new pattern of energy generation at this

time. I hope to learn all these efforts are working in tandem and

if we are going forward at the right pace. I also wonder what the

proper relationship between private and public investment is in a

project like this that serves both interests together.

Finally, the smart grid will support electricity from sources far

away from population centers. While this will support development

of renewable electricity, it may also support continued reliance on

old and polluting facilities that operate in some remote areas. I

hope we can address these concerns today, and I thank the Chairman for holding this hearing.

[The prepared statement of Mr. Inglis follows:]

9

PREPARED STATEMENT OF REPRESENTATIVE BOB INGLIS

Good morning and thank you for holding this hearing, Mr. Chairman.

At our last hearing, we discussed obstacles in getting renewable energy, wind and

solar in particular, into the electricity market in a meaningful way. One of the biggest gaps we heard about was getting renewable energy onto a grid designed for

centralized generation from conventional power plants. In order to move away from

fossil fuels, we need to update the grid.

A smart grid presents many exciting opportunities. First, we’ll be able to use distributed generation to supply our population centers, enabling a shift toward renewable power. Second, we’ll improve efficiency and increase capacity on the electricity

grid. Finally, we’ll create a new model of consumer participation. With the two-way

communication made possible by smart grid technologies, consumers will have access to new information about their energy use and prices and get more involved

in how they use electricity.

So now we have to figure out how to get to a modern electricity grid. I’m looking

forward to hearing from our witnesses about where we are now and where we have

to go. Governments and professional associations will certainly play an important

role in the research and development of smart grid technologies and in setting the

standards that will govern the new electricity delivery system. Private enterprise

will step in with cutting edge technology designed to integrate the grid, better manage peak loads, and give consumers the tools they need to make informed decisions.

I have several questions about the smart grid. We’re working on developing a new

grid and a new pattern of energy generation at the same time; I hope to learn how

these efforts are working in tandem and if we’re going forward at the right pace.

I also wonder what the proper relationship between private and public investment

is in a project like this that serves both interests together. Finally, the smart grid

will support electricity from sources far away from population centers. While this

will support development of renewable electricity, it may also support continued reliance on old and polluting coal facilities that operate in the same remote areas. I

hope we can address these concerns today.

Thank you again for holding this hearing, Mr. Chairman.

Chairman BAIRD. Thank you, Mr. Inglis.

If there are other Members who wish to submit additional opening statements, your statements will be added to the record at this

point.

[The prepared statement of Chairman Gordon follows:]

PREPARED STATEMENT OF CHAIRMAN BART GORDON

Thank you Chairman Baird. I am very pleased that the Energy and Environment

Subcommittee is holding this hearing today to discuss our efforts to transform our

electricity infrastructure into a smart grid.

Digitizing our electrical power grid is a massive endeavor that offers exciting possibilities and a wide range of benefits. Modernization will increase the reliability of

our grid, provide significant energy efficiency gains, and will enable us to broaden

the use of renewable energy sources and energy storage technologies. A smart grid

will allow active consumer involvement in decisions to use energy, and businesses

will reduce their energy costs by managing their demands for power.

Because transformation of our electricity delivery system is such an enormous undertaking, it comes with many challenges as well. We are investing billions of federal dollars toward the smart grid transition, and we need to make certain those

dollars are invested well.

I look forward to hearing from our panel of expert witnesses about our progress

to deploy innovative smart grid technologies and the hurdles we must yet overcome

to modernize our power infrastructure.

I thank the witnesses for testifying today and I look forward to an interesting dialogue.

[The prepared statement of Mr. Costello follows:]

PREPARED STATEMENT OF REPRESENTATIVE JERRY F. COSTELLO

Good morning. Thank you, Mr. Chairman, for holding today’s hearing to transition our aging electric delivery system to a smart grid infrastructure.

Our current electric grid is inefficient and outdated. These problems have been

highlighted by the three massive blackouts the Nation has experienced in the last

10

nine years. Smart grid technology will reduce inefficiency, provide consumers more

control over their electricity costs, and give utility operators more flexibility in generating and transmitting power. In addition, smart grid technology will improve the

security of our electricity infrastructure, making it less susceptible to threats. With

the House of Representative’s passage of the American Clean Energy and Security

Act, the need for a modernized, clean electricity grid has become increasingly important.

Developing and demonstrating these technologies will require coordination between the Federal Government and the private sector. The American Recovery and

Reinvestment Act’s $4.5 billion investment in smart grid technology was an important step in moving forward with early smart grid research efforts. DOE has distributed these funds to universities, including the Illinois Institute of Technology, and

private companies to move these projects towards large-scale demonstrations. I

would be interested to hear from our witnesses how Congress can continue to support these collaborative efforts. In particular, how can Congress support efforts to

move these important projects towards commercial application?

I welcome our panel of witnesses, and I look forward to their testimony. Thank

you again, Mr. Chairman.

Chairman BAIRD. It is now my pleasure to introduce our witnesses at this time. Ms. Patricia Hoffman is the Acting Assistant

Secretary of the Office of Electric Delivery and Energy Reliability

at the Department of Energy. Ms. Suedeen—am I pronouncing that

right? Is it Sueldeen or Suedeen?

Ms. KELLY. Suedeen.

Chairman BAIRD. Suedeen G. Kelly is the Commissioner of the

Federal Energy Regulatory Commission. Dr. George Arnold is the

National Coordinator for Smart Grid Interoperability at the National Institute of Standards and Technology. Mr. Paul De Martini

is the Vice President of Advanced Technology for Southern California Edison, Mr. Jeff Ross, Executive Vice President for

GridPoint Incorporated, and finally, Mr. Michael Stoessl is the

Group President of Cooper Power Systems. We thank you all. As

I think you have been briefed by staff, we try to keep the testimony

as near to five minutes as we can. As my distinguished friend, Dr.

Ehlers, used to say when he chaired the Committee, as you go past

five minutes there is a risk the chair drops out from under you and

you don’t get to testify for the rest of the hearing. Please keep your

comments brief, but we sure appreciate your testimony. Following

your comments, then we will have a series of questions from the

panel Members.

So with that, I will start from Ms. Hoffman from the Department

of Energy. Thank you. Please begin.

STATEMENT OF MS. PATRICIA HOFFMAN, ACTING ASSISTANT

SECRETARY, OFFICE OF ELECTRICITY DELIVERY AND ENERGY RELIABILITY, U.S. DEPARTMENT OF ENERGY

Ms. HOFFMAN. Thank you, Mr. Chairman and Members of the

Subcommittee for the opportunity to provide an update on the current status of smart grid activities at the Department of Energy as

well as future directions and priorities.

The Energy Independence and Security Act of 2007 and the American Recovery and Reinvestment Act expanded the role of the Federal Government substantially in research, development, demonstration and deployment of smart grid technologies, tools and

techniques. To fulfill this role, the Department of Energy and the

Office of Electricity Delivery and Energy Reliability are carrying

out smart grid activities in three primary areas: smart grid investVerDate 11-MAY-2000 13:37 Jan 22, 2010 Jkt 050954 PO 00000 Frm 00014 Fmt 6633 Sfmt 6601 C:\DWORK\E&E09\072309\50954 SCIENCE1 PsN: SCIENCE1
11

ment grants, smart grid demonstrations and smart grid research

and development.

One of our top priorities is to responsibly disburse funds made

available under the Recovery Act to develop and deploy smart grid

technologies designed to modernize our nation’s electric system. On

June 25, 2009, we released two funding opportunity announcements, one for smart grid investment grants and the second for

smart grid demonstrations. We are expecting to evaluate hundreds

of applications over the coming months and to make awards for

projects that will show the benefits of a more modern grid that

uses smart grid technologies, tools and techniques for the betterment of electricity consumers across America. We expect this funding to spark innovation, create businesses and provide jobs for

American workers. We believe these programs represent a once-ina-generation chance for game-changing investments, and we are

dedicated to making sure that the American taxpayers get maximum value from these investments in terms of a more reliable, secure, efficient, affordable and clean electric system.

While these programs are about transforming the delivery and

management of electric power through the application of today’s

smart grid technologies, tools and techniques such as phasor measurement units and advanced metering infrastructure, we are simultaneously working on the next generation systems for expanding

the capacity and increasing the flexibility and functioning of the

electric transmission and distribution system. Our fiscal year 2010

budget request for smart grid and related R&D is aimed at harnessing the Nation’s scientific and engineering talents in electric

systems and focusing it on discovery and innovation for new materials, algorithms, concepts and prototypes for power lines, substations, transformers, storage systems and power electronics.

Section 1302 of the Energy Independence and Security Act directed the Secretary of Energy to report to Congress concerning the

status of smart grid deployments nationwide and any regulatory or

government barriers to continued deployment. This week the Department of Energy released its Smart Grid Systems Report. The

report finds that while many smart grid capabilities, are still

emerging, penetration levels for substation automation, smart metering and distributed generation technologies are growing significantly.

A part of the vision for a smart grid is its ability to enable informed participation by consumers, making them an integral part

of the electric power system with bi-directional flows of energy and

coordination through communication mechanisms. A smart grid

should help balance supply and demand and enhance reliability by

modifying the manner in which consumers use and purchase electricity. These modifications can be the result of consumer choices

that motivate shifting patterns of behavior and consumption. These

choices involve new technologies, new information regarding electricity use, and new pricing and incentive programs.

A key aspect for implementation of smart grid technologies is the

need to address inter-operability and cyber security. Development

of industry-based standards governing how the many different devices involved in a smart grid can communicate and inter-operate

with each other in a seamless, efficient and secure manner is one

12

of the top priorities for DOE and other federal and State agencies.

Since the smart grid vision involves the two-way flow of information and electric power, for higher degrees of automation and control than what exist today in the electric transmission and distribution system, it is necessary for there to be standards that guide

manufacturers and smart grid developers, foster innovation and

provide a platform that enables a wide range of offerings to come

to market and have the opportunity to compete. As occurred with

the telecommunications and the evolution of the Internet, effective

standards form the basis upon which entrepreneurs can bring innovations to the marketplace, build new businesses and create job opportunities.

The public-private partnerships on phasor measurement units

have been instrumental in the development and deployment of this

technology and the formation of the North American SyncroPhasor

Initiative. The SyncroPhasor Initiative is an important technology

to provide greater insight into system operating conditions and

holds the promise to enable better indication of grid stress as well

as other performance characteristics. An important goal is to use

the phasor measurement unit (PMU)-derived information to trigger

corrective actions and maintain reliable system operation. This concludes my statement, Mr. Chairman. Thank you for the opportunity to testify. I look forward to answering any questions

you or your colleagues may have. [The prepared statement of Ms. Hoffman follows:]

PREPARED STATEMENT OF PATRICIA HOFFMAN

Thank you Mr. Chairman and Members of the Subcommittee for the opportunity to provide an update on the current status of smart grid activities at the Department of Energy as well as our future directions and priorities. The Energy Independence and Security Act of 2007 (EISA) and the American Recovery and Reinvestment Act of 2009 (Recovery Act) expand the role of the Federal

Government substantially in research, development, demonstration, and deployment

of smart grid technologies, tools, and techniques. To fulfill this role, the U.S. Department of Energy (DOE) and the Office of Electricity Delivery and Energy Reliability

(OE) are carrying out smart grid activities in three primary areas: (1) Smart Grid

Investment Grants, (2) Smart Grid Demonstrations, and (3) Smart Grid Research

and Development (R&D).

One of our top priorities is to responsibly disburse funds made available under

the Recovery Act to develop and deploy smart grid technologies designed to modernize the Nation’s electric system. On June 25, 2009 we released two Funding Opportunity Announcements (FOAs)—one for Smart Grid Investment Grants and the

second for Smart Grid Demonstrations. We are expecting to evaluate hundreds of

applications over the coming months and to make awards for projects that will show

the benefits of a more modern grid that uses smart grid technologies, tools, and

techniques for the betterment of electricity consumers across America. We expect

this funding to spark innovation, create businesses, and provide new jobs for American workers. We believe these programs represent a ‘‘once-in-a-generation’’ chance

for game-changing investments and we are dedicated to making sure that American

taxpayers get maximum value from these investments in terms of a more reliable,

secure, efficient, affordable, and clean electric system.

While these programs are about transforming the delivery and management of

electric power through application of today’s smart grid technologies, tools, and

techniques (such as phasor measurement units and advanced metering infrastructure), we are simultaneously working on ‘‘next generation’’ systems for expanding

the capacity and increasing the flexibility and functionality of electric transmission

and distribution systems. Our fiscal year 2010 budget request for smart grid and

related R&D is aimed at harnessing the Nation’s scientific and engineering talent

in electric systems and focusing it on discovery and innovation for new materials,

algorithms, concepts, and prototypes for power lines, substations, transformer

banks, feeder lines, storage systems, and switchgear to increase efficiency, reliVerDate 11-MAY-2000 13:37 Jan 22, 2010 Jkt 050954 PO 00000 Frm 00016 Fmt 6633 Sfmt 6621 C:\DWORK\E&E09\072309\50954 SCIENCE1 PsN: SCIENCE1
13

ability, security, resiliency, functionality, throughput, and energy density while reducing costs, footprint, and environmental impacts.

Smart Grid Performance Metrics and Trends

Section 1302 of Title XIII of the Energy Independence and Security Act of 2007

directed the Secretary of Energy to ‘‘. . . report to Congress concerning the status

of smart grid deployments nationwide and any regulatory or government barriers

to continued deployment.’’ This week the Department of Energy released the Smart

Grid Systems report. The report finds that while many smart grid capabilities are

emerging, penetration levels for substation automation, smart metering, and distributed generation technologies are growing significantly.

A part of the vision of a smart grid is its ability to enable informed participation

by customers, making them an integral part of the electric power system. With bidirectional flows of energy and coordination through communication mechanisms, a

smart grid should help balance supply and demand and enhance reliability by modifying the manner in which customers use and purchase electricity. These modifications can be the result of consumer choices that motivate shifting patterns of behavior and consumption. These choices involve new technologies, new information regarding electricity use, and new pricing and incentive programs.

Supporting the bi-directional flow of information and energy is a foundation for

enabling participation by consumer resources. Advanced metering infrastructure

(AMI) is receiving the most attention in terms of planning and investment. Currently AMI comprises about 4.7 percent of all electric meters and their use for demand response is growing. Approximately 52 million meters are projected to be installed by 2012. As many service areas do not yet have demand response signals

available, a significant number of the meters installed are estimated not being used

for demand response activities. Pricing signals can provide valuable information for

consumers (and the automation systems that reflect their preferences) to decide on

how to react to grid conditions. A Federal Energy Regulatory Commission (FERC)

study found that in 2008 slightly over one percent of all customers received a dynamic pricing tariff, with nearly the entire amount represented by time-of-use tariffs (energy price changes at fixed times of the day). Lastly, the amount of load participating based on grid conditions is beginning to show a shift from traditional interruptible demand at industrial plants toward demand-response programs that either allow an energy-service provider to perform direct load control or provide financial incentives for customer-responsive demand at homes and businesses.

Distributed energy resources and interconnection standards to accommodate generation capacity appear to be moving in positive directions. Accommodating a large

number of disparate generation and storage resources requires anticipation of

intermittency and unavailability, while balancing costs, reliability, and environmental emissions. Distributed generation (carbon-based and renewable) and storage

deployments, although a small fraction (1.6 percent) of total summer peak, appear

to be increasing rapidly. In addition, 31 states have interconnection standards in

place, with 11 states progressing toward a standard, one state with some elements

in place, and only eight states with none.

Gross annual measures of operating efficiency have been improving slightly as energy lost in generation dropped 0.6 percent to 67.7 percent in 2007 and transmission

and distribution losses also improved slightly. The summer peak capacity factor declined slightly to 80.8 percent while overall annual average capacity factor is projected to increase slightly to 46.5 percent. Contributions to these measures include

smart grid related technology, such as substation automation deployments. While

transmission substations have considerable instrumentation and coordination, the

value proposition for distribution-substation automation is now receiving more attention. Presently about 31 percent of substations have some form of automation,

with the number expected to rise to 40 percent by 2010. The deployment of dynamic

line rating technology is also expected to increase asset utilization and operating efficiency; however, implementations thus far have had very limited penetration levels.

The Smart Grid Investment Grant Program

The overall purpose of the Smart Grid Investment Grant Program (SGIG) is to

accelerate the modernization of the Nation’s electric transmission and distribution

systems and promote investments in smart grid technologies, tools, and techniques

to increase flexibility, functionality, inter-operability, cyber security, situational

awareness, resiliency, and operational efficiency.

14

The goals of the program involve accelerating progress toward a modern grid that provides the following specific characteristics that DOE believes define what a

smart grid would accomplish:

• Enabling informed participation by consumers in retail and wholesale electricity markets.

• Accommodating all types of central and distributed electric generation and

storage options.

• Enabling new products, services, and markets.

• Providing for power quality for a range of needs by all types of consumers.

• Optimizing asset utilization and operating efficiency of the electric power system.

• Anticipating and responding to system disturbances.

• Operating resiliently to attacks and natural disasters.

The SGIG FOA issued on June 25th calls for the submission of project applica- tions in three phases. Phase I applications are due August 6, 2009; Phase II applications are due November 4, 2009; and Phase III applications are due March 3, 2010.

We expect to make Phase I selections in September 2009.

There is approximately $3.4 billion available for this solicitation for projects in

two categories:

• Smaller projects in which the federal share would be in the range of $300,000 to $20,000,000.

• Larger projects in which the federal cost share would be in the range of

$20,000,000 to $200,000,000.

We expect about 60 percent of the funds will be allocated to larger projects and

about 40 percent for smaller projects. The period of performance for awarded

projects is three years, or less.

Project applications will be considered in six topic areas:

• Equipment manufacturing,

• Customer systems,

• Advanced metering infrastructure,

• Electric distribution systems,

• Electric transmission systems, and

• Integrated and/or crosscutting systems.

A technical merit review of the applications will be conducted by our own staff

plus experts from colleges, universities, national laboratories, and the private sector.

Reviewers will be subject to non-disclosure and conflict of interest agreements and

will apply the following technical merit review criteria:

• The adequacy of the technical approach for enabling smart grid functions;

• The adequacy of the plan for project tasks, schedule, management, qualifications, and risks;

• The adequacy of the technical approach for addressing inter-operability and

cyber security, and

• The adequacy of the plan for data collection and analysis of project costs and

benefits.

The Smart Grid Demonstration Program

The overall purpose of the Smart Grid Demonstrations Program (SGDP) is to

demonstrate how a suite of existing and emerging smart grid technologies can be

innovatively applied and integrated to investigate technical, operational, and business-model feasibility. The aim is to demonstrate new and more cost-effective smart

grid technologies, tools, techniques, and system configurations that significantly improve upon the ones that are either in common practice today or are likely to be

proposed in the Smart Grid Investment Grant Program.

The SGDP FOA was also released on June 25th and calls for applications to be

submitted by August 26, 2009 in two areas of interest:

• Regional demonstrations, and

• Grid-scale energy storage demonstrations.

The regional demonstration area covers projects involving electric system coordination areas, distributed energy resources, transmission and distribution infrastrucVerDate 11-MAY-2000 13:37 Jan 22, 2010 Jkt 050954 PO 00000 Frm 00018 Fmt 6633 Sfmt 6621 C:\DWORK\E&E09\072309\50954 SCIENCE1 PsN: SCIENCE1
15

ture, and information networks and finance. The grid-scale energy storage demonstration area covers battery storage for load shifting or wind farm diurnal operations, frequency regulation ancillary services, distributed energy storage for grid

support, compressed air energy storage, and demonstration of promising energy

storage technologies and advanced concepts. Approximately $615 million is available for awards with 8–12 regional demonstra- tion projects and 12–19 energy storage projects expected. The period of performance

for awards is three to five years.

Inter-operability and Cyber Security

A key aspect for the implementation of smart grid technologies, tools, and tech- niques nationwide is the need to address inter-operability and cyber security. Development of industry-based standards for governing how the many different devices

involved in smart grid can communicate and inter-operate with each other in a

seamless, efficient, and secure manner is one of the top priorities for OE and other

federal and State agencies. Since the smart grid vision involves the two-way flow

of both information and electric power, and for higher degrees of automation and

control than exist in today’s electric transmission and distribution system, it is necessary for there to be standards that guide manufacturers and smart grid developers, foster innovation, and provide for a platform that enables a wide range of offerings to come to market and have the opportunity to compete. As occurred with

telecommunications and the evolution of the Internet, effective standards form the

basis upon which entrepreneurs can bring innovations to the marketplace, build

new businesses, and create job opportunities. At the same time, it is paramount that smart grid devices and inter-operability standards include protections against cyber intrusions and have systems that are

designed from the start (not patches added on) that prevent hackers from disrupting

grid operations from gaining entry through the millions of new portals created by

the deployment of smart grid technologies, tools, and techniques. Through the Federal Smart Grid Task Force, we are collaborating with the Na- tional Institute of Standards and Technology (NIST) and other agencies and organizations in the development of a framework and roadmap for inter-operability standards, as called for in EISA Section 1305. Cyber security is a critical element of these

efforts. Our collaboration with NIST includes financial assistance involving $10 million of Recovery Act funding that was designated to support the development and

implementation of inter-operability standards. As a demonstration that the DOE is working to eliminate cyber security risks, the following language is part of the smart grid FOAs: Cyber security should be addressed in every phase of the engineering life cycle of the project, including design and procurement, installation and commissioning,

and the ability to provide ongoing maintenance and support. Cyber security solutions should be comprehensive and capable of being extended or upgraded in response to changes to the threat or technological environment. The technical approach to cyber security should include:

• A summary of the cyber security risks and how they will be mitigated at each

stage of the life cycle (focusing on vulnerabilities and impact).

• A summary of the cyber security criteria utilized for vendor and device selection.

• A summary of the relevant cyber security standards and/or best practices that

will be followed.

• A summary of how the project will support emerging smart grid cyber security standards.

DOE intends to work with those selected for award but may decide not to make

an award to an otherwise meritorious application if that applicant cannot provide

reasonable assurance that their cyber security will provide protection against broadbased systemic failures in the electric grid in the event of a cyber security breach.

The following technical merit review criteria will be used in the evaluation of applications and in the determination of the SGIG project awards. The relative importance of the four criteria is provided in percentages in parentheses.

1. Adequacy of the Technical Approach for Enabling Smart Grid Functions (40

percent)

2. Adequacy of the Plan for Project Tasks, Schedule, Management, Qualifications, and Risks (25 percent)

3. Adequacy of the Technical Approach for Addressing Inter-operability and

Cyber Security (20 percent)

16

4. Adequacy of the Plan for Data Collection and Analysis of Project Costs and

Benefits (15 percent)

Smart Grid Research and Development

OE’s fiscal year 2010 budget request contains a new line item to support a suite

of activities to develop the next generation of smart grid technologies, tools, and

techniques. While the FOAs are intended to accelerate existing systems, the R&D

activities are aimed at new inventions, discoveries, and technology advances. We

view grid modernization as a multi-decade process based on private sector investments and business innovations across a variety of markets and applications. This

will be a highly dynamic process and will require agility and flexibility in the way

OE manages its activities. There is direct linkage between the FOAs and the R&D,

as lessons learned during implementation will generate use cases, best practices,

and experience that will guide R&D directions and priorities.

Smart grid R&D priorities for fiscal year 2010 include:

• Integrated communications,

• Advanced components,

• Advanced control methods,

• Sensing and measurement,

• Improved interfaces and decision support, and

• Grid materials research.

Integrated communications involves projects to create an open architecture and

support inter-operability for a ‘‘plug & play’’ smart grid environment. Advanced components include projects to develop power electronics devices for high-voltage energy

conversion and flow control. Advanced control methods includes projects to provide

operating and control solutions for integrating renewable and distributed energy

systems into the electric transmission and distribution system, including plug-in

electric vehicles. Sensing and measurement includes projects for advanced devices

to evaluate system conditions and feed back such information to both grid operators

and consumers for optimized operations and controls. Improved interfaces and decision support includes projects to develop tools for grid operators and consumers to

use information streams from smart grid devices for real-time decision-making and

diagnostics. Grid materials research includes projects to explore advanced materials

for conductors, insulators, power electronics devices, and other equipment that involve materials that change shape or functionality in response to external conditions

where new qualities and performance features will be needed when those devices

operate in a smart grid environment.

Another R&D priority for 2010, and one that is closely related to and coordinated

with our work in smart grid R&D, involves Clean Energy Transmission and Reliability and projects involving the deployment of Phasor Measurement Units (PMUs).

OE leadership has been instrumental in the development and deployment of this

technology and in the formation of the North American SyncroPhasor Initiative

(NASPI), which involves OE collaboration with the Nation’s leading electric utilities,

power transmission companies, independent system operators, universities, national

laboratories, and the North American Electric Reliability Corporation. The NASPI

mission is to improve power system reliability and visibility through wide area

measurement and control. Synchrophasors are precise grid measurements now

available from monitors called phasor measurement units (PMUs). PMU measurements are taken at high speed (typically 30 observations per second—compared to

one every four seconds using conventional technology). Each measurement is timestamped according to a common time reference. Time stamping allows

synchrophasors from different utilities to be time-aligned (or ‘‘synchronized’’) and

combined together providing a precise and comprehensive view of the entire interconnection. Synchrophasors are providing greater insight into system operating conditions and hold the promise to enable a better indication of grid stress. An important goal is the use of PMU-derived information to trigger corrective actions that

maintains reliable system operation.

A map of PMU installations shows growing numbers across North America including the Eastern Interconnection, Western Interconnection, and the ERCOT Interconnection (which comprises most of Texas). Devices called phasor data concentrators aggregate PMU data for use by system operators for wide area visibility and

measurements. There are significant computational challenges in organizing and

analyzing phasor data and in developing models and analysis tools for grid operators and visualization and decision-making support. Such models and tools are essential for making key system-level improvements, including:

17

• Wide-area, real-time interconnection monitoring, visualization, and situational awareness of precursors of grid stress, e.g., phase angles, damping,

• Monitoring of key metrics and compliance with reliability standards,

• Translation of data and metrics into information dashboards for operator action,

• Model validation (e.g., dynamic models, load models),

• Event analysis of root causes and forensics,

• Small signal stability monitoring and oscillation detection,

• Automated control actions—smart switchable networks,

• Definition of ‘‘edge’’ and reliability margins for real-time dynamic system

management, and

• Computation of sensitivities and analysis of contingencies.

OE priorities in this area for fiscal year 2010 include development of prototype

small signal monitoring tools for damping of characteristic grid oscillations, development of dynamics analysis capabilities for PMU-based networks, development of advanced visualization and decision-making tools, assess possible PMU installations to

monitor dynamics from wind and other variable sources of renewable generation, research in new algorithms and computational methods for solving complex power system problems, and assessments of human factors requirements for grid operators

using operational simulations and scenario-based assessments.

Conclusion

OE’s smart grid activities are among our top priorities and crosscut virtually everything we do in electricity delivery and energy reliability. Our immediate attention is on the successful implementation of the two Recovery Act programs in smart

grid investment grants and demonstrations. At the same time we are moving forward on smart grid R&D to accelerate development of the next generation of smart

grid technologies, tools, and techniques. All of these efforts are aimed at modernizing the North American electric grid. We believe that grid modernization is paramount for achieving national energy, environmental, and economic goals for reductions in oil consumption and carbon emissions, as well as creation of new businesses

and jobs for American workers.

This concludes my statement, Mr. Chairman. Thank you for the opportunity to

testify. I look forward to answering any questions you and your colleagues may

have.

BIOGRAPHY FOR PATRICIA HOFFMAN

Patricia Hoffman is the Principal Deputy Assistant Secretary for the Office of

Electricity Delivery and Energy Reliability at the U.S. Department of Energy. The

Office of Electricity Delivery and Energy Reliability leads the Department of Energy’s (DOE) efforts to modernize the electric grid through the development and implementation of national policy pertaining to electric grid reliability and the management of research, development, and demonstration activities for ‘‘next generation’’ electric grid infrastructure technologies.

Hoffman is responsible for developing and implementing a long-term research

strategy for modernizing and improving the resiliency of the electric grid. Hoffman

directs research on visualization and controls, energy storage and power electronics,

high temperature superconductivity and renewable/distributed systems integration.

She also oversees the business management of the office including human resources,

budget development, financial execution, and performance management. Before joining the Office of Electricity Delivery and Energy Reliability, Hoffman was the Program Director for the Federal Energy Management Program which implements efficiency measures in the federal sector and the Program Manager for the Distributed

Energy Program that developed advanced natural gas power generation and combined heat and power systems. She also managed the Advanced Turbine System

program resulting in a high-efficiency industrial gas turbine product. Hoffman holds

a Bachelor of Science and a Master of Science in Ceramic Science and Engineering

from Penn State University.

Chairman BAIRD. Thank you, Ms. Hoffman.

Ms. Kelly.

18

STATEMENT OF MS. SUEDEEN G. KELLY, COMMISSIONER,

FEDERAL ENERGY REGULATORY COMMISSION

Ms. KELLY. Thank you, Mr. Chairman and Members of the Subcommittee for the opportunity to testify today. My name is Suedeen

Kelly. I am a Commissioner on the Federal Energy Regulatory

Commission, and what I am going to do now is describe FERC’s efforts to develop and implement a range of technologies which has

come to be known collectively as the smart grid. I am going to discuss three topics: our authority to act, the coordinated efforts we

have undertaken to date with other federal regulators and State

regulators, and the activity that we have undertaken on our own.

Regarding our authority to act, it derives from two statutes: the

Energy Independence and Security Act passed in 2007 and the Federal Power Act, which has been with us for over 70 years now. The

Energy Independence and Security Act gives FERC authority in the

area of inter-operability standards for the smart grid. The Federal

Power Act gives FERC jurisdiction over part of the electricity industry and part of the electricity market. Specifically, there are

three areas under the Federal Power Act where we have jurisdiction that are relevant to smart grid development.

First, we have jurisdiction over the transmission of electricity by

public utilities but we don’t have jurisdiction over the distribution

of electricity, which is subject to State regulation. We have jurisdiction over the wholesale sales of electricity in interstate commerce

by public utilities, but we don’t have jurisdiction over retail sales,

which is under the jurisdiction of State regulators. And we have jurisdiction over the approval and enforcement of reliability standards for the bulk power system.

We have been coordinating over the last two years with federal

and State agencies. In the federal arena, smart grid efforts involve

a broad range of government agencies and the federal agencies include primarily those who are with you today: the Department of

Energy, the National Institute of Standards and Technology, and

FERC, as Ms. Hoffman has described DOE’s role on smart grid and

Dr. Arnold will soon describe the role of NIST. NIST will be involved in setting up the framework for inter-operability standard

development and overseeing that development. Once FERC determines that NIST’s work has led to sufficient consensus regarding

a standard, then FERC’s role under the Energy Independence and

Security Act is to adopt the inter-operability standards ‘‘needed to

ensure the functionality and inter-operability of smart grid.’’ So it

may be that some of the standards developed through the NIST

process will not ultimately fall into the category of ‘‘needed to ensure the functionality and inter-operability’’ but to the extent those

standards do fall into that category, it is FERC’s responsibility to

adopt them as regulations, or at least we have the authority to do

that.

Development of the inter-operability framework, as Dr. Arnold

will discuss, is a very challenging task. Recent funding for NIST’s

efforts will help but coordination among government agencies as

well as among industry participants is just as important. DOE,

NIST and FERC have been working with each other to ensure

progress, and those efforts will continue.

19

In the State arena, as I mentioned, utilities are regulated by

FERC at the transmission level and the wholesale level, and most

of them are also regulated by one or more State regulatory commissions at the distribution level and the retail sales level. Now, because smart grid technologies span the grid from the transmission

through the distribution level, the concurrent jurisdiction of federal

and State regulators, we believe, will best be served if both federal

and State regulators adopt complementary policies to avoid sending

regulatory signals. To address this as well as other issues related

to deployment of smart grid technology, I and Mr. Fred Butler, who

is Chairman of the New Jersey Public Utility Commission as well

as President of the Association of State Utility Commissioners,

formed a collaborative and we co-chair that collaborative between

FERC and the State commissions. At present, there are 21 states

that have become a member of that collaborative. Since its creation

15 months ago, the collaborative has explored a host of technological and regulatory issues involving the smart grid including the

development of a clearinghouse of information at the Department

of Energy as well as the drafting of criteria that we suggested to

the Department of Energy for the funding of smart grid technologies under the stimulus bill and we are now participating with

the help of Lawrence Berkeley Lab and the Pacific Northwest National Lab in the NIST process as a collaborative and in the development of DOE’s clearinghouse for information from smart grid

demonstration projects.

A critical issue as smart grid is deployed is the need to ensure

grid reliability and cyber security. FERC can use its existing authority to facilitate implementation of smart grid under the Federal

Power Act. Last week FERC adopted a smart grid policy statement

that basically has two parts. The first part identified priorities that

we see from our position of regulator of the electric industry for the

development of inter-operability standards. Cyber security is one of

those priorities as is standardized communication across intersystem interfaces. We also listed four functional priorities: wide

area situational analysis, demand response, electric storage and

electric transportation. The policy statement also specified certain

cost recovery mechanisms available for recovery of costs of transmission-owning utilities that want to invest in the smart grid facilities.

I appreciate the opportunity to testify today and I would be

happy to answer any questions that you might have.

[The prepared statement of Ms. Kelly follows:]

PREPARED STATEMENT OF SUEDEEN G. KELLY

Introduction and Summary

Mr. Chairman and Members of the Subcommittee, thank you for the opportunity

to speak here today. My name is Suedeen Kelly, and I am a Commissioner on the

Federal Energy Regulatory Commission (FERC or Commission). My testimony addresses the efforts to develop and implement a range of technologies collectively

known as the ‘‘smart grid.’’

Our nation’s electric grid generally uses decades-old technology and has not incorporated new digital technologies extensively. Digital technologies have transformed

other industries such as telecommunications. A similar change has not yet happened

for the electric grid. As detailed below, a smart grid can provide a range of benefits

to the electric industry and its customers, enhancing its efficiency and enabling its

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technological advancement while ensuring its reliability and security. While we are

moving forward expeditiously on smart grid, its implementation will take time.

Smart grid efforts involve a broad range of government agencies, at both the federal and State levels. The federal agencies include primarily the Department of Energy (DOE), the National Institute of Standards and Technology (NIST) and the

FERC. DOE’s tasks include funding research and development; awarding grants for

smart grid projects; managing the Smart Grid Task Force, discussed below; and developing a smart grid information clearinghouse. NIST has primary responsibility

for coordinating development of an ‘‘inter-operability framework’’ allowing smart

grid technologies to communicate and work together. The FERC is then responsible

for adopting inter-operability standards, once FERC is satisfied that NIST’s work

has led to sufficient consensus.

Development of the inter-operability framework is a challenging task. Recent

funding for NIST’s efforts will help, but cooperation and coordination among government agencies and industry participants is just as important. DOE, NIST and FERC

have been working with each other and with other federal agencies to ensure

progress, and those efforts will continue. FERC also has been coordinating with

State regulators, to address common issues and concerns.

The FERC can use its existing authority to facilitate implementation of smart

grid. For example, through its recent final smart grid Policy Statement (Policy

Statement), the Commission has specified criteria for recovery of costs of investing

in jurisdictional smart grid facilities.

A critical issue as smart grid is deployed is the need to ensure grid reliability and

cybersecurity. The significant benefits of smart grid technologies must be achieved

without taking reliability and security risks that could be exploited to cause great

harm to our nation’s citizens and economy.

Finally, if the intent of Congress is that everyone must comply with the smart

grid standards adopted by the Commission under the Energy Independence and Security Act of 2007 (EISA), additional legislation would need to be considered.

What is the Smart Grid?

‘‘Smart grid’’ refers to the effort to modernize the electric grid to improve the way

we deliver and use power. The smart grid takes the existing electricity delivery system and makes it smarter by linking seamless communications systems to the electrical transmission and distribution system between any point of generation and any

point of consumption. It can monitor, protect and automatically optimize the operation of the interconnected elements. The smart grid will provide a two-way flow

of electricity and information to create a more automated and efficient energy delivery network.

The smart grid concept encompasses all levels of the electric system, and, therefore, a comprehensive list of applications and technologies could be quite long. Two

key examples, however, include: (1) smart thermostats capable of receiving and responding to electricity price or dispatch signals to lower or raise demand as necessary to balance available supply at the device level; and (2) advanced sensor networks on the distribution and transmission grids to improve awareness of actual

system conditions and, thus, permit more advanced control and use of those grids.

How do Technology and Regulation Interact?

Existing retail and wholesale regulatory frameworks generally assume that load

(i.e., customer consumption; also called demand) is an uncontrollable variable that

can only be addressed with controllable generation. Accordingly, load pays to consume the energy it needs, and generation is paid to meet that need no matter how

variable and unpredictable it may be. This mutes any incentive for load to shift its

usage in grid-favorable ways and increases the challenge and cost of accommodating

such load with generation. The smart grid concept seeks to move away from this

framework by making all aspects of the electric system, including the load side,

more transparent, interactive, and responsive.

This interplay between technology and regulation is visible in the Commission’s

examination of its rate policies in light of the new Congressional directive in the

EISA to initiate rule-makings on smart grid inter-operability standards. As explained in more detail below, the Commission recently issued a smart grid Policy

Statement that adopts an interim rate policy to help encourage investment in smart

grid systems.

At the consumer level, a smart grid could include smart devices, such as smart

thermostats capable of receiving and responding to electricity price or dispatch signals to lower or raise demand as necessary to balance available supply at the device

level. State regulators have the authority and ability to provide pricing and dispatch

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signals at retail. If signals reflect real-time costs, consumers are likely to buy and

install smart devices. For example, consumers might install smart thermostats if

regulators provide real-time price signals.

What Federal Regulation Applies?

Federal regulation relevant to smart grid is found in the following statutes: EISA; the Energy Policy Act of 2005; and the American Recovery and Reinvestment Act of

2009. The provisions of the FPA can also be used to advance smart grid tech- nologies. These are discussed below. Section 1301 of the EISA states that ‘‘it is the policy of the United States to sup- port the modernization of the Nation’s electricity transmission and distribution system to maintain a reliable and secure electricity infrastructure that can meet future

demand growth and to achieve’’ a number of benefits. Section 1301 specifies benefits

such as: increased use of digital technology to improve the grid’s reliability, security,

and efficiency; ‘‘dynamic optimization of grid operations and resources, with full

cyber-security;’’ facilitation of distributed generation, demand response, and energy

efficiency resources; and integration of ‘‘smart’’ appliances and consumer devices, as

well as advanced electricity storage and peak-shaving technologies (including plugin hybrid electric vehicles). Section 1305(a) of the EISA gives NIST ‘‘primary responsibility to coordinate the development of a framework that includes protocols and model standards for information management to achieve inter-operability of smart grid devices and systems.’’

NIST is required to solicit input from a range of others, including the GridWise Architecture Council and the National Electrical Manufacturers Association, as well as

two international bodies, the Institute of Electrical and Electronics Engineers and

the North American Electric Reliability Corporation (NERC). Many of the organizations working with NIST on this issue develop industry standards through extensive

processes aimed at achieving consensus. Although the EISA does not define inter-operability, definitions put forth by oth- ers often include many of the same elements. These include: (1) exchange of meaningful, actionable information between two or more systems across organizational

boundaries; (2) a shared meaning of the exchanged information; (3) an agreed expectation for the response to the information exchange; and (4) requisite quality of service in information exchange: reliability, accuracy and security. (See GridWise Architecture Council, ‘‘Inter-operability Path Forward Whitepaper,’’ www.gridwiseac.org)

Pursuant to EISA section 1305(d), once the Commission is satisfied that NIST’s

work has led to ‘‘sufficient consensus’’ on inter-operability standards, it must then

‘‘institute a rule-making proceeding to adopt such standards and protocols as may

be necessary to insure smart-grid functionality and inter-operability in interstate

transmission of electric power, and regional and wholesale electricity markets.’’ Section 1305 does not specify any other prerequisites to Commission action, such as a

filing by NIST with the Commission or unanimous support for individual standards

or a comprehensive set of standards.

The Commission’s role under EISA section 1305 is consistent with its responsibility under section 1223 of the Energy Policy Act of 2005. Section 1223 directs

FERC to encourage the deployment of advanced transmission technologies, and expressly includes technologies such as energy storage devices, controllable load, distributed generation, enhanced power device monitoring and direct system State sensors. Recently, the American Recovery and Reinvestment Act of 2009 (the ‘‘Stimulus

Bill’’) appropriated $4.5 billion to DOE for ‘‘Electricity Delivery and Energy Reliability.’’ The authorized purposes for these funds include, inter alia, implementation

of programs authorized under Title XIII of EISA, which addresses smart grid. Smart

grid grants would provide funding for up to 50 percent of a project’s documented

costs. In many cases, State and/or federal regulators could be asked to approve

funding for the balance of project costs. The Secretary of Energy is required to develop procedures or criteria under which applicants can receive such grants. The

Stimulus Bill also states that $10 million of the $4.5 billion is ‘‘to implement [EISA]

section 1305,’’ the provision giving NIST primary responsibility to coordinate the development of the inter-operability framework. The Stimulus Bill also directed the Secretary of Energy to establish a smart grid information clearinghouse. As a condition of receiving smart grid grants, recipients

must provide such information to the clearinghouse as the Secretary requires.

As an additional condition, recipients must show that their projects use ‘‘open protocols and standards (including Internet-based protocols and standards) if available

and appropriate.’’ These open protocols and standards, sometimes also referred to

as ‘‘open architecture,’’ will facilitate inter-operability by allowing multiple vendors

to design and build many types of equipment and systems for the smart grid enviVerDate 11-MAY-2000 13:37 Jan 22, 2010 Jkt 050954 PO 00000 Frm 00025 Fmt 6633 Sfmt 6621 C:\DWORK\E&E09\072309\50954 SCIENCE1 PsN: SCIENCE1
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ronment. As the GridWise Architecture Council stated, ‘‘An open architecture encourages multi-vendor competition because every vendor has the opportunity to

build interchangeable hardware or software that works with other elements within

the system.’’ (See ‘‘Introduction to Inter-operability and Decision-Maker’s Checklist,’’

page 4, www.gridwiseac.org)

The Commission’s interest and authority in the area of smart grid derives not only from the EISA but also from its authority under the Federal Power Act (FPA)

over the rates, terms and conditions of transmission and wholesale sales in interstate commerce and its responsibility for reliability standards for the bulk-power

system. Specifically, the Commission has jurisdiction over transmission and sales for

resale of electric energy in interstate commerce by public utilities pursuant to FPA

section 201 and over the approval and enforcement of reliability standards for the

bulk-power system under FPA section 215. An additional issue involves enforcement of smart grid standards promulgated by the Commission under EISA section 1305. This section, which is a stand-alone provision instead of an amendment to the FPA, requires the Commission to promulgate

standards, but does not provide that the standards are mandatory or provide any

authority or procedures for enforcing such standards. If the Commission were to

seek to use the full scope of its existing FPA authority to require compliance with

smart grid standards, most of its authorities apply only to certain entities (i.e., public utilities under its rate-making authority in sections 205 and 206, or users, owners and operators of the bulk power system under its reliability authority in section

215). The Commission also has asserted jurisdiction in certain circumstances over

demand response programs involving both wholesale and eligible retail customers.

However, The Commission’s authority under the FPA excludes local distribution facilities unless specifically provided; its rate authority under sections 205 and 206

applies only to public utilities; and its section 215 reliability authority does not authorize it to mandate standards but rather only to refer a matter to NERC’s standard-setting process. Further, its section 215 reliability authority excludes Alaska

and Hawaii. If the intent of Congress is that everyone must comply with the smart

grid standards adopted by the Commission under the EISA, additional legislation

should be considered.

While FERC, by itself, may be able to take steps to foster smart grid technologies, achieving the full benefits of a smart grid will require coordination among a broad

group of entities, particularly DOE, NIST, FERC and State regulators. For example,

Congress itself recognized, in EISA section 1305(a)(1), the need for NIST to seek

input from FERC, the Smart Grid Task Force established by DOE and ‘‘other relevant federal and State agencies.’’ On another front, DOE’s authority to support up

to 50 percent of the cost of a smart grid project must be matched with regulatory

approvals allowing utilities to recover the rest of their costs in rates. Similarly, the

concurrent jurisdiction of the FERC and State commissions over many utilities will

require regulators to adopt complementary policies to avoid sending conflicting regulatory signals. More fundamentally, a smart grid will require substantial coordination between wholesale and retail markets and between the federal and State rules

governing those markets. Similarly, smart grid standards may require changes to

business practice standards already used in the industry, such as those developed

through the North American Energy Standards Board, and the industry and government agencies should support the work needed to evaluate and develop those

changes.

How are the FERC, NIST and DOE Collaborating?

As required by EISA section 1303, DOE has established the smart grid Task Force. The Task Force includes representatives from DOE, FERC, NIST, the Environmental Protection Agency and the Departments of Homeland Security, Agriculture and Defense. The Task Force seeks to ensure awareness, coordination and

integration of Federal Government activities related to smart grid technologies,

practices, and services. The Task Force meets on a regular basis, and has helped

inform the participating agencies of the smart grid efforts of other participants as

well as the efforts outside the Federal Government. FERC has designated two employees (one from the Office of Energy Policy and Innovation and one from the Office of Electric Reliability) to the Task Force. These employees bring a policy, rates,

reliability and cybersecurity perspective to the Task Force. The FERC routinely updates the Task Force on the FERC/NARUC smart grid Collaborative, discussed

below, and other FERC orders regarding smart grid policy.

Independent of the Smart Grid Task Force, the Commission has coordinated closely with NIST and DOE on the development of inter-operability standards for the

smart grid. Several FERC commissioners and staff have participated in relevant

meetings and conferences as speakers and/or session chairs. FERC staff also confers

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regularly with NIST and DOE staff on inter-operability standards, discussing matters such as accelerating the timeline, strategies to achieve consensus, and setting

priorities.

How is FERC Collaborating with the States?

In February 2008, FERC and NARUC began the Smart Grid Collaborative. I and

Commissioner Frederick F. Butler of the New Jersey Board of Public Utilities cochair the collaborative. Initiation of a collaborative effort was timely because State

regulators were increasingly being asked to approve pilot or demonstration projects

or in some cases widespread deployment in their states of advanced metering systems, one key component of a comprehensive smart grid system.

The Collaborative began by convening joint meetings to hear from a range of experts about the new technologies. A host of issues were explored. Key among them

were the issues of inter-operability, the types of technologies and communications

protocols used in smart grid applications, the sequence and timing of smart grid deployments, and the type of rate structures that accompany smart grid projects.

Through these meetings, Collaborative members learned of a range of smart grid

projects already in place around the country. The smart grid programs in existence

were varied in that they used a mix of differing technologies, communications protocols and rate designs. Collaborative members began discussing whether a smart grid

information clearinghouse could be developed that would then allow an analysis of

best practices. This information could help regulators make better decisions on proposed smart grid projects in their jurisdictions. In keeping with the Stimulus Bill,

DOE is working to establish such a clearinghouse.

The Collaborative members have begun to look beyond the information clearinghouse to who could best analyze this information to identify best practices from

smart grid applications. Funding is being sought for a project under the auspices

of the Collaborative that could act as an analytical tool to evaluate smart grid pilot

programs, using the information developed by the clearinghouse, once the clearinghouse information becomes available. DOE recently selected a contractor to set up

the clearinghouse.

The Collaborative also developed criteria to apply to projects seeking smart grid

grants. The Collaborative members focused on criteria that could help them fulfill

their legal responsibilities as to smart grid projects they would be asked to approve.

DOE has adopted many of the Collaborative’s suggested funding criteria regarding

data disclosures, cybersecurity, inter-operability and requirements related to the

identification of project benefits.

In addition, the Collaborative has met with DOE staff to discuss possible funding

for technical assistance to the Collaborative and State regulators as they engage

with NIST and other stakeholders in the development of smart grid inter-operability

standards and protocols.

The Commission and NARUC also have a Demand Response Collaborative headed

up by FERC Chairman Jon Wellinghoff, Commissioner Phyllis Reha of the Minnesota Public Utilities Commission, and Commissioner Katrina McMurrian of the

Florida Service Commission. The Demand Response Collaborative often focuses on

smart grid issues because demand response will play an integral role in the smart

grid. Smart grid technologies have considerable potential to facilitate demand response, and demand response can help address bulk-power system challenges, including reliably integrating unprecedented amounts of renewable resources into the

grid.

How is the FERC Reaching Out to Industry?

The Commission performs continuing outreach within the electric power industry

to ensure that regulated entities are aware of NIST’s process for the development

of the framework for inter-operability standards and to encourage participation in

this process. Numerous discussions have occurred with regional transmission organizations, the ISO–RTO Council (a coordinating entity comprised of ten independent

system operators and regional transmission organizations in North America), and

public utilities that have been actively involved in smart grid projects, including

Xcel, AEP, SoCal Edison, PG&E, Oncor, Consumers Energy, and Duke. The Commission has also followed the efforts of the GridWise Architecture Council in order

to get a better understanding of smart grid inter-operability standards from an information technology point of view. The GridWise Architecture Council was formed

by DOE to promote and enable inter-operability among the many entities that interact with the Nation’s electric power system.

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The FERC’s Policy Statement

Last week, the Commission approved its smart grid Policy Statement. This action was preceded by the issuance of a proposed policy statement on March 19, 2009.

Over 70 comments were received in response to the proposed policy statement. The Policy Statement prioritizes the development of key inter-operability stand- ards. This prioritization will facilitate progress on the smart grid technologies that

will provide the largest benefits to a broad group of market participants. The Policy Statement establishes two cross-cutting and four functional priorities for inter-operability standards. The cross-cutting priorities are cybersecurity and

standardized communication across inter-system interfaces. To insure the integrity

and reliability of the underlying bulk-power system, the Commission has required

a demonstration of sufficient cybersecurity protections in all proposed smart grid

standards to be considered in the FERC rule-making process directed by the EISA,

including, where appropriate, a proposed smart grid standard applicable to local distribution-related components of smart grid. The Commission has also recognized

that development of a common semantic framework and software models to enable

effective communication and coordination across the inter-system interfaces is critical to supporting all of the smart grid goals, such as system self-healing, integration of diversified resources and improved system efficiency and reliability.

The four functional priorities are wide-area situational analysis, demand response, electric storage, and electric transportation. First, wide-area situational

analysis awareness is imperative for enhancing reliability of the bulk-power system

because it allows for greater knowledge of the current state of available resources,

load requirements and transmission capabilities. Second, smart grid technologies

have considerable potential to promote demand response, which can reduce wholesale prices and wholesale price volatility and reduce potential generator market

power. Third, as the technology advances, electricity storage will become a valuable

resource providing a variety of services to the bulk-power system, including helping

to address large-scale changes in generation mix. Finally, to the extent that new

electric transportation options become more widely adopted in the near future,

maintaining the reliable operation of the bulk-power system will require some level

of control over when and how electric vehicles draw electricity off the electric system. Therefore, the Commission has urged the early development of standards that

can permit distribution utilities to facilitate electric vehicle charging during off-peak

load periods.

In the Policy Statement, the Commission also adopted an interim rate treatment

to encourage the near-term deployment of smart grid systems capable of helping to

address challenges to the operation of the bulk-power system, if certain conditions

are met. Those conditions include showing that (1) the smart grid facilities will advance the smart grid concept, (2) reliability and cybersecurity of the bulk-power system will not be adversely affected, (3) the applicant has minimized the possibility

of stranded investment in smart grid equipment, and (4) the applicant must share

feedback useful to the inter-operability standards development process with the Department of Energy Smart Grid Clearinghouse. The conditions that FERC has put

in place for FERC-jurisdictional costs may serve as a model for retail regulators.

Conclusion

A coordinated and timely deployment of smart grid can provide many positive

benefits to the Nation’s electric industry and its customers, if we are careful to

maintain and enhance grid security and reliability at the same time. Indeed, I

would expect smart grid to evolve in many unanticipated but beneficial ways. Welldesigned standards and protocols are needed to make smart grid a reality. They will

eliminate concerns about technology obsolescence, allow system upgrades through

software applications, and ultimately permit plug-and-play devices, regardless of

vendor. The dynamic nature of smart grid technologies and practices are, in some

cases, creating challenges in government oversight of the power industry. There is

a great need for continued collaboration between State and federal regulators and

between industry and government in general. The FERC is committed to working

closely with DOE, NIST and others to facilitate rapid deployment of innovative, secure smart grid technologies.

Thank you again for the opportunity to testify today. I would be happy to attempt

to answer any questions you may have.

BIOGRAPHY FOR SUEDEEN G. KELLY

Suedeen G. Kelly is a Commissioner at the Federal Energy Regulatory Commission, who has served since November 2003. In December 2004, she was confirmed

25

to a second term that expires June 30, 2009. Previously she was a Professor of Law

at the University of New Mexico School of Law, where she taught energy law, public

utility regulation, administrative law and legislative process. She also worked with

the law firm of Modrall, Sperling, Roehl, Harris & Sisk in Albuquerque from 2000

through 2003 and the law firm of Sheehan, Sheehan, and Stelzner from 1992

through 1999. In 2000, Ms. Kelly served as counsel to the California Independent

System Operator. In 1999, she worked as a Legislative Aide to U.S. Senator Jeff

Bingaman. Prior to joining the faculty of the Law School, Ms. Kelly served as Chair of the New Mexico Public Service Commission, which regulated New Mexico’s electric, gas

and water utilities. She had been a lawyer in the Office of the New Mexico Attorney

General and with the New Mexico firm of Leubben, Hughes & Kelly. She also

worked in Washington, DC, for the Natural Resources Defense Council and Ruckelshaus, Beveridge, Fairbanks & Diamond.

Education: University of Rochester, B.A. with Distinction in Chemistry and a J.D. cum laude from Cornell Law School. She is admitted to the bars of New Mexico and

the District of Columbia.

Chairman BAIRD. Thank you, Ms. Kelly. Dr. Arnold.

STATEMENT OF DR. GEORGE W. ARNOLD, NATIONAL COORDINATOR FOR SMART GRID INTER–OPERABILITY, NATIONAL

INSTITUTE OF STANDARDS AND TECHNOLOGY, U.S. DEPARTMENT OF COMMERCE

Dr. ARNOLD. Chairman Baird, Ranking Member Inglis and Mem- bers of the Subcommittee, thank you for this opportunity to discuss

NIST’s progress in accelerating the development of standards needed to realize a secure and inter-operable nationwide smart grid. Working with industry, government and consumer stakeholders, NIST is providing strong national and technical leadership to help

make a reliable, robust smart grid a reality. The Recovery Act provided NIST with $10 million from the Department of Energy and

we are using this funding to speed up the process to build a standards foundation for the smart grid. First, I would like to summarize our three-phase effort to expedite development of this foundation.

Phase I is well underway and nearing completion. On the basis of stakeholder input, we have identified an initial slate of 16 standards and 64 more are undergoing public review. In September, we

intend to issue for public comment Release 1.0 of the NIST framework and roadmap for smart grid inter-operability standards. The

document that we deliver to FERC will describe a reference architecture, an initial set of standards to support secure and inter-operable implementation and prioritized action plans to fill gaps. In

Phase II, which we launched last month with a request for proposal, NIST is establishing a formal standards panel, a privatepublic partnership to drive long-term progress in the development

and implementation of the hundreds of standards that eventually

will be needed. Later this year in Phase III, NIST will announce

plans for a framework for testing and certifying how standards are

implemented in the smart grid devices, systems and processes.

As we work with the many stakeholder groups, we are uncovering and addressing many issues that are impediments to a fully

operational smart grid. For example, there is a foundational smart

meter-related standard that is so feature-rich that different meter

vendors have implemented it in different ways. This ambiguity undermines inter-operability. We have commissioned a fast track efVerDate 11-MAY-2000 13:37 Jan 22, 2010 Jkt 050954 PO 00000 Frm 00029 Fmt 6633 Sfmt 6601 C:\DWORK\E&E09\072309\50954 SCIENCE1 PsN: SCIENCE1
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fort to revise the standard and to ensure upgradability to extend

the useful life of smart meter deployments.

We are also focusing on the plethora of wired and wireless communications technologies being employed by the smart meter manufacturers. The goal is to provide guidance on the selection of communication standards—one size does not fit all in this case—and

not to mandate the use of a particular technology or spectrum.

Then there is the matter of supporting plug-in electric vehicles,

or PEVs. The interface between the PEVs and the grid needs to

support two-way flow of electricity and information and to meet relevant standard codes. At least seven sets of standards under the

auspices of five different standards development organizations

needs to be completed or revised to provide this functionality.

These are but a few of the many technical issues that we are addressing with the engagement of the many hundreds of stakeholders in our process.

Mr. Chairman, I would like to conclude with some final thoughts.

First and foremost, we will continue to stress the critical dimension

of security in our work. We need to design in the necessary safeguards at the very beginning. Second, I believe the approach we

are taking to develop standards for the smart grid, a strong publicprivate partnership forged with active White House and Cabinetlevel leadership is the right one. Third, we must aim to develop

and use international standards wherever possible to enable U.S.

manufacturers to capture global market opportunities. Fourth,

NIST is engaging, as Commissioner Kelly has cited, the states as

integral partners in the standards effort. And finally, it is essential

that we base the smart grid on open standards in order to foster

innovation.

In conclusion, NIST is proud to have been given such an important role in the smart grid effort. We are committed to achieving

the Administration’s vision of a cleaner, greener, more efficient and

effective electric power grid that creates jobs and reduces our dependence on others to meet our energy needs.

Thank you for this opportunity, and I would be happy to answer

any questions.

[The prepared statement of Dr. Arnold follows:]

PREPARED STATEMENT OF GEORGE W. ARNOLD

Introduction

Chairman Baird, Ranking Member Inglis, and Members of the Subcommittee, I

am George Arnold, the National Coordinator for Smart Grid Inter-operability at the

Department of Commerce’s National Institute of Standards and Technology (NIST).

Thank you for the opportunity to appear before you today to discuss NIST’s

progress in accelerating the development of standards needed to realize a secure

and inter-operable nationwide Smart Grid.

A Smart Grid would replace the current, outdated system and employ real-time,

two-way communication technologies to allow users to connect directly with power

suppliers. The development of the grid will create jobs and spur the development

of innovative products that can be exported. Once implemented, the Smart Grid is

expected to save consumers money and reduce America’s dependence on oil by improving efficiency and spurring the use of renewable energy sources.

President Obama’s comprehensive energy plan sets ambitious short- and longterm goals. And, the American Recovery and Reinvestment Act includes $11 billion

27

1 ‘‘The American Reinvestment and Recovery Plan—By the numbers,’’ http://

www.whitehouse.gov/assets/documents/recovery¥plan¥metrics¥report¥508.pdf 2S.M. Kaplan, Electric Power Transmission: Background and Policy Issues. Congressional Research Service, April 14, 2009.

in investments to ‘‘jump start the transformation to a bigger, better, smarter grid.’’ 1

The President’s Council of Economic Advisors estimates that the number of environment-based jobs will increase by more than 50 percent between 2000 and 2016, and

jobs created by the Smart Grid are part of this.

The Smart Grid is a critical piece of the Administration’s overall goal of fostering

and creating millions of jobs in a green economy through the creation of whole new

industries and green entrepreneurs, who are able to grow and thrive as a result of

the investments made in a Smart Grid. NIST’s mission to advance innovation and

U.S. industrial competitiveness fits perfectly with this goal and we’re committed to

helping make that vision a reality.

Modernizing and digitizing the Nation’s electrical power grid—the largest interconnected machine on Earth—is an enormous challenge and a tremendous opportunity. Success requires a combination of quick action and sustained progress in implementing and integrating the components, systems, and networks that will make

up the Smart Grid.

NIST is providing strong national leadership to drive the creation of inter-operability standards needed to make the Smart Grid a reality. We are carrying out our

standards-related responsibility with a strong sense of urgency. We are engaging industry, government, and consumer stakeholders in an open, public process to expedite identification and development of standards critical to achieving a reliable and

robust Smart Grid. An initial slate of 16 standards has already been identified, 64

more are undergoing public comment, and a roadmap for development of additionally-needed standards will be published in September.

Congress assigned NIST responsibility to coordinate development of these standards in the Energy Independence and Security Act of 2007.

The Recovery Act provided NIST with $10 million in funding from the Department of Energy (DOE) to ensure that we had the resources to get the job done. Development of standards typically occurs at a glacial pace. ARRA funds are the providing the major boost needed to dramatically speed up this process.

NIST is well suited for the role of leading the charge for rapid standards development. The agency has earned a reputation as an ‘‘honest broker’’—an impartial,

technically knowledgeable third party with a long history of working collaboratively

with industry and other government agencies. These partners include the DOE,

which leads the overall federal Smart Grid effort. They also include the Federal Energy Regulatory Commission (FERC), State regulatory commissions, and many others.

In its role as the Nation’s metrology institute, NIST has provided measurement

technology and technical assistance to utilities, equipment manufacturers, and other

power-system stakeholders. For example, NIST has developed measurements and a

special calibration service for power monitoring instruments so that utilities can

know the operational state of the power grid in real time to minimize disruptions

and outages. With such an integrated monitoring system major blackouts that have

ravaged regions of the Nation in the past can be mitigated. NIST participates in

key international standards organizations, and NIST’s measurement and testing expertise is recognized worldwide.

NIST also is a recognized expert in advanced networking technology and in the

cyber security countermeasures needed to prevent or detect and mitigate intrusions

and network disruptions. NIST also has collaborated with businesses and standards

organizations on guidelines and standards to protect industrial supervisory control

and data acquisition (SCADA) systems and to secure their interfaces to the power

grid. NIST know-how extends to standards and measurements for building control

systems and their links to the grid.

These strengths are allowing NIST to make a unique contribution to public and

private sector efforts to build the Smart Grid.

NIST Plan to Expedite Standards for the Smart Grid

The need to get this critical standards development work done now is clear. A recent Congressional Research Service report,2 for example, cited the ongoing deployment of smart meters as an area in need of widely accepted standards. Ultimately,

the U.S. investment in smart meters is predicted to total $40–$50 billion.

28

3ON World, ‘‘100 Million New Smart Meters within the Next Five Years.’’ June 17, 2009;

http://www.onworld.com/html/newssmartmeter.htm

Globally, 100 million new smart meters are predicted to be installed over the next five years.3

DOE’s Smart Grid Investment Grant Program will provide $3.4 billion for cost- shared grants to support manufacturing, purchasing and installation of existing

smart grid technologies that can be deployed on a commercial scale. Sound inter-operability standards are needed to insure that these technology in- vestments are not stranded. Such standards enable diverse systems and their components to work together and to securely exchange meaningful, actionable information.

NIST took aggressive action in March of this year to accelerate the identification of needed standards. The agency established a Smart Grid National Coordinator position—my role—to provide visible leadership at the national level and focus accountability for managing NIST smart grid resources to ensure success. In April, NIST launched a three-phase plan to expedite development and promote

widespread adoption of Smart Grid inter-operability standards. This plan was developed after consulting with dozens of stakeholders in industry, the standards community, and Federal and State government. It satisfies the need to rapidly establish

an initial set of standards, while providing a robust, well governed process for the

evolution of smart grid standards. Here’s a rundown of the three phases, parts of which run in parallel:

Phase I—Engage stakeholders in a participatory public process to identify

applicable standards, gaps in currently available standards and priorities

for new standardization activities.

The work required in this phase is a very large task being done over a short pe- riod of time. Work on Phase I began in April and will conclude in September with

the publication of Release 1.0 of the NIST Inter-operability Framework. To expedite

progress, NIST augmented its own technical resources through a contract with the

Electric Power Research Institute (EPRI). EPRI assisted NIST in engaging Smart

Grid stakeholders in assessing existing standards and identifying new standards

needs.

EPRI technical experts compiled and distilled stakeholder inputs, including tech- nical contributions made at two EPRI-facilitated, two-day, public workshops—one in

April and the other in May. The two workshops drew more than a thousand participants. The results are documented in EPRI’s ‘‘Report to NIST on the Smart Grid

Inter-operability Standards Roadmap,’’ which NIST released for public comment on

June 18. NIST is using this report, along with comments received, as an input in

developing the NIST framework for Smart Grid inter-operability standards, as

called for in EISA. Other inputs include the accomplishments of five Domain Expert

Working Groups established by NIST in 2008, and the Cyber Security Coordination

Task Group established in 2009. Cyber security is a top priority. The Cyber Security

Coordination Task Group was established to help ensure that NIST is addressing

the cyber security requirements of the Smart Grid as part of the NIST Smart Grid

Inter-operability Framework. The group includes over 150 experts from industry,

academia and government agencies. Early next month, NIST will convene another public workshop to get down to the nuts and bolts of developing plans and setting timelines for development of the new

or revised standards identified through this process. Representatives of standards

developing organizations—SDOs and user groups—will lead sessions at this workshop.

Developing standards for an advanced metering infrastructure is an example of one priority area. Research suggests that the combination of smart meters and demand response could reduce peak power demand by more than 20 percent. Such

benefits will also require standards for grid-connected consumer products and building systems. The September Release 1.0 document will describe an initial Smart Grid architecture; priorities for inter-operability standards, including cyber security; an initial set

of standards to support implementation; and plans to meet remaining standards

needs.

Phase II—Establish a formal private-public partnership to drive longerterm progress.

While initial standards for the Smart Grid will be identified in 2009, further

standards development will be needed to address gaps, harmonize standards, and

incorporate evolving technology. Industry has made it clear that a representative,

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reliable, and responsive organizational structure is needed to support and sustain

this evolutionary development. By the end of 2009, NIST plans to use ARRA funds

to establish, through a contract, a more permanent public-private partnership entity—a Smart Grid Inter-operability Standards Panel to serve this function.

Phase III—Develop and implement a framework for testing and certification.

Testing and certification of how standards are implemented in Smart Grid de- vices, systems, and processes are essential to ensure inter-operability and security

under realistic operating conditions. Industry has indicated that this is a high priority. NIST, in consultation with industry, government, and other stakeholders, intends to develop an overall plan for a testing and certification framework by the end

of 2009 and initiate steps toward implementation in 2010.

Now, I’d like to shift to some observations on the process and to identify several issues that could impact standards-related efforts and, ultimately, progress toward

realizing the Smart Grid vision.

Pace, Perseverance, and Perspective

The task of developing standards for a national infrastructure like the Smart Grid is a large and complex undertaking. However it is eminently doable. There have

been several previous national infrastructure standards projects of similar magnitude that were accomplished successfully and with which I have personal experience. Thirty years ago, Bell Laboratories successfully put in place architecture for the complete automation of maintenance and operations in the nationwide telecommunications network, with an underlying foundation of protocols and standards that utilized distributed computing and data networking technology of that era. That job

was comparable in scale to the current challenge of the Smart Grid; however the

coordination challenge was a bit easier because the national network at that time

was owned and operated by a single entity with a captive manufacturer rather than

3100 utilities and many more suppliers. A more recent effort that required industry-wide cooperation was the development of standards for so-called ‘‘next generation networks’’ that are transforming legacy

voice networks into packet networks integrating voice, video and data. These networks are being successfully deployed, embodying hundreds of standards developed

over a five-year period. However, the situation we face with the Smart Grid is that the deployment of some elements is out pacing the availability of firm standards. Clearly, the need for

identification and development of Smart Grid inter-operability standards is urgent.

This means that the diverse community of Smart Grid stakeholders must commit

to picking up the pace of standards development and to engaging in productive collaboration.

Fortunately, executives in government and industry agree with the Administra- tion that the challenge, while daunting, must be addressed as quickly and as thoroughly as possible to ensure success. Energy Secretary Steven Chu and Commerce

Secretary Gary Locke hosted a meeting at the White House of 70 industry leaders

from the IT, utility, manufacturing, and other sectors. The secretaries encouraged

the executives to devote the organizational energy, will, and resources necessary to

expedite the development and adoption of standards. The response was overwhelmingly positive. Yet, by its very nature, the process of developing voluntary standards from scratch can be painstakingly slow. Years—not weeks or months—are the customary

measurement units. In fact, when NIST announced its three-phase plan to expedite

the process, a newsletter called it an ‘‘unnaturally paced standards effort.’’ So, if the standards process were a track competition, it would be part sprint, part

mid-distance race, and part marathon.

In the sprint portion, we are identifying already-existing standards that can be applied to Smart Grid needs. In May, after analyzing input received at our first

workshop, NIST identified 16 standards for inclusion in the initial Smart Grid interoperability standards framework. This list of standards—all of which require further

development—was submitted for public review and comment.

There are additional examples of this ‘‘low hanging fruit.’’ In fact, the EPRI report identified more than 80 existing standards that could be applied or adapted to

Smart Grid inter-operability or cyber security needs.

EPRI’s report to NIST also flags 70 gaps and issues, and NIST continues to identify others. We are in the process of distilling, categorizing, and prioritizing these

gaps and issues. For those at the top of the list, we are developing ‘‘priority action

plans,’’ in consultation with standards organizations and other stakeholders.

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Our goal is to achieve agreement on individual and collaborative responsibilities

of the standards development organizations—the SDOs—to address and resolve

standards issues and gaps. And, we are asking the SDOs to achieve ‘‘personal bests’’

in terms of the time required to go from start to finish.

This is the mid-distance portion of the effort, and we will be setting ambitious

timetables for developing sound standards, along with associated conformance requirements. Clearly, there is a need for speed, but the standards process must be

systematic, not ad hoc.

That, in effect, will complete the first leg of the marathon. Ultimately, a robust,

secure Smart Grid that fosters sustainability and promotes innovation will be built

on an infrastructure consisting of hundreds of inter-operability standards. Persistence and perseverance in the domestic and international standards arenas will be

required over a span of, perhaps, a decade or more. The standards panel, which will

be established in the second phase of the plan, will help to maintain the consistency

of effort that will be critical to success.

Standards are necessary but not sufficient—a testing and certification regime is

essential. Developing a framework for testing and certification constitutes the third

phase of the NIST plan.

Examples of Issues

I would like to give you a few examples of the issues we are uncovering and how

we are going about addressing them in collaboration with industry and the SDOs.

Smart Meters are one of the earliest elements of the Smart Grid to be deployed

and they play an important role by allowing near real-time collection of data on

power usage that enables new forms of demand response programs and pricing. One

of the ‘‘low hanging fruit’’ standards identified by NIST is the ANSI C12.19 standard, which specifies the data tables captured by these meters. The National Electrical Manufacturers Association (NEMA) was the lead for this standards effort.

This is one of the most fundamental standards needed for the Smart Grid. Through

our workshop process, it was determined that this standard is so ‘‘feature rich’’ and

allows so much room for interpretation that different meter vendors have implemented it in different ways. This is a serious impediment to inter-operability. We

now know the standard will have to be revised, and it will take some time to gain

industry consensus on the revision.

As soon as we learned this, we called upon NEMA to convene a standards effort

with the leading meter manufacturers to develop a plan to upgrade the related

standards and develop an upgradeability standard for smart meters to ensure that

firmware in meters to be deployed in near future can be upgraded to accommodate

needed changes to the ANSI C12 standard. This effort will ensure that deployment

of smart meters conforming to this specification can proceed without risk of becoming stranded investments that are prematurely obsolete.

I would like to commend NEMA and the involved industry participants for recognizing the issue and for rising to this challenge.

We are also urgently focusing efforts on the plethora of communications technologies being employed by the smart meter manufacturers, both wired and wireless. There are proposals for new approaches, such as the Utility Telecom Council’s

proposal for the allocation of dedicated spectrum for utility communications. With

the high demand for spectrum from many different kinds of radio systems, the concept of dedicating spectrum for one particular application must be considered carefully so as not to use the critical resource inefficiently. A standards issue is the need

that multiple standards be supported to meet different real-world requirements and

is in keeping with Congress’s requirement that the NIST Inter-operability Framework be technology neutral to encourage innovation. However, the Federal Communications Commission has received reports that some wireless meters operating on

unlicensed frequencies have experienced interference from other unlicensed devices

that share the same frequencies. The potential for interference to wireless meters

will require study in order to develop recommendations and guidance on appropriate

standards and technologies for wireless smart meter communications.

Moreover, regardless of the outcome of these technical studies, there is no intention to mandate for smart meter systems the use of specific spectrum (licensed or

unlicensed) or the use of specific wireless technologies. Thus, all current systems,

as well as all systems under development, which fully comply with FCC requirements, will be allowed.

I would like to discuss one final example to illustrate the complexity of the coordination task to develop standards for new smart grid applications. Consider the

standards that are needed to support the wide-scale deployment of plug-in electric

vehicles (PEVs).

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4SAE—formerly known as the Society of Automotive Engineers is now referred to by the acronym SAE only. 5 IEEE—formerly known as the Institute of Electrical and Electronics Engineers, Inc., is now

referred to by the acronym IEEE.

Supporting PEVs on the grid is not just a matter of plugging them into an ordi- nary electric socket. Ideally PEVs should be charged when demand on the grid, and

hence the price of electricity, is low. The charging system into which a PEV is connected needs to be integrated into the Smart Grid demand response capability. The

batteries in PEVs can also be a source of energy for the grid, providing regulation

service or even energy support during periods of peak demand. Thus, the interface

between the PEVs and the grid needs to support two-way flow of electricity. In order

to be deployed, these interfaces and charging systems need to meet relevant electric

codes to ensure safety. There are at least seven sets of standards developed or being developed by five different organizations that need to be completed or revised to provide this

functionality. SAE International4 is developing the standards for the connector on the vehicle and the associated charging system; IEEE5 develops the standards that

are needed for these charging systems to feed power back into the grid; NEMA develops the standards for smart meters that need to be able to support the two-way

flow of electricity and information; and Underwriters Laboratories Inc. (UL), National Fire Protection Association (NFPA), and IEEE develop standards needed to

ensure electric safety of the overall system. An additional standard that will be needed is an information management stand- ard to allow electricity usage for roaming vehicles to be billed appropriately.

Observations

To conclude, a few overarching observations:

First, the scale and complexity of this standards effort may be unprecedented. Consider, for example, that the 5.4 million miles of distribution and transmission

cables that make up today’s grid could circle the Earth at the equator more than

200 times. The grid includes some 22,000 substations and 130 million watt-hour meters. But as I observed earlier, we have faced similar challenges before, successfully,

and have valuable experience to draw upon to ensure the success of this effort.

Second, I believe the approach we are taking to develop standards for the Smart

Grid—a strong public-private partnership forged with active White House and Cabinet-level leadership—illustrates the effectiveness of the U.S. approach. The American way abhors ‘‘one size fits all’’ solutions and prizes innovation and flexibility.

In the Smart Grid we are capitalizing on our strength—a dynamic and flexible decentralized system—as well as our innovation in solving problems. Our spirit of public/private partnership motivates cooperation to find the right balance of ‘‘top down’’

and ‘‘bottom up’’ to achieve the coordination needed for the smart grid. The rest of

the world is following our effort closely.

Third, it is important that we base our standards, wherever possible, on international standards or work to get our approaches adopted as international standards. This will maximize the opportunities for U.S. suppliers to address a large,

global market opportunity. Fortunately, we are well-connected to International Electrotechnical Commission (IEC), IEEE and other international organizations and are

pursuing those connections vigorously in our effort.

Fourth, one of our challenges is our regulatory complexity. Jurisdiction over the

grid is divided among 50 states, the District of Columbia, and the Federal Government. Regulatory uncertainty can impede investment and create an inertia that

slows innovation and the adoption of new technology. NIST is working closely with

National Association of Regulatory Utility Commission (NARUC) and the FERC/

NARUC Smart Grid Collaborative to engage the states as integral partners in the

standards effort.

However, the regulatory model for the Smart Grid will need to keep pace with

the reality that the information and communications technologies that enable the

Smart Grid have a much faster life cycle than traditional power system technologies.

Fifth, it is essential that we base the Smart Grid on open standards. This is essential to unleash the power of innovation and competition to create new applications and businesses that grow the benefits that the Smart Grid can offer to the

economy and the environment.

Finally, and most important, we need to continue to stress the critical dimension

of security in our work. This is an area in which we need to take the time to do

it right because security must be built into the foundation of the Smart Grid. It canVerDate 11-MAY-2000 13:37 Jan 22, 2010 Jkt 050954 PO 00000 Frm 00035 Fmt 6633 Sfmt 6621 C:\DWORK\E&E09\072309\50954 SCIENCE1 PsN: SCIENCE1
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not be added on later. We are treating this aspect with the utmost priority and I

would refer to my NIST colleague, Cita Furlani’s July 21, 2009 testimony before the

House Committee on Homeland Security’s Subcommittee on Emerging Threats,

Cyber Security, and Science and Technology, which describes NIST’s approach to ensuring the security and reliability of the information and communication aspects of

the Smart Grid.

Conclusion

The Smart Grid, with the unique investment opportunity afforded by the American Recovery and Reinvestment Act, represents a once in a lifetime opportunity to renew and modernize one of the Nation’s most important infrastructures. NIST is

proud to have been given such an important role and is committed to achieving the

Administration’s vision of a cleaner, greener, more efficient and effective electricity

grid that creates jobs and reduces our dependence on others for our energy needs.. Thank you for the opportunity to testify today on NIST’s work on Smart Grid inter-operability. I would be happy to answer any questions you may have.

BIOGRAPHY FOR GEORGE W. ARNOLD

George Arnold was appointed National Coordinator for Smart Grid Inter-oper- ability at the National Institute of Standards and Technology (NIST) in April 2009.

He is responsible for leading the development of standards underpinning the Nation’s Smart Grid. Dr. Arnold joined NIST in September 2006 as Deputy Director,

Technology Services, after a 33-year career in the telecommunications and information technology industry. Dr. Arnold served as Chairman of the Board of the American National Standards

Institute (ANSI), a private, non-profit organization that coordinates the U.S. voluntary standardization and conformity assessment system, from 2003 to 2005. He

served as President of the IEEE Standards Association in 2007–2008 and is currently Vice President—Policy for the International Organization for Standardization

(ISO) where he is responsible for guiding ISO’s strategic plan. Dr. Arnold previously served as a Vice President at Lucent Technologies Bell Lab- oratories where he directed the company’s global standards efforts. His organization

played a leading role in the development of international standards for Intelligent

Networks and IP-based Next Generation Networks. In previous assignments at

AT&T Bell Laboratories he had responsibilities in network planning, systems engineering, and application of information technology to automate operations and

maintenance of the nationwide telecommunications network.

Dr. Arnold received a Doctor of Engineering Science degree in Electrical Engineer- ing and Computer Science from Columbia University in 1978. He is a Senior Member of the IEEE.

Chairman BAIRD. Leave it to NIST to hit it within one second of

the time. I am sure you are proud of that, and we are appreciative.

Well done, Dr. Arnold.

Mr. De Martini.

STATEMENT OF MR. PAUL DE MARTINI, VICE PRESIDENT OF

ADVANCED TECHNOLOGY, SOUTHERN CALIFORNIA EDISON

Mr. DE MARTINI. Thank you, Mr. Chairman and distinguished Members of the Subcommittee, for the opportunity to be here

today. Southern California Edison is one of the Nation’s largest utilities, serving a population of nearly 14 million people in a 50,000-squaremile service territory. As a subsidiary of Edison International,

Southern California Edison is uniquely qualified to share our experience, progress and vision in the development of a smarter electricity grid.

Edison purchases more renewable energy than any utility in the

country including 65 percent of the Nation’s solar power. We pioneered demand response programs and helped our customers conserve more energy than any other utility. We are a leader in the

implementation of advanced transmission and distribution techVerDate 11-MAY-2000 13:37 Jan 22, 2010 Jkt 050954 PO 00000 Frm 00036 Fmt 6633 Sfmt 6601 C:\DWORK\E&E09\072309\50954 SCIENCE1 PsN: SCIENCE1
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nologies, including one of the largest smart meter programs in the

country, and 20 years ago we launched an electric transportation

program that includes our electric vehicle technology center opened

in 1993, allowing us to be a critical player in the development not

only of the electric vehicle but also of improved battery storage

technologies.

As Members of this committee are well aware, the current stakes

for addressing climate change, energy independence and infrastructure security could not be higher and our nation’s climate and energy goals simply cannot be met by our aging grid. We need a

smarter, more robust electricity infrastructure if we as a country

are to rely on greater amounts of intermittent renewable energy,

use electricity as a fuel for vehicles, empower our customers to

manage their monthly energy bills, and ensure the continued reliability and vitality of our nation’s energy economy.

In California, we are on a critical path as we also have a number

of ambitious climate and energy policy goals that will require many

aspects of our smart grid vision to be operational by the year 2020.

Southern California Edison saw the limitations associated with

aging grid and began implementing components of a smarter grid

over the past decade to improve our ability to anticipate and prevent outages and empower our customers to make smarter consumption decisions in the best interests of our environment and

their bottom line. Three examples illustrate the breadth of these

investments.

Edison pioneered synchrophasor technology that allows operators

and engineers the ability to monitor the grid at critical points every

one-thirtieth of a second, which significantly reduces the likelihood

of widespread outages or a system collapse, such as the 2003

Northeast blackout. Edison also has one of the largest deployments

of substation and distribution automation technologies in the industry including an advanced distribution circuit called Avanti cofunded by the Department of Energy. After the California energy

crisis, Edison deployed smart meters to all of its largest commercial

and industrial customers that consume in total about 60 percent of

the energy delivered on our grid. Over the next four years, Edison

is making an additional capital investment of $1.5 billion in smart

grid infrastructure that has already been approved by the California Public Utilities Commission. This year, Edison’s new meter

program will begin rolling out to our five million small commercial

and residential customers. We are also expanding our

synchrophasor technology to all of Edison’s bulk transmission system, which will be the largest deployment in the United States.

As we look forward, Edison believes the deployment and development of a smart grid is a journey that will evolve over the next decade or more and will require significantly more R&D and capital

investment to achieve our goals. It will require new technology,

open standards and more robust security. We are actively collaborating with research institutes, universities, product manufacturers, aerospace and defense and information technology firms to

identify opportunities to develop game-changing energy technologies such as energy storage, high-temperature superconducting

equipment as well as adapting telecommunications, cyber security

and data management technologies. Edison believes that advancing

34

the smart grid inter-operability and security through standards

adoption fosters innovation and accelerates robust, secure and reliable technology developments. We have been active for the past

five years in several DOE-sponsored efforts including the GridWise

Architecture Council and have been increasingly active with Dr.

Arnold in the National Institute of Standards and Technology efforts to identify and recommend standards for the smart grid. As the smart grid technology is deployed, we believe consumer adoption of new pricing, energy conservation and demand response

programs will be one of the largest behavioral change management

initiatives undertaken in public policy. However, the time appears

right for introducing change. Edison’s research indicates consumers

more clearly recognize that the smart use of energy will save them

money and help make a positive difference for the environment. In conclusion, Edison is making significant investments in both capital infrastructure and R&D to accelerate our country’s transition to a cleaner, smarter energy future. We look forward to continuing to work with Members of this committee, Congress and the

Administration to make our vision a reality in the best interests of

our customers, our environment and our economy. Thank you. [The prepared statement of Mr. De Martini follows:]

PREPARED STATEMENT OF PAUL DE MARTINI

Thank you Mr. Chairman and distinguished Members of the Subcommittee for the opportunity to share Southern California Edison’s smart grid strategy and activities

to enable federal and California climate and energy policies over the next decade. My name is Paul De Martini, I am the Vice President for Advanced Technology for Southern California Edison. My responsibilities include Smart Grid and Electric

Transportation strategy, policy and technology research, development and demonstration. Southern California Edison (Edison) is a subsidiary of Edison International and one of the Nation’s largest electric utilities, serving a population of

nearly 14 million via 4.9 million customer accounts in a 50,000-square-mile service

area within Central, Coastal and Southern California. Edison is a recognized global

leader in the development and implementation of a smarter electric grid. This leadership is based on solid research and development capabilities and existing and current capital deployments in advanced technology to create a smarter grid.

Edison Smart Grid Strategy

The United States has arrived at a critical juncture in its energy future. The cur- rent stakes for addressing climate change, energy independence and infrastructure

security could not be higher. Federal and State policy-makers alike have recognized

the need for a smarter, more robust electricity infrastructure if we as a country are

to rely on greater amounts of renewable generation, use electricity as a fuel for vehicles, enable consumers to become active participants in the energy supply chain, and

ensure the continued reliability and vitality of our nation’s energy economy. Edison is in the process of modernizing and expanding its electric power delivery systems. In doing so, it is critical that Edison deploy technologies that enable it to

provide service in a manner consistent with present and future customer needs,

while accommodating changes in market participation. Edison’s vision of a smart

grid is to develop and deploy a more reliable, secure, economic, efficient, safe and

environmentally-friendly electric system. This smart grid will incorporate high-tech

digital devices throughout the transmission, substation and distribution systems

and integrate advanced intelligence to provide the information necessary to both optimize electric services and empower customers to make informed energy decisions.

Consistent with the 2007 EISA and the U.S. Department of Energy’s and National

Energy Technology Laboratory’s Vision for the Modern Grid, Edison’s smart grid

will enable the increase of intermittent and renewable resources (such as wind and

solar power) and spark greater use of Plug-in Electric Vehicles (PEVs) by increasing

system flexibility; reduce greenhouse gas emissions; avoid the economic losses associated with catastrophic failures and wide-area blackouts; foster energy conservation, energy efficiency and demand response capabilities by providing customers

with better energy use information and choices; reduce operating costs and improve

35

reliability and safety by providing real-time information for system monitoring and

system automation; improve maintenance and operations practices on the electrical

grid; and facilitate the development of a ‘‘Clean Tech’’ economy, which is expected

to include the creation of new jobs. We believe a true smart grid can help America

achieve a more secure energy future and meaningful greenhouse gas reductions.

Additionally, Edison believes that many aspects of our smart grid vision will need

to be operational by the year 2020 to enable California’s ambitious policy goals, such

as the AB 32 greenhouse gas reductions, zero net energy homes, California Solar

Initiative, smart metering infrastructure, California’s renewable portfolio standard,

low carbon fuel standard, and wide-spread consumer adoption of plug-in electric vehicles.

To accomplish this objective, Edison’s overall smart grid strategy encompasses six

areas that address a broad set of requirements:

• Renewable and Distributed Energy Resources Integration

• Grid Control & Asset Optimization

• Workforce Effectiveness

• Smart Metering

• Energy-Smart Customer Solutions

• Secure Telecommunications & Computing Systems

Smart Grid Research, Development & Deployment

Edison seeks to discover, evaluate, and adopt energy and information technologies

to implement our smart grid strategy. It is important to keep in context that California is the Nation’s leader in many of these areas and as such, several components

of a smart grid are already in development within Edison’s service territory. For example, Edison has already achieved significant results in energy efficiency, demand

response, and renewable energy, and is a recognized national and international

leader in these three areas. Other aspects of a future smart grid are under development, but their future implementation will enable Edison to meet increased renewable energy goals, further reduce greenhouse gas emissions, and improve system reliability and safety.

Existing Smart Grid System

Edison has made significant investments over the past decade in the deployment

of transmission system measurement and control technology, distribution and substation automation, and smart meters for our large commercial and industrial customers. Edison has been a leading developer of wide area measurement and control

technologies for over 15 years. Edison’s pioneering efforts in the area of synchronized phasor measurement systems allows operators and engineers the ability

to monitor the grid at critical points every one-thirtieth of a second. This is a significant improvement in our ability to assess and respond to the dynamic operating

characteristics of the grid that can help avoid widespread electric system collapse.

Synchrophasors as compared to SCADA systems is analogous to MRI as compared

to X-ray. Edison’s synchrophasor efforts were awarded the 2007 T&D Automation

Project of the Year award from Utility Automation & Engineering T&D magazine.

Edison has one of the largest deployments of substation and distribution automation in the industry with over half of its 900 substations equipped with automation

technology, including state-of-the-art microprocessor-based systems. Edison has also

equipped over a third of its 4,300 distribution circuits and most of its nearly 10,000

capacitor banks with automation equipment that operates using wireless networks.

Edison’s automation strategy allows for both remote control/monitoring and autonomous control of critical grid components, which helps protect the system during abnormal conditions and maintain reliability.

After the energy crisis in California, it was recognized that providing energy use

and pricing information to customers would allow them to make informed decisions

about energy consumption that could mitigate wholesale market constraints. As part

of a State initiative, Edison deployed smart meters to all of its largest commercial

and industrial customers to provide timely energy information and online energy

analysis tools to help them manage their energy costs. These customers with peak

demand of 200kW or greater consume about 60 percent of the energy delivered on

our grid. Edison’s new smart meter program is designed to extend this capability

to our small commercial and residential customers.

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Current Smart Grid Projects

Edison is currently poised to take our grid to the next level over the next four years with another round of investments. In 2008, the California Public Utilities

Commission (CPUC) approved our deployment of our Edison SmartConnectΤΜ me- ters to five million residential and small commercial customers beginning this year

and proceeding through 2012. Earlier this year, the CPUC approved Edison’s 2009

general rate case that included about $270 million in smart grid investments related

to advanced electric grid measurement and control systems that enable, in part, the

integration of large-scale and distributed renewable generation and improve the

overall operation of the electric grid. Also, Edison will expand synchrophasor technology to all of Edison’s bulk transmission system—the largest deployment in the

United States. Combined, these projects bring Edison’s planned level of smart grid

capital investment to about $1.5 billion over the next four years. This investment

will provide important foundational elements, but more technology investment over

the coming decade will be required to meet federal and California climate, renewable and energy policy objectives and to realize additional operational efficiencies.

RD&D Overview

In the electric utility industry, Edison has a unique and comparatively large re- search, development and demonstration (RD&D) effort to support the achievement

of our 2020 objectives. The current RD&D strategy is focused on three key themes:

1. Integration and managing complex systems

• Renewable integration modeling and analysis

• Telecommunications

• Computing systems and data management

• Inter-operability standards development

• Cyber-security

2. Game-changing energy technology

• Energy storage

• Superconductivity applications

• Electric transportation

• Self-healing distribution automation

• Consumer end-use technology

3. People and processes

• Customer adoption of energy smart technology

• 21st Century electric utility workforce

• Robotics, unmanned aerial vehicles, mobile workforce automation

• Safety equipment

A significant level of complexity will be introduced to the electric grid over the

next decade. Edison is working with leading research universities such as Caltech,

MIT, Stanford, University of Southern California and Carnegie Mellon to better understand ‘‘system of systems’’ complexity, designing computing systems models and

event scenarios to understand the nature of the future electric grid. Edison is also

working with aerospace-defense and information technology firms to identify opportunities to adapt telecommunications, cyber-security and data management technologies.

Several game-changing energy technologies are expected to become commercially

and economically viable over the next decade, including various forms of energy

storage, high-temperature superconducting equipment, various forms of electric

transportation, advanced self-healing distribution automation equipment and energy

smart consumer devices/appliances. Edison is working with several national research labs, EPRI and manufacturers on the development of products from prototype testing to field demonstrations through commercial introduction on Edison’s

system. One example is the live demonstration of second generation distribution circuit automation on a Department of Energy (DOE) co-funded project called Avanti

that also includes the world’s first high temperature superconducting fault current

limiter. Another is the work Edison is conducting at our Electric Vehicle Technology

Center (EVTC), where we work closely with auto manufacturers on electric-drive

systems and battery manufacturers on emerging mobile and stationary storage applications. Edison was honored to have President Obama visit our EVTC facility

earlier this year.

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In the area of people and processes, Edison is looking ahead to evaluate the consumer, organizational and workforce impacts of introducing a vast range of new

technologies, customer programs and related operational process changes. Edison

has engaged a consortium of universities to conduct research on the ‘‘Energy Workforce of the 21st Century’’ and has conducted consumer research to better understand technology adoption behavior with leading design firms like IDEO.

Edison is actively pursuing stimulus funds for two smart grid demonstrations and

development of electric transportation. For smart grid, Edison will seek matching

funds for both utility-scale energy storage utilizing automotive grade batteries and

a regional smart grid demonstration that includes the development of a secure energy network for the smart grid. Edison participated in three electric transportation

proposals currently under evaluation with the DOE. One was related to the development of plug-in electric vehicles with GM, The second proposal was for plug-in hybrid utility bucket trucks with Ford and Eaton and the third expands public charging infrastructure with Ford, the California Air Resources Board and other stakeholders in Southern California.

Inter-operability Standards and Cyber-security

Edison recognizes that advancing smart grid inter-operability and security

through standards adoption fosters innovation and accelerates robust, secure and

reliable technology deployments. This is achieved by lowering the barriers to entry

for vendors; accelerating secure and inter-operable product time to market; and ultimately lowering costs for consumers. Unfortunately, realizing the benefits of standardization requires more than just selection of a standard. Full realization of the

benefits will require a shared government, utility and product supplier focus on a

common set of smart grid functions, and a standards life cycle framework supporting those functions. The goal of this standards life cycle framework is to align

policy, standards development, product development and procurement actions to create a self-sustaining smart grid market. A successfully operating, self-sustaining

smart grid product market is defined by public policy supported by standards that

are rapidly adopted by product suppliers seeking certification, and driven by utility

procurement agents only buying products certified to those standards.

To realize this goal, Edison has been active over the past five years in several

DOE sponsored efforts, including the GridWise Architecture Council to define use

cases, user requirements, and reference designs. Over the past year, we have been

increasingly active with the National Institute of Science and Technology’s efforts

to identify and recommend standards for the smart grid. Edison’s long standing participation with several industry and standards organizations provided an opportunity to work more closely with both DOE and NIST on the development of standards in several areas, including customer access to energy information and a set of

smart grid cyber-security specifications and profiles. For example, Edison is one of

a dozen utilities that contributed funding to the smart meter security effort with

DOE last year and is currently co-funding a broader smart grid effort in collaboration with DOE and NIST. Also, Edison along with several other utilities has been

championing the development of an open standard and secure interface for customer

access through a web services provider to customer related energy information on

utility computing systems. NIST is leading an effort to coordinate the development

of such a standard and Edison is actively supporting the effort.

Integration of new technologies with existing technology

Edison defines ‘‘inter-operability’’ as a characteristic that permits seamless communication and exchange of information between diverse, disparate systems. The

national and utility grids will need inter-operability of key future smart grid technology components to support a robust, flexible, and secure energy infrastructure.

Edison’s vision for a smart grid has long been premised on the idea of ‘‘inter-operability from the generator to the customer, and everywhere in between.’’ This is important for stimulating vendor competition, fostering innovation, and realizing lower

costs. Edison also supports criteria that, where appropriate, call for future smart

grid deployments and enhancements to be inter-operable with existing capital investments. The challenge is developing a systems architecture and roadmap that

provides a graceful transition from the existing systems to the future state. For example, Edison has invested heavily in substation and distribution automation, and

believes it is prudent to leverage this existing infrastructure for future smart grid

enhancements as much as possible. Computing systems and telecommunications

have evolved over the past twenty-five years to the mostly plug and play state that

we know today—Edison expects the smart grid to similarly evolve over the next two

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decades given the typically long asset lives and the need to balance large capital

costs with consumer rate impacts.

Smart grid benefits & Consumer adoption

Smart grid benefits can be generalized into three categories; utility operational

benefits, customer energy savings benefits and societal benefits. In terms of utility

operational benefits, many of the smart grid technologies involve automation of existing business practices that create substantial reductions in labor. For example,

Edison’s residential smart metering program created benefits that exceeded costs by

about 110 percent on a net present value basis, with nearly 60 percent of the benefits derived from reduction in labor and related costs due to the elimination of the

meter reading function. Other operational savings result from operational efficiencies in financial transaction management and field operations. The other 50 percent of the smart metering benefits come from energy procurement cost savings as

a result of enabled demand response programs and reduction in residential energy

consumption due to energy information.

Consumers will have a new range of energy management services and programs

available from utilities and third parties that are enabled by smart metering, energy

storage, energy smart appliances and plug-in electric vehicles. In a survey of research studies by Oxford University, and subsequently validated in limited field

trials in the industry, consumers are expected to save on average between 5–15 percent on their monthly electric bills if they actively participate in dynamic pricing

and energy conservation related programs. Consumer benefits also include improved

customer experience from automated services like turning the electric service on

when moving in to a house or apartment. Over 20 percent of Edison’s 4.9 million

customers move each year so this is a significant improvement. Customers will also

experience improved service reliability and faster outage response as the smart grid

is deployed.

A substantial portion of smart grid benefits are societal in nature and include national and State priorities, such as achieving energy independence, reducing greenhouse gas emissions, and increasing grid security, safety, and reliability. These benefits are often difficult to quantify, they may vary widely in their justification of various smart grid technologies, and they are multi-tiered in terms of who benefits

from them. Benefits may relate to Edison customers, California residents in general,

or society at large. These benefits should be considered by policy-makers within the

context of a complete portfolio of smart grid technologies, as the benefits may not

accrue to any one project, but the integrated system which would necessarily be deployed over an extended time horizon.

Consumer adoption of new pricing, energy conservation and demand response programs will be one of the largest behavioral change management initiatives undertaken in public policy. However, based on Edison’s research, we believe our customers are ready to change how much and when they use electricity. Edison has

conducted persona based customer research over the past five years and the majority of our customers now are actively looking for a way to either reduce their energy

costs to manage their monthly budget or reduce their energy use to reduce their carbon footprint. Consumers do not want to be wasteful and recognize that the smart

use of energy will save them money and help make a positive difference for the environment.

One key is to provide customers information that is actionable. This is one of the

values of a smart meter system especially combined with dynamic pricing. Another

key is make the process simple and use technology to automate the customer’s desired outcome. For example, to enable a customer who wants to manage to a monthly budget amount for electricity, Edison is creating a daily electric budget manager

that notifies the customer if their usage will likely exceed the target budget in advance through online, text messages or cell phone application. Edison is also working with many product and service providers to create this type of automation. Edison recognizes that we have a once in a lifetime opportunity to engage and educate

our small commercial and residential customers when we replace all our approximately five million meters over the next three plus years.

Conclusion

The electricity infrastructure delivering power from a variety of generating

sources to our homes, businesses and communities is not suitable for today’s needs.

The challenges that face our nation’s energy future simply cannot be met by our

aging electric grid. Growing renewable energy capacity requirements, global climate

change provisions, and the pressing need for more energy self-determination on behalf of customers all require a smarter, more intelligent grid. Edison is making sigVerDate 11-MAY-2000 13:37 Jan 22, 2010 Jkt 050954 PO 00000 Frm 00042 Fmt 6633 Sfmt 6621 C:\DWORK\E&E09\072309\50954 SCIENCE1 PsN: SCIENCE1
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nificant investments in both capital infrastructure and smart grid R&D to accelerate

our ability to support the future.

BIOLOGRAPHY FOR PAUL DE MARTINI

Paul De Martini is Vice President of Advanced Technology in the Transmission

& Distribution Business Unit of Southern California Edison (SCE). Advanced Technology is SCE’s R&D organization responsible for SmartGrid development, which includes advanced grid technologies, electric transportation, smart metering and integration of energy smart consumer products.

Prior to joining SCE in 2002, De Martini held senior management positions with

ICF Consulting, Sempra Energy, Coastal Corporation and PG&E Corporation.

De Martini is a member of the California Energy Commission’s Public Interest

Energy Research (PIER) Advisory Board, Electric Power Research Institute’s Power

Delivery and Utilization Sector Council and Smart Grid Advisory Committee, CoChair of both the Utility Smart Grid Executives working group and the Western

Electric Industry R&D Collaborative.

De Martini earned a MBA from the University of Southern California and a BS

from the University of San Francisco. He also completed the technology management program at the California Institute of Technology. De Martini is currently a

Fellow of the Wharton School, University of Pennsylvania.

Chairman BAIRD. Thank you, Mr. De Martini.

Mr. Ross.

STATEMENT OF MR. JEFFREY L. ROSS, EXECUTIVE VICE

PRESIDENT, GRIDPOINT, INC.

Mr. ROSS. Good morning, Mr. Chairman, Ranking Member Inglis

and distinguished Members of the Subcommittee. Thank you for

the opportunity to testify today. I am Executive Vice President at

GridPoint, a leading smart grid software company. We have developed an online energy management solution that enables customers to obtain near-real-time information on their energy use

and empowers them to make informed decisions about their energy

consumption.

Our solutions also help utilities better balance supply and demand

across a wide range of areas including electric vehicle charging,

storage, integration of renewable energy and demand response in

an economical, efficient and environmentally beneficial manner.

I have three points I would like to leave with you today. First,

while the infrastructure of smart meters and advanced communications is important in modernizing the Nation’s grid, to realize the

benefits of increased efficiency, reliability, security, we also need

software that allows utilities to better control and optimize load.

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Second, we need to realign the regulatory and economic policies

and incentives guiding investor-owned utilities such that those utilities are motivated to invest in smart grid technologies. Third, we

must provide consumers with greater information on their energy

use if we expect them to be able to reduce their consumption and

their energy costs.

The term ‘‘smart grid’’ refers to energy delivery and distribution

using two-way communications and digital technology to enhance

the grid with sensing, communications, analysis, feedback and control technologies in order to improve efficiency, increase reliability,

ensure security and reduce environmental impacts. The Energy

Independence and Security Act of 2007 and the American Recovery

and Reinvestment Act provide for regional demonstration projects

to develop advanced techniques for measuring peak load reductions

and energy efficiency savings from smart metering, demand response, distributed generation and storage systems and to validate

new business models and best practices for implementing advanced

smart grid technologies that can be replicated throughout the country. These goals encourage the testing of new technologies. While

the smart grid will benefit from investments in smart meters and

advanced communications, these investments alone will not realize

the true promise of the smart grid. Smart meters and advanced

communications cannot by themselves manage peak demand, integrate renewable energy, manage electric vehicle charging and storage, or provide customers with information they can use to manage

their energy consumption, all of which can help the electric grid operate more efficiently and reliably. The electric grid needs software

and applications to work in conjunction with meters and communications to realize these benefits.

Xcel Energy’s Smart Grid City is the U.S.’s first full-scale pilot

project designed to test smart grid technologies and the new business models they enable. Since 2008, Xcel Energy and its partners

have developed a website portal for customers to better manage

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their energy use, launched the Nation’s first test of plug-in hybrid

electric cars with vehicle-to-grid capability, turned the Chancellor’s

residence at University of Colorado into the Nation’s first fully integrated ‘‘smart house’’ with solar, backup power, electric vehicle

charging and consumer controls, installed nearly 15,000 smart meters and implemented a wind-to-battery program to create a more

predictable, reliable source of energy. The city of Austin, Texas,

also announced late last year a new smart grid deployment called

the ‘‘Pecan Street Project’’ that would create a virtual 300-megawatt clean power plant through a combination of efficiency and

clean power. These types of efforts would likely increase as funding

under the Recovery Act is awarded. There is real value in these types of demonstration projects be- cause they provide a test bed for new and innovative smart grid

technologies. Only through testing new technologies can we determine what works in order to spur innovation. Studies have shown

that when consumers have more information about their energy

use, they typically reduce their consumption by 10 to 20 percent.

Near-real-time information on energy use through a portal or an

in-home display will empower consumers to control their energy

consumption. The portal, or in-home display, provides customers

with energy savings tips and a comparison of their use against earlier periods, among other benefits, which will help them lower their

energy consumption. In conclusion, we have an historic opportunity to transform and modernize our nation’s electric grid. To do so, we need to look beyond smart meters and communications and invest in the applications that reside on top of this infrastructure to make the smart

grid more efficient, reliable and secure. We must create the regulatory and economic structures that incentivize utilities to make

smart grid investments and we need to provide consumers with information about their own energy use to empower them to control

their energy consumption. Thank you for this opportunity to testify here today. I am happy to answer any questions you may have. [The prepared statement of Mr. Ross follows:]

PREPARED STATEMENT OF JEFFREY L. ROSS

Good morning Chairman Baird, Ranking Member Inglis, Full Committee Chair- man Gordon, Ranking Member Hall, and distinguished Members of this subcommittee. Thank you for the opportunity to testify at today’s hearing. My name

is Jeffrey L. Ross, and I am an Executive Vice President at GridPoint, a leading

smart grid company that has developed an online energy management solution for

consumers, as well as products and services that help utilities manage energy in the

areas of electric vehicle charging, storage, integration of renewable energy, and demand response. We are a private company headquartered in Arlington, VA with approximately 130 employees. I would like to request that my full statement be entered into the record.

I appreciate the leadership you, the Full Committee, and this Congress have dem- onstrated in supporting the Energy and Independence Security Act of 2007 (EISA)

and the American Reinvestment and Recovery Act of 2009 (ARRA), the provisions of

which have the potential to reshape positively the energy ecosystem in our country.

I am here to provide GridPoint’s perspectives on the role of the Federal Government and industry in transforming the Nation’s electric grid from an over-burdened,

outdated system into an interconnected, intelligent ‘‘smart grid.’’

I have three points I would like to leave you with today:

1. First, while the infrastructure of smart meters and advanced communications is important in transforming the Nation’s grid, we also need other new

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innovative technologies to realize the benefits of increased efficiency, reliability, and security.

2. Second, we need to realign the regulatory and economic policies and incen- tives pertaining to investor-owned utilities (IOUs), such that utilities are motivated to invest in smart grid technologies.

3. We must provide consumers with greater information on their energy use if we expect them to better manage their energy consumption.

An Historic Opportunity

The term ‘‘smart grid’’ refers to the means by which energy is delivered from gen- erators to consumers using two-way communications and digital technology to improve efficiency, increase reliability, and add transparency. This generally involves

enhancing the grid with sensing, communications, analysis, feedback, and control

technologies to realize operational efficiencies and improve environmental impacts.

Much of the attention around ‘‘smart grid’’ has focused on the distribution side of

the electricity system, which is where GridPoint offers its solutions. While this area

benefits from improvements in ‘‘smart’’ meters (often referred to as Advanced Metering Infrastructure (AMI) ) and advanced communications systems, there needs to be

a wider range of technologies adopted to realize the full benefits of the smart grid.

These technologies will provide utilities and consumers with the ability to understand and better manage energy consumption. They also will help improve energy

efficiency and/or reduce demand, and thereby help reduce greenhouse gas emissions. EISA and the ARRA set forth the following goals and benefits for smart grid: cre- ate a modern electric grid, enhance security and reliability of energy infrastructure,

and facilitate recovery from disruptions to the energy supply. The ARRA and EISA

envision that there will be a variety of regional demonstration projects to develop

advanced techniques for measuring peak load reductions and energy-efficiency savings from smart metering, demand response, distributed generation, and electricity

storage systems; quantify costs and benefits; verify technology viability; and validate

new business models and best practices for implementing advanced smart grid technologies that can be replicated throughout the country. These goals encourage the

testing of new technologies, in addition to improvements in smart metering and advanced communications infrastructure.

The ARRA provides $4.5 billion in funding for the smart grid investment program. More than $2 billion of this funding will likely be spent on smart meters and advanced communications systems. While this new metering and communications infrastructure is important, it is critical to include applications that run on this infrastructure as new smart grid projects roll out. Without the applications to improve

efficiency, reliability, security, and provide consumers and utilities with additional

information, the true promise of the smart grid will not be realized.

The Promise of the Smart Grid

Our system for generating, transmitting, and producing electricity was developed

more than a century ago when all we required of electricity was that it be cheap,

ubiquitous, and reliable. Over the last century, we have constructed a complex network of power plants that are connected regionally via transmission lines to population centers, with electricity distributed to homes and businesses over power lines.

Today, this system is experiencing issues with reliability, efficiency, and security.

We are increasingly asking more from the electric grid—not just greater demand,

but also that delivery of our energy be efficient and green. Without significant technological upgrades, our electric grid cannot meet these 21st century challenges.

If we take advantage of the historic opportunity presented to us today, with the

policies set in place in EISA, to upgrade our grid and make it ‘‘smarter,’’ the benefits

are limitless. Imagine if you could access real-time information about how much energy you were consuming, and which appliances and devices in your home consumed

the most energy. What if, armed with that information, you could make small

changes in your behavior that would save significant amounts of energy and lower

your monthly utility bill?

What if solar panels on peoples’ roofs and electric vehicles in garages were

networked together such that their capacity could be used to relieve areas of stress

and high demand in the grid? What if your utility and your electric vehicle were

smart enough to delay your charging until nighttime, when electric rates are less

expensive, demand on the grid lower, and more renewable energy is available?

What if a utility could sense an overheating transformer, and divert its load by

shifting it to other resources in the system? Imagine if a utility could make wind

reliable and predictable by storing electricity in the form of a battery to back up

the intermittent renewable power so, together, these became a continuous, reliable

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source of energy? That is, the wind could be used to charge a large battery. When

the wind blew at night the battery would charge, and when the wind died down,

the battery would discharge to keep a constant amount of power available.

Smart grid technologies exist today to enable all of these benefits. Just imagine

if utilities and consumers were to implement them. How many power plants could

we avoid building? How much money would we save? How much carbon dioxide

would we prevent from entering the atmosphere?

The technologies that can make the ‘‘smart grid’’ a reality offer consumers greater

insight and control over their energy usage and improved environmental benefits,

while utilities gain greater efficiency in their operations, improved reliability, and

increased security.

GridPoint’s Technology and the Benefits of a Modern Grid

GridPoint has developed a software platform (i.e., management system) that enables utilities to have visibility into, and manage, their distributed energy assets.

The platform seamlessly integrates five solutions: online energy management, load

management, electric vehicle management, storage, and integration of renewable

energy. With GridPoint’s platform, utilities efficiently balance supply and demand

in an economical, scalable and environmentally beneficial manner.

In online energy management, the GridPoint solution offers utilities a portal to

provide their customers far greater awareness of their energy consumption. It also

provides consumers with insight into their energy usage with features such as carbon calculators, comparisons to their bill from a previous month or year, and energy

savings tips based on their consumption patterns. Consumers benefit by having control over, and being able to reduce, their energy usage. Studies have shown that

simply providing consumers information about their energy use can lead to reductions in consumption of between 10 to 20 percent. Providing consumers with information about their energy use is an important first step in empowering them to control their energy consumption.

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The GridPoint load management solution assists utilities in managing capacitystrained areas by providing visibility and control of devices in the home or business

to address peak loads. This increases reliability in the electric grid. The solution

provides utilities detailed measurement and verification of achieved reductions

against a projected baseline, which enables carbon measurement. It allows the utility to shift load and reduce peak demand through demand response programs with

circuit-level visibility and control of large load classes by type (e.g., Air conditioners)

either in aggregate or by substation, feeder or individual customer.

By market share, 70 percent of automobile manufacturers have announced plans

to launch electric vehicle models, the first of which will hit the road, and the electric

grid, in 2010. The GridPoint smart charging solution controls the flow of electricity

to plug-in electric vehicles, allowing utilities to balance real-time grid conditions

with the needs of individual drivers. During peak periods, the flow of energy can

be delayed or slowed to shift the charging load into an off-peak period—minimizing

grid stress and ensuring service reliability. When wind or solar power is available,

the charging rate can be increased to expand the use of renewable energy in the

grid. The solution enables smart charging at every charging level and from any

point on the grid, whether the driver is at home, work, or a public charging station.

The GridPoint storage management solution provides aggregated, real-time control over the charging and discharging of distributed storage assets located in the

utility’s transmission and distribution systems. Its software algorithms allow energy

storage devices to be managed in isolation or aggregated at various levels of the sysVerDate 11-MAY-2000 13:37 Jan 22, 2010 Jkt 050954 PO 00000 Frm 00048 Fmt 6633 Sfmt 6621 C:\DWORK\E&E09\072309\50954 SCIENCE1 PsN: SCIENCE1
45

tem and dynamically dispatched in a coordinated fashion. Charging and discharging

scenarios include: load leveling, load shaping, integrating renewable energy, economic dispatch based on price signals, system regulation, and spinning reserves to

respond to an unexpected power disruption. These capabilities allow utilities to

manage the grid more cost effectively; increase predictability, availability and optimization of renewable energy sources; and improve the efficiency of transmission

and distribution resources.

Finally, the GridPoint renewable integration solution predicts and precisely monitors the production of distributed renewable power systems, like a solar panel

array, to allocate the associated energy, renewable credit, and carbon credit value

streams. It also maximizes the value of grid-connected renewable power sources,

both residential and utility-scale, by balancing output variability via automated dispatch of other distributed energy assets, including demand response, storage, and

plug-in hybrid vehicles. Utilities benefit from the monitoring and prediction of residential and commercial grid-connected renewable systems. Consumers benefit by

having insight into their personal solar production and consumption, reductions in

their carbon footprint due to environmental data based on renewable production and

consumption, and weather information to help predict their future solar energy production.

Challenges to Realizing a Truly ‘‘Smart’’ Smart Grid

With all of the tremendous benefits inherent in a ‘‘smart grid,’’ one might ask why

the technologies are not being adopted more widely by utilities. There are several

reasons, but perhaps the most important is that the regulatory model for investorowned utilities (IOUs) does not incent those utilities to make investments in smart

grid technologies.

IOUs make money for their investors by receiving a guaranteed rate of return on

capital to deploy generation, transmission and distribution assets and to ensure system reliability. The more energy IOUs need to produce, the more capital they can

deploy to purchase these assets. This, in turn, allows them to include those assets

into the rate base and receive a return on their investment. Therefore, the more

power an IOUs produces, transmits, or distributes, the more money that IOU will

earn.

One of the benefits of smart grid technologies is that they create efficiencies in

the electric grid, thereby reducing the amount of energy needed to serve the same

population. If an IOU deploys smart grid technologies, it could serve its customer

base while producing less energy. This would benefit ratepayers, who would not face

an increase in rates, and the environment, by reducing the need for additional

power generation assets. However, this scenario—under the current regulatory

structure—would leave the IOU without the need to deploy new generation, transmission or distribution assets and would reduce the IOU’s ability to receive a return

on investment. IOUs may actually risk losing money if they deploy smart grid technologies that serve their customers more efficiently and improve environmental impacts. Not all IOUs face this economic deterrent all of the time; however, the challenge of this economic and regulatory model is prevalent enough to dampen IOUs

investment in smart grid technologies.

Xcel Energy’s SmartGridCity (Boulder, CO)

SmartGridCity is the U.S.’s first and largest full-scale pilot project designed to

test smart grid technologies and the new business models they enable. It is sponsored by Xcel Energy Corporation, a fully-integrated power utility, headquartered in

Minnesota, with a service territory extending into eight states, including Colorado,

and a total of 3.3 million electric and 1.8 million gas customers. Xcel is a leading

utility in the use of wind power, with nearly 3,000 MW of capacity installed.

SmartGridCity is a demonstration project designed to understand how the utility

and its customers collectively manage power generation, delivery, and energy consumption.

SmartGridCity is a multi-phase project that began in the spring of 2008. The first

phase, over 18 months, was designed to test capabilities and gauge customer reaction. It involves upgrades to two substations and five feeders, as well as 15,000 residential and commercial premises. The second phase will be a full deployment with

a larger reach to a broader customer base, and includes an additional two substations, 20 feeders, and 35,000 premises. Grid Point is providing demand and supply side management, solar integration, plug-in hybrid electric vehicle support, online energy management and integration services to the SmartGridCity project.

Xcel Energy conceived of this project as a way to test a number of business, customer and social issues. The principal benefits centered on the following:

46

1. Peak Energy Consumption: Can real-time pricing and environmental sig- nals, in conjunction with advanced in-home energy management systems reduce residential peak energy consumption?

2. Grid Reliability: Will there be a reduction in the number and duration of

customer outages as a result of the technology installed in the distribution

network?

3. Capital Expenses: Will the reduction in peak load demand result in a deferral of capital spent on distribution and transmission infrastructure?

4. Operating Expenses: Will there be cost savings to Xcel from the implemen- tation of smart meters, distribution automation and home energy automation?

5. Carbon Footprint: Will there be a meaningful and measurable reduction in carbon emissions as a result of the lowered residential peak demand and

other efficiency programs?

Xcel’s vision is to make SmartGridCity a fully-connected and horizontally-inte- grated system that would require real-time and automated decision-making across

all parts of the network. The project includes:

1. High-speed communications network (broadband over power line and wire- less) and sensing equipment.

2. Smart meters with the ability to provide near real-time data on consumption.

3. Improved intelligence at the substations.

4. A feeder distribution system with communications-enabled reclosers and

switches, and other assets to provide power system information.

5. Power analyzers at each transformer to provide real-time data on power consumption, outages, restorations and fault locations.

6. Integration of renewable energy generation and distributed storage, including a large scale wind-to-battery project.

7. Integration and optimization, or smart charging, of plug-in hybrid electric vehicles within the grid.

8. Customer programs and incentives that help them save energy, track energy

usage, and manage demand in response to real-time price signals, all

through a custom web portal interface that provides: (a) control to set energy

preferences; (b) analysis of information, billing history and a means for helping customers discover how to best manage energy; and (c) information to effectively educate customers about how their energy is produced and how to

lower their carbon footprint.

The SmartGridCity project is about half way through its duration. Since construction began in 2008, Xcel Energy and its partners have:

• Installed nearly 15,000 smart meters with another 10,000 more ‘‘opt-in’’ customers;

• Launched the SmartGridCity Control Room and Operations Center;

• Implemented over 327 network elements for grid communication and monitoring;

• Developed a web site portal for customers to better manage their energy use;

• Launched the Nation’s first test of plug-in hybrid electric cars with vehicleto-grid capability;

• Turned the Chancellor’s residence at the University of Colorado into the Nation’s first fully-integrated ‘‘smart house,’’ with solar, back-up power, PHEV

smart charging and consumer control; and

• Implemented Xcel Energy’s wind-to-battery program to test the control and

firming quality of an integrated wind and storage system.

Although we are still at an early stage in the project, Grid Point, as a participant,

has learned some valuable lessons about demonstrating and deploying ‘‘smart grid’’

technologies as we move forward with the SmartGridCity team to create a more resilient and responsive grid. There is real value in demonstration projects such as

SmartGridCity that can provide a test bed for new and innovative smart grid technologies. Consumers must be able to understand their energy consumption and

usage with greater frequency and granularity than the information in their bill at

the end of the month. Near real-time information on energy usage can influence

positively consumers’ behavior and provide them with the means to control their energy consumption.

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Importance of Smart Grid Demonstration Projects and Innovation

Other cities have begun to follow Xcel’s SmartGridCity project with their own demonstration projects. The city of Austin, Texas announced late last year a new

smart grid deployment called the Pecan Street Project that would create a virtual

300MW clean power plant through a combination of efficiency and clean power. The

City of Miami, Florida likewise has announced a high-profile project. These efforts

will likely increase as funding under the ARRA is awarded. It is important that

smart grid demonstration projects test a broad range of new technologies and measure and verify the costs and benefits of the technologies. Only by doing this, can

the best technologies gain recognition and acceptance to improve the grid.

Conclusion

In conclusion, we face an historic opportunity today to transform our nation’s elec- tric grid. To do so, we need to leverage the funding Congress has made available.

While we need the advanced infrastructure of meters and communications, we also

need the applications that reside on top of the infrastructure to make the grid more

efficient, reliable, and secure. We need to continue to work toward regulatory and

economic structures that incent utilities to make smart grid investments. Finally,

we need to provide consumers with information about their own energy use to empower them to control their energy consumption. Thank you for this opportunity to testify here today.

BIOGRAPHY FOR JEFFREY L. ROSS

Jeffrey L. Ross is Executive Vice President at GridPoint, Inc., a leading smart grid software company. Mr. Ross works on business development, marketing, and

corporate development matters for the company. Prior to GridPoint, he served as a

partner at Dakota Ventures, a technology investment fund. Earlier in his career, Mr. Ross served as General Manager & Vice President of the Identity & Enterprise Security business for Gemalto North America. In this role,

he was responsible for sales, marketing, solutions development and management,

strategy, partnerships and alliances, and customer delivery and technical support.

He previously served as Vice President for Marketing & Solutions for Gemplus’

North American Enterprise Security & Identity and Banking & Retail businesses. Prior to joining Gemplus in 2004, Mr. Ross founded Alereon, Inc., a leading wire- less semiconductor company focused on ultra wideband technology for wireless USB

and next generation Bluetooth. He held the position of Executive Vice President at

Alereon responsible for finance, marketing, strategy, and administration. Mr. Ross

also worked as Senior Vice President for Corporate and Business Development at

Time Domain Corporation from 1999 to 2003. Prior to Time Domain, Mr. Ross practiced corporate law at Patton Boggs in Washington, D.C. Mr. Ross has considerable experience working with growth clean technology, wire- less, software, and semiconductor companies. Mr. Ross is a frequent speaker on

technology issues and has appeared on television and radio and in print in such

venues as CNBC and the Wall Street Journal. Mr. Ross holds a B.A. Degree, magna cum laude, from Washington University in St. Louis and a law degree from the Uni- versity of Virginia.

Chairman BAIRD. Thank you, Mr. Ross. Before moving on, are you any connection to the Ross of the Ross Power Station fame in the Pacific Northwest?

Mr. ROSS. No, not that I am aware of.

Chairman BAIRD. Ross is a great name in Northwest energy, so there may be some connection there. Mr. Stoessl.

STATEMENT OF MR. MICHAEL A. STOESSL, GROUP

PRESIDENT, COOPER POWER SYSTEMS

Mr. STOESSL. Good morning, Mr. Chairman and Members of the

Committee. On behalf of the National Electrical Manufacturers Association, I am Mike Stoessl, Group President of Cooper Power Systems. I have been asked to appear here today to help describe some

of the challenges our industry faces in actually making the grid

smart.

48

Now, Cooper Power Systems has been providing equipment and

solutions to the electric utility industry literally since the days of

Thomas Edison. We provide transformers and components needed

to connect and restore energy, switchgear and automation technology needed to make the electrical grid reliable and efficient as

well as AMI and demand response capabilities that help manage

the grid’s overall load. Our solutions cover the range of smart grid

intelligence.

Now, all smart solutions have in common the ability to sense activity on a grid, communicate that information back to some sort

of decision support application, send a decision back to the grid and

actually make some change.

So as an example, we brought a picture here of a sensor that can

help determine when the grid is becoming more or less efficient. If

air conditioning comes on in the middle of the day, the grid can actually start wasting energy as it responds to that increase in load.

So the sensor you see in the upper right working with the capacitor

bank controller that you see in the middle on the left can determine that inefficiencies are occurring. Equipped with radio technology or some other form of communication, it will send a signal

back to the utility alerting them to the situation. They in turn can

then choose to take that capacitor bank, which is in the lower middle of the screen, and turn it on or off using the cap bank switch.

This is just one example of a smart application and the sort of

things that have to be installed in the field to make it work.

Now, one of the big challenges we face with building out the

smart grid is the integration of legacy equipment that already exists. Many pieces of apparatus installed on the grid do not provide

49

or support any external interface or have custom communication

protocols. So, for example, this recloser that is pictured here provides over-current protection to our overhead lines.

If there is a fault, for instance, a branch falls and shorts out a

power line, the recloser will open, isolate the circuit and basically

try to restore power. Many of these devices do not support two-way

communications, so while they are an effective isolated solution,

they cannot be truly part of a smart grid without being replaced

or being retrofitted. The key to doing these kind of upgrades will

be an economic cost benefit to the utility, or it is going to be government incentives based on the value, more intangible value of a

truly more reliable grid. With more than 500,000 of just these type

of reclosers out in service today, retrofits of product like this will

be an important part of making the grid smart.

Another challenge we face in building out the smart grid is the

range of communication options that are already available. In the

past three years we have seen an increase in availability of costeffective two-way communication technology. Cellular, Wi-Fi,

WIMAX, Mesh RF, line-of-sight RF are a few of these technologies.

Now, these cost-effective two-way communications have become an

enabler of adding intelligence to the grid but they also present a

host of challenges. So as an example, the fault circuit indicator

shown here in the upper left is a great example of a successful

product making the transition from being a dumb, isolated solution

to a smart, integrated solution.

50

The original form of a fault circuit indicator had no communica- tion capabilities. It simply displays a local orange visual indication

when a fault has occurred on the line. And prior to communications

capabilities, the utility would literally dispatch their line crew, who

would drive the lines, looking up, trying to find the orange indicator. When they found it, they knew where the fault was and they

could begin repair. When you actually can communicate with the

utility, the utility can now know that a fault has occurred, dispatch

linemen directly to the source of the fault, which reduces fuel consumption, reduces CO2 emissions and also potentially can reduce

the time of an outage from hours into minutes. That is just one example of what the smart grid can do. However, what is pictured

directly below the fault circuit indicator are the range of hardware

options that we have to add into the device in order to communicate. Even though there are standards, if we want to communicate over the AT&T cell network, there is a different card required versus communicating through a Mesh RF network versus

a line-of-sight network versus the Verizon cell network. Each different choice necessitates a new card. Each card then requires that

we integrate it into our package so it has to fit into the device

itself, validate it with a variety of standards, certify it with a communications provider and then write software, which we grabbed

some screenshots and put at the bottom to actually interface it

with our software as well as the software that the utilities themselves use and have deployed over past decades.

So in conclusion, Cooper Power Systems believes Congress, NIST

and the DOE should continue to drive smart grid standards. We

also commend the DOE in their preparation for evaluating grant

applications for the $4.5 billion stimulus for smart grid investments. We believe the swift and judicious release of these funds

51

will help stimulate the economy and support the process of converting the legacy grid into a smart grid. We would also encourage

Congress to consider favorable incentives for utilities and vendors

for replacement or upgrades to existing legacy equipment.

Thank you for the opportunity to appear before you this morning

and I am prepared to answer any questions you may have.

[The prepared statement of Mr. Stoessl follows:]

PREPARED STATEMENT OF MICHAEL A. STOESSL

Good morning, Mr. Chairman and Members of the Committee,

On behalf of the National Electrical Manufacturers Association (NEMA), I am Michael Stoessl, Group President of Cooper Power Systems. Cooper is represented on

the NEMA Board of Governors and on its Smart Grid Advisory Panel. NEMA is the

leading trade association in the U.S. advancing the interests of 430 electrical manufacturers of a wide array of electrical industry products used in utility, industrial,

commercial, institutional, medical imaging, and residential applications.

NEMA companies are actively engaged in the research, development, manufacturing and promotion of a wide range of smart grid technologies and products, including advanced transmission devices, end user controls, and utility distribution

equipment. NEMA is an ANSI-accredited standards development organization and

publishes several hundred standards, including dozens used today in electrical grid

equipment. In the 2007 Energy Independence and Security Act, Congress directed

NEMA to advise the National Institute of Standards and Technology on a smart

grid inter-operability framework. NEMA along with its member companies are actively supporting NIST in identifying standards and protocols that will accelerate

deployment of smart grid technologies, including the one(s) in my presentation

today.

Cooper Power Systems has been providing equipment and solutions to the electric

utility industry since the days of Thomas Edison. Our product range covers the

transformers and components needed to connect and restore power, the switchgear

and automation technology needed to make the electric grid reliable and efficient,

as well as AMI and Demand Response capabilities that help manage the grid’s overall load. Our solutions cover the range of ‘‘Smart Grid’’ intelligence. Our ‘‘Smart’’

offerings include Smart Metering (AMI/AMR), Demand Response, VAR Management, Voltage Regulation, Over-current Protection, Outage Detection and Substation Automation. These solutions are known as ‘‘Smart’’ because they are communications equipped and provide decision support both locally on the grid and in back

office software solutions. What they all have in common is the ability to sense activity on the grid, communicate that information back to a decision support application, send a decision back to the grid, and then make an actual change to the grid

itself. As an example, consider that electricity flow can become inefficient as central

air conditioning load increases on a hot day. ‘‘VAR’’ sensors on the grid [picture] can

detect this inefficiency, alert decision support software, which can use two-way communication to turn on capacitor bank and improve the load flow efficiency. Cooper

has been developing and providing these types of solutions to the industry since the

late 1980’s.

One of the big challenges we face with building out the smart grid is the integration of legacy equipment in operation on our grid. Many pieces of apparatus installed on the grid do not provide or support any external interfaces, or use custom

communication protocols. For example, these reclosers provide over-current protection to overhead lines on the distribution grid. In the event of a fault (say a tree

branch momentarily short circuits a line) it will open the circuit to try to isolate

the problem. Many of these devices do not support two-way communications, so

while they are effective as an isolated solution, they can not be part of a truly

‘‘Smart’’ grid without being replaced, or being retrofitted to integrate with the grid.

The key to these upgrades will be an economic cost benefit to the utility through

operational savings, a variety of government incentive programs, or a combination

of both. With more than 500,000 of these types of devices in service today, this is

an important undertaking.

Another challenge we face in building out the smart grid is the range of communication options available. In the past three years we have seen an increased availability of cost effective two-way communications technology. Cellular, Wi-Fi,

WiMAX, Mesh RF, and Line of sight RF are a few of those technologies. These cost

effective two-way communications have become an enabler of adding intelligence to

the grid but also present a host of challenges. As an example, Cooper’s Faulted CirVerDate 11-MAY-2000 13:37 Jan 22, 2010 Jkt 050954 PO 00000 Frm 00055 Fmt 6633 Sfmt 6621 C:\DWORK\E&E09\072309\50954 SCIENCE1 PsN: SCIENCE1
52

cuit Indicator (FCI) [see photo] has been one of the successful products making the

transition from ‘‘dumb’’ to ‘‘smart.’’ Our legacy FCI has no communications capabilities. It simply displays a local visual indication that a fault has occurred; it is visible

to utility line crews from the ground. When a power outage is reported, utility line

crews drive along the overhead distribution grid beginning at the substation looking

for an FCI indicating a fault. We have transformed this product using today’s low

cost communications into a communicating FCI. These devices report the outage

event to the utility control center allowing them to dispatch the crew directly to the

correct FCI location. This can translate into less miles traveled thus saving fuel and

reducing CO2 emissions. It also can potentially reduce outage time from hours to minutes. One of our challenges with this technology is that we must support a host

of communication technologies within this device. Each communication technology

must be integrated into our package, validated with a variety of standards, often

certified by the communications provider, and interfaced into utility backend IT infrastructure. This adds to the amount of time it takes to bring each communication

technology to the market and the amount of research and development investment

made by companies like ours. Cooper Power Systems believes Congress, NIST, and the DOE should continue to drive smart grid standards, as they have begun to do. These industry standards

should be directed through standards organizations like NEMA, they should be

based on existing or de facto standards, and they should be able to evolve with the

emerging smart grid technology. We commend the DOE in their preparation for

evaluating FOA grant applications for the $4.5 billion stimulus for smart-grid investments. We believe the swift and judicious release of these funds will help stimulate the economy and support the process of converting the legacy grid into a smart

grid. We would also encourage Congress to consider favorable incentives to utilities

and vendors for smart grid replacement or upgrades to existing ‘‘dumb’’ equipment,

and for U.S.-based research and development investments in smart grid technology. Thank you very much for the opportunity to testify.

BIOGRAPHY FOR MICHAEL A. STOESSL

Michael A. Stoessl was named Group President, Cooper Power Systems in 2004, reporting directly to Kirk S. Hachigian, President and CEO, Cooper Industries. He

had been President, Cooper Bussmann since 2002. Mr. Stoessl joined Cooper

Bussmann from Emerson Electric Company where he had been employed from 1993

to 2002, most recently as General Manager and Vice President of a unit of Emerson’s Liebert Power business. In his nine years at Emerson, Mr. Stoessl held a number of positions, starting as a Marketing Manager in Emerson’s Specialty Motors

business, to President of Hurst Manufacturing, to President of Rosemont Analytical

Uniloc and then to General Manager and Vice President of Astec DC–DC Power

Supplies before joining Liebert. Prior to Emerson, Mr. Stoessl was with the Circuit Protection Division of

Raychem Corporation for four years, serving in marketing, strategic planning and

operations management positions. Mr. Stoessl began his career as a Business Analyst with McKinsey & Company, Inc. after graduating with Highest Honors from Princeton University with a B.S.

in Computer Science and Electrical Engineering. Mr. Stoessl also holds an M.B.A.

from Harvard University where he graduated as a Baker Scholar. Cooper Power Systems manufactures equipment, components and systems for the distribution and management of electrical power for electrical utilities, industries,

businesses and institutions worldwide. Headquartered in Waukesha, WI, Cooper

Power Systems has manufacturing facilities in ten domestic locations and three foreign locations, and approximately 3,400 employees worldwide.

Cooper Industries, Ltd. (NYSE: CBE) is a global manufacturer with 2008 revenues of $6.5 billion, approximately 88 percent of which are from electrical products.

Founded in 1833, Cooper’s sustained level of success is attributable to a constant

focus on innovation, evolving business practices while maintaining the highest ethical standards, and meeting customer needs. The Company has eight operating divisions with leading market share positions and world-class products and brands including: Bussmann electrical and electronic fuses; Crouse-Hinds and CEAG explosion-proof electrical equipment; Halo and Metalux lighting fixtures; and Kyle and

McGraw-Edison power systems products. With this broad range of products, Cooper

is uniquely positioned for several long-term growth trends including the global infrastructure build-out, the need to improve the reliability and productivity of the electric grid, the demand for higher energy-efficient products and the need for improved

electrical safety. In 2008, 61 percent of total sales were to customers in the Industrial and Utility end-markets and 37 percent of total sales were to customers outside

53

the United States. Cooper, which has more than 29,000 employees and manufacturing facilities in 23 countries as of 2008, is incorporated in Bermuda with administrative headquarters in Houston, TX.

DISCUSSION

Chairman BAIRD. I thank our witnesses for a very interesting

and informative testimony. I recognize myself for five minutes for

questions.

ANTICIPATED DEVELOPMENT TIMELINE

Give us a sense of the glide path of when we begin to see these

technologies becoming more adopted. You know, the temptation is

to say when will this be ready. I know it is going to be a gradual

transition but give us kind of a sense, metrics that give us a sense

of what will be established by what time, and I know that is dependent also on incentives and markets, et cetera, but give us some

thoughts about that. Mr. De Martini, you might be in one of the

best places.

Mr. DE MARTINI. Sure. Well, I think certainly across the country

we are seeing, and California in particular, the adoption of smart

meter technology as a foundational element as was discussed. Certainly as we see over the next, in our case in California, over the

next three and a half years all three investor-owned utilities will

have smart meters deployed for all their customers, building on

what we have done already for our largest industrial customers. At

the same time, there is a lot of push, and we are certainly at the

forefront, but others looking at opportunities as part of the ARRA

funds for synchrophasor technologies. It is very cost-effective. So

we see that over the next couple years, that being deployed on the

transmission systems, and that has two benefits, not only the one

that I mentioned in terms of helping to reduce, or improve, I should

say, the reliability and reduce the exposure to these large blackouts. It also has the benefit of allowing us to be able to understand

how large amounts of wind energy can be integrated into the grid

because of the very dynamic nature of wind energy. So that is one

of the things that we look at in California with the strong reliance

on renewable energy in our system. We are anticipating over the

next five years as much as 4,500 megawatts of new wind energy

coming on and so we are looking at that. As we look at these other

distribution automation technologies, while we have deployed and

many others in the country have deployed quite a bit of distributed

automation, what we have had in the last 10 years needs to be

taken further. I think it was mentioned in the other testimonies

and I think at the outset in the opening comments that when we

start to look at two-way power flow in the distribution system,

many of the protection schemes, how we think about and design

these distribution systems, need to be taken to another level. So

part of what we are looking at with this Avanti circuit but also

other demonstration projects is, how do we accommodate two-way

power flow on the distribution system that for the last 100-plus

years has been designed as a one-way power flow from central

plant down to the customer?

54

FEATURES OF SMART METERS

Chairman BAIRD. Excellent summary. If I am an average citizen

and you say the word ‘‘smart meter,’’ you are installing a smart

meter, what is the difference between the dumb meter I have outside and the smart meter?

Mr. DE MARTINI. Well, the dumb meter hasn’t really changed in

50 years and really in basic form type in 100-plus years. So it is

an electromechnical device. It has magnets and it spins on a disc.

I think most folks have taken a look at one of those. It is extremely

difficult to read because of the way the clocks in terms of the numbers are there so it is very difficult for folks to understand, the average consumer. What the digital meter will do, first and foremost,

it is digital. It is two-way communicating, has two forms of communication included in the meter, one two-way communication methodology back to the utility to be able to do remote metering——

Chairman BAIRD. Real time?

Mr. DE MARTINI. Real time—well, near real time. So we can get

the information and we can collect it on an hourly or up to 15-

minute increments and then we usually download it once a day or

a couple times a day, but we can get real-time reads off the meter

as needed. The other communication goes into the home so many

of us are looking at wireless technology. Zigbee in particular is one

that we are looking at that allows us to bridge to many of the devices that Mr. Ross talked about in terms of being able to allow energy management systems in the home to get the read right off the

meter every 10 seconds, really real-time information, and take advantage of that. So these sorts of things and more processing and

memory capability in the meter are really what distinguish it, and

features like remote service switches that allows us to remotely

turn on the power when somebody moves in. In our case, we have

over 20 percent of our customers move every year. That is over a

million and a half customers moving.

Chairman BAIRD. Thank you. I am not going to have time to ask

a couple other questions but I will just put those out if someone

could be kind enough to share down the road with us. If we get to

a second round of questions, we will get to it. I am interested in

the extent to which the energy bill that we recently passed out of

the House—a number of folks mentioned incentives as key to

adopting or not adopting some of these technologies—how the system of allowances and credits, et cetera, particularly in the capand-trade system would relate to incentives, or disincentives possibly for adoption of this. The other thing is, Dr. Arnold, you know,

when we travel the world we are used to now carrying these little

plug adaptors, and I am interested in, you mentioned global standards. I am interested separately in how we are coordinating with

the rest of the world smart grid technology so that, you know, we

don’t create yet another layer of incompatibility for international

travel and international trade and consumption of international

goods. With that, I recognize Mr. Inglis for five minutes.

FLEXIBILITY AND PACE OF STANDARDS DEVELOPMENT

Mr. INGLIS. Thank you, Mr. Chairman. Mr. Ross was talking earlier about the feedback loop of customers figuring out how much

55

power they are using. The first house that my wife and I bought

was heated with electric baseboard resistance heaters and so the

first time it turned cold, I went outside and watched the meter and

I called out to her to turn them on. I thought the thing was going

to come busting through the glass and become a dangerous projectile going through the neighborhood, it was going so fast. That was

the beginning of the feedback loop but 30 days later when we got

the bill was when the real feedback came about, gee, do we have

to change this technology, and so we changed pretty rapidly because even in warmer South Carolina it is not that cold, you know,

but wow, was it expensive. So I can see the value of a quick feedback loop to change behavior because you realize oh, my gosh, this

is costing a fortune to heat this house.

Mr. Ross, Dr. Arnold is working on standards. You are in a rapidly evolving area. Software moves rapidly. Is it time for standards? Are you ready for standards or are you hoping for more development before he gets his standards in place or do his standards

help you implement your technology?

Mr. ROSS. We have been very supportive of the NIST standards

efforts and really would like to commend Dr. Arnold and all the

work that they have done there. You know, they are dealing with

a huge area and have set forth a plan in multiple phases that really is moving with good, deliberate speed while taking into account

all the complexities of the issues they are needing to deal with.

From our standpoint, I think most people in industry are supporting open standards. It would be helpful to have the standards

in place obviously as quickly as possible but you really need to balance that with getting it right and making sure there is enough

time to investigate and work through all the issues.

Mr. INGLIS. Is there a way to keep this flexible? Because it seems

to me in an area of rapidly evolving technology, which I hope is

what we are dealing with, particularly in the software, to keep

those standards flexible. It may be a question for Mr. Ross and Dr.

Arnold.

Mr. ROSS. I can just comment, and then Dr. Arnold would have

a lot more to say. I think there is. I mean, I think the intent is

not to pick winners or losers or very specific technologies, but to

be able to pick the types of technologies broadly that will at least

allow for inter-operability and connectivity, which is a hallmark of

the smart grid, but I will let Dr. Arnold talk about that.

Dr. ARNOLD. Thank you. Well, we have to be careful not to overspecify things because we do need to facilitate innovation, which

will benefit the consumer. There are certain aspects in the standards that everyone agrees have to be common like you have to have

some common understanding of what data are you going to have,

how is it going to be represented, and these are things that people

can agree on. We can allow a lot of flexibility in terms of things

people can innovate and get benefits to consumers and they are

built on this foundation, sort of the key fundamental standards,

data models and so forth. So we are proceeding to address this in

I think a thoughtful fashion.

56

NET METERING

Mr. INGLIS. What is the holdup with net metering? I hear, you

know, a lot of people have trouble with—theoretically I think

EPACT 2005 really requires power companies to allow us to do

that, right? But then there are all kinds of questions about the

ability, the actual ability to sell your power back to the grid. What

is the holdup? Is it technological or is it a business issue and we

really don’t want to move quickly if you are in the power business?

Mr. DE MARTINI. In terms of net metering, there are actually two

dimensions. One is net metering where you are netting out how

much energy is being used by the home, and then there is the metering that involves a separate meter to be able to then get paid

for, for the energy being produced at the home. The current meters

that we are deploying, the electronic meters have capability to do

net metering. They also have the ability if we put a discrete measurement device on, say, a solar panel to be able to measure that

and we are looking at this also for the vehicle—I think Dr. Arnold

talked about this—as well as when we look at energy storage potentially in the home or at the business, how we would be able to

measure that as well in terms of its contribution to the grid, not

only for energy but also what other services it might provide in

terms of grid stability. So we are looking at that. It is really—it

is not a technology issue. I think we are looking at what the new

form factors need to be to be able to do that and then there are

standards both in terms of interconnection standards that might be

required as well as some technology standards to deal with these

different form factors because in most cases these meters would

have protection on them, unlike the meter on the side of the house

that doesn’t and so there are different safety considerations.

Mr. INGLIS. Thank you.

Chairman BAIRD. Mr. Luja ́n.

INTER-OPERABILITY STANDARDS

Mr. LUJA ́ N. Thank you very much, Mr. Chairman. I would like

to start off where our Chairman and Ranking Member’s questions

have gone as well with talking about some of the open standards

and not picking winners or losers, but the importance of inter-operability, and as we look to see some of the technologies that we depend on every day, our cell phones as an example, which are developed in open platforms but in the United States have not kept up

with some of the technological advances that have occurred in

other nations, and when you talk about an open platform but some

of the restrictions that are placed on consumers as a result of carving out niches within this industry. Can you talk about the importance of inter-operability and some of the minimum performance

standards that should be included so that way we are able to maximize efficiency, cost-effectiveness when we are looking at consumers’ implementation and the integration with utilities as well?

Dr. ARNOLD. Well, I think we have to be careful not to fall into

the trap of thinking that one size fits all because the smart grid

has to accommodate a nationwide infrastructure. Environments in

rural context are very different than urban areas so there will have

to be a range of technologies that utilities can employ, and we don’t

57

1 National Association of Regulatory Utility Commissioners

want to impede innovation. So the challenge in this effort is to

identify the critical interfaces in which there needs to be a standard and the nature of the standard has to be right as well. One

example that I will give you is that a standard for communicating

dynamic pricing information across the grid is going to be a very

fundamental standard for the smart grid, but we have 53 jurisdictions in the United States that set tariffs and rates and they are

not all the same. So we can’t have one pricing model. So the type

of standard that we need, there is language to describe pricing

models, and this is quite doable. So it is a combination of recognizing which are the key interfaces and applying the right type of

technology to create the right type of standard.

Mr. LUJA ́ N. Very good. Does anyone else want to comment on

that?

Ms. KELLY. From the regulatory perspective, both the federal and

State regulators have recognized the importance of inter-operability

at some level. And in the absence of inter-operability of open architecture, and the State commissions adopted a resolution at their

meeting, their national meeting yesterday, that pledges the State

commissions to ensure that any smart grid technology that is

sought to be deployed on their systems that they will require that

the architecture be open. (And in FERC’s policy statement for cost

recovery, we have made the same statement.)

Mr. LUJA ́ N. Thank you. And I would also like to second the

thoughts of Mr. Inglis as well as it pertains to net metering. As we

are looking to smart meters and the importance of making that inclusion as we are making this critical investment now to prepare

homes and the investments to be made with smart meters for those

individuals that would like to get involved in that type of an environment, I think it is critical and I hope that that would be some

type of a parameter that would be established.

And lastly, Commissioner Kelly, just to applaud your efforts with

what you have done in the collaborative effort between FERC and

NARUC1 to bring those two entities together to talk about the regulatory environment that exists, the framework that has to be

adopted and how the two can truly adopt best practices throughout

the United States to help carry this out. And if you can just touch

upon any of the practices that you have already identified or the

progress that can be made and how we as a Congress can provide

the support that you need, whether it is for FERC, DOE, NIST,

with NARUC to help you do what it is that we need to do, recognizing that all of your testimony supports the robust investment

that has been made in smart grid applications, recognizing the investments that can be made and the progress that can be made

over the next five, 10 and 15 years.

Ms. KELLY. Well, thank you, Congressman. It has been a very

fruitful effort, this collaboration between the states and the Federal

Government. In addition to adopting a policy that inter-operability

has to be met by all smart grid investment, cyber security has also

been a concern of State regulators as well as federal, and we have

pledged ourselves to demand that any smart grid technology that

comes before us for approval for deployment to the grid will have

58

2 Intercontinental Ballistic Missile

to be shown to be cyber secure. You already have helped us with

the stimulus funds and in the ARRA you created a clearinghouse

of information which the Department of Energy is working to establish right now, and we see both of these as very helpful for the

encouragement of deployment of the smart grid. With the stimulus

funds, we are anxious to see them spent on demonstration projects

that actually demonstrate a range of technologies from the transmission end down to the distribution end, because some of these

technologies are not known. So if we can have a demonstration

project and get the information from that project that shows that

this technology performs, that it actually provides benefits that we

can quantify and report on and that it has been accepted by consumers, this is a wonderful way to kick start the deployment of

smart grid technology and advance it. So thanks for your legislative efforts.

Mr. LUJA ́ N. Thank you, and thank you, Madam Chair. I see my time is expired. I want to invite any of the other panelists to submit a response to that question if you so choose in writing for the

record. Thank you very much. Thank you, Madam Chair.

Ms. GIFFORDS. [Presiding] Thank you, Mr. Luja ́n.

The Chair will recognize Mr. Bartlett.

Mr. BARTLETT. Thank you very much.

NATIONAL SECURITY CONCERNS

Just about a week before the G–8 ratified the framework agree- ment that ended the Kosovo conflict, I was sitting in a hotel room

in Vienna, Austria, with three members of the Russian Duma and

the personal representative of Slobodan Milosevic. One of those

Russians was Vladimir Lukin, who is Ambassador here and at that

time the Chair of what would be our Foreign Affairs Committee.

He was very angry. He spent two days with his arms crossed looking at the ceiling and finally he said if we really wanted to hurt

you with no fear of retaliation, we would launch an ICBM.2 We

would detonate a nuclear weapon high above your country and

shut down your power grid and your communications for six

months or so. The third-ranking Communist was there, Alexander

Shabanov, and he smiled and said and if one weapon wouldn’t do

it, we have some spares like about 10,000, I think. What was he

talking about? I won’t ask Ms. Hoffman because I know that she

knows what he was talking about. Let us start with Ms. Kelly. Because it really is relevant to this hearing and what you all are

doing. What was he talking about?

Ms. KELLY. Well, Congressman, he was talking about electromagnetic pulse and he was thinking about using it as a threat to

the stability of the United States, and it is a concern. It is a physical threat as opposed to a cyber threat, but nevertheless a very

real threat.

Mr. BARTLETT. Dr. Arnold.

Dr. ARNOLD. Well, this is indeed a very serious concern that we

must address in the context of the smart grid, and although it is

a physical threat, it does have cyber implications because the

greatest damage with that threat is to the control systems which

59

3 Electromagnetic Compatibility

4 Electromagnetic Pulse

5 International Electrotechnical Commission

are based on electronics. We consider that threat to be within the

scope of the cyber security task force within the NIST standards

program. We have a number of EMC3 experts who participate in

that group and NIST has expertise as well. I would just like to say

that I am aware that some of the manufacturers are at least sensitive to the issue and several of the manufacturers on our working

groups have informed us of research they are doing on component

technologies that are more EM immune than conventional circuits.

There are existing approaches with layered magnetic shielding to

create EMP4-resistant designs and there are applicable standards.

IEC5 Subcommittee 77C has had work underway for some time and has produced a series of standards. The real challenge in this, and

I am reminded of this by the report of the commission to assess the

threat to the United States on EMP attack in which it says it is

not practical to try to protect the entire electrical power system or

even all high-value components from damage. So I think the key

to this is identifying which are the critical assets that need to be

protected and to apply the relevant design standards to ensure

their protection.

Mr. BARTLETT. Yeah, the smarter we make the grid, the more vulnerable we are, and unless you are incorporating EMP protection, you are simply making it worse rather than better as far as

security is concerned.

Mr. De Martini.

Mr. DE MARTINI. Yes. In addition to what Dr. Arnold described,

the other potential threat, physical threat, has to do with the longcycle currents that are induced under one of the three different scenarios. There are three different pulse sort of effects that result

from EMP. The second looks and acts like lightning on the system

and the current grid use of lightning arrestors and protection devices will mitigate that. The third, though, is the one that has the

most potential physical damage for things like transformers and

others large equipment that we have on our bulk transmission system and also in our distribution and subtransmission systems.

There are ways to approach this. This is also similar to a phenomenon, solar flares, which is fairly well understood. There have

been a number of scenarios over the last 20, 30 years, one by

Hydro Quebec in the 1980s and some of the technologies that they

have deployed. Again, I think to Dr. Arnold’s point, what we need

to look at is sort of a risk assessment and looking at what we think

are the key vulnerabilities. In the case of the physical infrastructure, it is long lead time items like transformers so if a transformer

was to fail, getting a new replacement transformer for a 500,000-

volt transformer is very long.

Mr. BARTLETT. What is ‘‘very long’’?

Mr. DE MARTINI. Could be two to three years, if we had a very

wide scale. Usually if we have one fail, you know, there is a sharing arrangement usually with other utilities and manufacturers so

that we can get something quick as in the case of an earthquake,

but when we talk about widespread, you know, damage, then we

would exhaust those standbys. So looking at ways to isolate those

60

transformers or dampen those currents that may get induced into

the system is something we can look at, and our 500-KB system,

for example, in the West, and particularly in California, we have

series capacitors to help actually shorten the lines, which is one of

the things you can do to mitigate the exposure from EMP.

Mr. BARTLETT. My time is up. Let us come back to this in the second round because it really needs more exploration because if

we don’t adequately respond to this, it could really, if we had that

event, end life as we know it in this country. So let us come back

to that in the second round. Thank you, Mr. Chairman. Chairman BAIRD. Thank you, Dr. Bartlett. Ms. Giffords.

ENERGY STORAGE

Ms. GIFFORDS. Thank you, Mr. Chairman, and thank you to the panelists for being here today. I come from southern Arizona, and

it is a state that is abundant in solar energy and incredible potential in its natural resources. As you all know, smart grid technologies provide a real relevance to the goal of making our state

and the country more dependent on renewable energy and particularly solar because of the storage capacity issues that deal with the

sun setting at night and clouds coming overhead, so I want to talk

a little bit about what happens under the traditional rate-making

process. There are very few ways currently that utilities can monetized the benefits of storage. Since storage technologies do not fall

into any of the traditional asset classes like generation or transmission or distribution, it is really a struggle for the utilities to use

storage as part of their rate base. So my question is, what can

FERC do to encourage the use of energy storage in light of these

circumstances, and should FERC institute a separate asset class

for storage since it provides benefits for the generation and transmission and distribution of energy?

Ms. KELLY. Thank you, Congresswoman. You are absolutely right. Storage is not a traditional resource on the system. The traditional resources are generation, transmission and distribution,

and that is how rates have been set. Storage can potentially act as

any one of them or all three of them, and that is where the difficulty comes in. If it is acting as a generator, for example, pump

storage, a traditional storage facility, then it receives revenues as

a generator. Some of the issues that get more difficult come if the

deployer of the asset wants to capture multiple revenue streams.

I know that there was a proposal by AEP that was at the distribution level in Texas that would have been a distribution asset and

the Texas commission did approve that in distribution rates and I

believe also allowed them to recover revenues as a generator at the

same time. One thing that FERC has done to facilitate storage is

to allow—in our organized markets, we have seven organized markets in the United States and we have allowed storage to qualify.

We changed the rules so that storage can qualify as a demand response provider and we have lithium ion batteries in particular

that, although they are expensive, can provide ancillary services

because those ancillary services are costly. So we are working to

change market rules to allow storage to sell power into the market.

We also have an office of policy and innovation, and two months

61

ago they began an effort internally to decide whether this is something that we should develop a comprehensive policy on or whether

it is something that we should decide on a case-by-case basis, because you are absolutely right; storage can act as a number of different kind of entity within the system, and the question of whether or not they can recover as a transmission asset and a generation

asset has a lot of implications for the market and the competitiveness of the market and cost recovery, but it is something that we

are undertaking to look at to see whether we should come up with

some sort of comprehensive policy.

Ms. GIFFORDS. Thank you, Ms. Kelly.

Would anyone else like to comment? Ms. Hoffman.

Ms. HOFFMAN. I just would like to comment that the best thing

we can do for the industry is to develop a clear definition of those

services and what can be covered under what cost structure so that

the industry knows how to move forward and where they can get

cost recovery so it is completely transparent and consistent.

Mr. ROSS. I would just like to say, we agree with your view. Storage is, you know, a very attractive solution for utilities. The price

points are coming down now with some of the advantages gained

through the development of batteries for electric vehicles, and I

think those price points are now approaching new generation and

I think more clarity would be beneficial for the industry because

today where we are at, there are some utilities that have deployed

storage solutions, grid-scale storage solutions, but it has tended to

be basically on a pilot basis and not more widespread.

Ms. GIFFORDS. Mr. Chairman, just in closing, this seems to me

a real key part of how we are going to figure out transitioning to

renewable energy and, you know, I am glad that you are holding

this hearing today and I look forward to working with all of you

to make sure that we can actually get these changes in place so

that we can really move forward and transform our economy and

our energy usage.

Chairman BAIRD. Excellent point, as always, Ms. Giffords. Maybe

we want to pursue specifically a hearing on the issue of storage in

some more detail.

Ms. GIFFORDS. That would be a great idea.

Chairman BAIRD. Dr. Ehlers.

Mr. EHLERS. Thank you, Mr. Chairman. I don’t know about you

but I am having fun. It is not every day we have a panel on which

every member knows what they are talking about. So I have

learned a lot.

Just one quick comment on the EMP. When I look at that issue,

I just think this is so far beyond what anyone should do that it almost is in the category of mutually assured destruction as being

the only defense against it. We can protect some things but good

grief, given all the processors around, if every car stops because of

EMP, you have total gridlock, the Nation doesn’t function. So it is

something we would rather not think about it but I really think it

is very, very difficult to address the whole issue.

On the smart grid, it seems to me a smart grid requires smart

people too, and I think the comments about digital meters—I think

we would do everyone in this country a great favor if every major

energy consuming appliance had a digital display on the appliance

62

showing how much energy it was using at that moment. You know,

this would apply to stoves, dryers, washers, dishwashers, the major

appliances, perhaps even the furnaces and air conditioners, although you wouldn’t want the display on the machine per se but

somewhere in the house. People have to become much more conscious about their energy usage if we are really going to be serious

about conserving energy, and so I would—you know, I don’t know,

Dr. Arnold, whether you want to put this as one of the standards

but I certainly wouldn’t mind seeing a recommendation in there

that this is something we should move towards, and perhaps it requires legislation at some point. I think the public will make intelligent decisions if they know the facts, and we have to make sure

that we let them know the facts in every way possible.

THE PURPOSE OF THE SMART GRID

The question I have is, what is the primary purpose of the smart grid? It seems to me its origin was in the blackouts and concern

about that, but what you are talking about today and discussing

is far beyond just dealing with blackouts, and I don’t have much

time left but if you can each give just a short response of what really are we trying to accomplish with a smart grid. What is our purpose? What is our goal? We will start with—well, let us reverse the

order. Ms. Hoffman, you get nabbed every time. Mr. Stoessl, and

just go down. I am looking for short answers, not long ones.

Mr. STOESSL. I think unfortunately smart grid has become some- thing that is ubiquitous. Everybody takes anything going on in the

grid and calls it smart grid application but from our perspective,

improving reliability is a key part of it. Improving conservation of

resources, reducing waste is a key part of it, and providing signals

to both consumers as well as the utilities on how to reduce waste,

reduce usage is also a key part of it.

Mr. EHLERS. Thank you.

Mr. Ross.

Mr. ROSS. Yeah, I would agree with a lot of that. I think it is to create efficiencies. I think it is to improve reliability. We should

have as a goal to increase security and I think there is a lot of

work being done on that, and I think those are the main prongs.

Mr. EHLERS. Mr. De Martini.

Mr. DE MARTINI. I would say there are three things. One is that if we look at renewable energy integration, involving large amounts

of wind and distributed solar energy, we need a different set of

technologies to be able to integrate that energy in a reliable, safe

manner. The other is the grid efficiencies that were talked about,

two elements. One is, there are superconducting technologies that

can make our grid, the inherent grid more efficient which means

less energy wasted through losses on the system, and then obviously engaging our customers in the process that you described in

terms of using more-efficient energy. So I would say those, and

then overall reliability of the grid in terms of providing better service for our customers.

Mr. EHLERS. Dr. Arnold.

Dr. ARNOLD. I think of it as reducing energy usage, allowing consumers to manage their use of energy, increasing reliability and

benefiting the environment.

63

Mr. EHLERS. Ms. Kelly.

Ms. KELLY. Congressman, I think of it as doing the same thing that the dumb grid does, which is send electricity, only doing it better, more efficiently and more reliably, and then increasing our

ability to do things with the grid that it has never done before like

sending electricity two ways, allowing for net metering and allowing for dynamic price signals and automated demand response,

things that we can’t do with the dumb grid today.

Mr. EHLERS. Ms. Hoffman.

Ms. HOFFMAN. I will summarize it as sensing, measurement, in- formation, decision-making and automation such that we have a

greater—as you eloquently stated, an educated consumer and a

more sophisticated industry.

Mr. EHLERS. Thank you very much. Just to summarize, most of you mentioned the issue of efficiency, which I think is a huge issue

that we have to deal with internationally, not just in this country,

and I appreciate your comments. They are right on target. Thank

you. Chairman BAIRD. Dr. Lipinski.

FIRST STEPS TO A SMART GRID

Mr. LIPINSKI. Thank you, Mr. Chairman, and thank you for hold- ing this hearing today. It is very important that we talk a lot about

alternative energy. This is another critical part of the equation that

oftentimes gets overlooked. I will start out by asking about this. I

read recently that the National Association of Regulatory Utility

Commissioners reported that the most effective place for initial investment in the smart grid for smart grid improvements is on the

electric grid itself where energy and cost savings are immediate

and that rely upon change in customer behavior or for customers

to purchase and install in-home energy-saving devices. So I was

wondering what the panel thinks about the commissioner’s assessment. Do you think that that is the best way to start building the

Nation’s smart grids? Maybe we will start with Ms. Hoffman.

Ms. HOFFMAN. I actually think we need to drive innovation and smart grid technologies on all three levels, at the transmission

level with the phasor measurement units, at the distribution level

through substation automation, and at the customer level. The

safest route from a regulatory commissioner’s perspective is something that is dealing directly with the industry, or within the utility industry itself. The most competitive and most innovative aspect of the smart grid is on the consumer side for consumer decision-making.

Mr. LIPINSKI. Ms. Kelly.

Ms. KELLY. Congressman, I would agree with Ms. Hoffman. The

State utility regulators are concerned because the technology that

we are talking about putting in is new to them and so I think that

the DOE demonstration projects will be very valuable in demonstrating that the technology does perform, that it does provide

benefits and that it is accepted by the consumers. The technology

that they referred to is technology that we understand pretty well

and we could put on the transmission system, and I think that is

one reason they endorse it because it is well known and we know

how much efficiency can be delivered by it. And so from that perVerDate 11-MAY-2000 13:37 Jan 22, 2010 Jkt 050954 PO 00000 Frm 00067 Fmt 6633 Sfmt 6601 C:\DWORK\E&E09\072309\50954 SCIENCE1 PsN: SCIENCE1
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spective, I think that it is important that that kind of technology

be deployed but in parallel we should be undertaking these demonstration projects to show that other technology can also work

well.

Mr. LIPINSKI. Does anyone else have a comment? Mr. De Martini.

Mr. DE MARTINI. Yes. Thanks. I think that is important to recognize, for example, in California and certainly in southern California

Edison’s case, our peak, system peak is occurring on less than 60

hours of the year. During the period from 2002 to 2007 when we

were experiencing the dramatic growth in our economy, our average peak demand was growing by about 1,000 megawatts a year.

That peak, 30 percent of that peak, 7,000 megawatts is air conditioning load. As we look at investing more in capital to try and

meet that type of growth, which we anticipate that we will see

again once we come out of this downturn, it is important that we

engage our customers in a way that they can see what prices are,

what the cost of this energy is going to be so that we can have this,

you know, mutually beneficial relationship that we can meet their

needs but also that they can recognize what the cost of this is so

we can end up with a much more efficient system. It is just not

possible to continue to try and meet that sort of growth.

Mr. ROSS. Yeah, I would like to just comment on that as well.

I agree with what the other panelists have said. I would like to

point out that a lot of the work that has been done to date, though,

really has been on the grid operations and reliability side. So we

have done a lot in transmission, and we are doing a lot at substations and distribution automation. Where we haven’t done a lot

so far really is on the demand side and looking at efficiency, and

so a lot of those things hopefully through the smart grid demonstration projects and elsewhere we will see new technologies that

can be deployed, but those things have done, you know, at best

very small pilots. So a real focus on efficiency and addressing the

demand side as well as the supply side I think is needed.

Mr. LIPINSKI. Thank you. With the little time I have left, I want

to ask Ms. Hoffman, is DOE spending any of the stimulus dollars

on efficiency improvements on the electric grid itself?

Ms. HOFFMAN. We are. Through the demonstration program we

will have a complete portfolio of generation as well as smart grid

technologies that will hopefully show improvement in efficiency of

the whole system, the system as a whole. For the investment grant

program, there are very technology-specific actions or proposals

that will be submitted to the Department so some of them could

but not all of them probably will.

Mr. LIPINSKI. Thank you. I see my time is up. Thank you for

your answers, and I yield back.

Chairman BAIRD. Thanks, Dr. Lipinski.

Ms. Biggert.

Ms. BIGGERT. Thank you, Mr. Chairman. This must be smart

grid day. I co-chair a caucus on high-performance buildings, and

the title of what we are having today is ‘‘Connecting Buildings in

the Smart Grid.’’ So it obviously is a topic that is very much in the

forefront. I do chair this caucus with Representative Carnahan

from Missouri, so if you happen to be down in the basement of RayVerDate 11-MAY-2000 13:37 Jan 22, 2010 Jkt 050954 PO 00000 Frm 00068 Fmt 6633 Sfmt 6601 C:\DWORK\E&E09\072309\50954 SCIENCE1 PsN: SCIENCE1
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burn around 11:30, that is when that starts, if you need some more

talk about the smart grid.

I read recently that the National Association of Regulatory Utility Commissioners has reported that the most effective place for

initial investment in smart grid improvements or immediate investments in the smart grid improvements is on the electric grid

itself where energy and cost savings are immediate and do not rely

upon changes in customer behavior and do not need customers to

purchase and install in-home energy-savings devices. Do you agree

with that assessment as the best way to start building this Nation’s smart grids? Ms. Hoffman.

Ms. HOFFMAN. Congresswoman, thank you. I believe that we

really need investments at the transmission-level system as well as

at the distribution and at the customer levels. The innovation that

is occurring on the system is occurring at the customer level as you

look at the wealth of technologies including the appliances, with intelligence. It will provide great advancement and great education

to the industry as well as consumers on their energy consumption.

Ms. BIGGERT. Thank you.

Ms. KELLY. Congresswoman, the technology that they are discussing there will indeed provide a lot of efficiency and translate

into a lot of savings for consumers. However, I don’t think we want

to lose sight of the fact that adding smart grid technology at the

retail level in the home also has the potential to accomplish similar

types of savings.

Ms. BIGGERT. Thank you. Anybody else?

Mr. Stoessl, you mentioned something in your testimony

about——

Mr. STOESSL. Absolutely, and I think that while it is essential

that we invest everywhere, I think if you really want immediate

gains, the fastest response is going to come from going after management of efficiency on the grid itself. Voltage management and

reactive power management, that first example that I provided,

looking at how you turn capacitor banks on and off or turn voltage

regulators on and off when demand shifts and the load comes up

and down, that is something the utility can manage directly without relying on consumers to get cues and individually make a

whole host of actions. And so I think there are opportunities for immediate benefits going in that direction while waiting for all the

cues that the consumers will need to manage their own consumption, which is going to be very important down the road as well.

Ms. BIGGERT. Well, you know, we hear a lot about the smart meters and the programs to enable consumers to reduce energy use,

you know, usage and shift part of it, you know, to particular times

of the day but it seems that there is more to the smart grid, essentially making the utility systems themselves self-healing as you

mentioned, Mr. Stoessl, and making them more reliable and more

efficient and lowering the cost of electric delivery. But if this is so,

Ms. Hoffman, how is DOE encouraging the deployment of these

types of smart grid systems?

Ms. HOFFMAN. Well, hopefully we will get some wonderful proposals through the American Recovery and Reinvestment Act that

demonstrate some of the objectives that the legislation asks us to

do in advancing consumer behavior, managing load on the system

66

as well as we look at supply and demand, increasing the availability of renewable resources. I believe that through the American

Recovery and Reinvestment Act solicitations for both the demonstration as well as the investment grants, we will have taken a

major step in the right direction in doing projects as well as documenting the benefits of these projects.

Ms. BIGGERT. Thank you. I yield back. Chairman BAIRD. Thank you, Ms. Biggert.

Mr. Davis.

POTENTIAL ENERGY PRODUCTION SAVINGS

Mr. DAVIS. Mr. Chairman and Ranking Member, thanks for hav- ing the hearing today to better inform those of us who will be making decisions on energy issues in the future where America can become more energy independent and more economically secure and

have greater national security. I look at the issues today that I

hear discussed so often from everyone in this room and everyone

in the District I represent and throughout the country, and each

seems to have a better mousetrap. The windmills quit moving

when the wind quits blowing and the solar systems quit working

at least to 100 percent efficiency when the sun goes down. We are

putting—50 percent of our energy production is from coal, which

belches into the atmosphere carbon emissions that seems to be destroying our planet, about 24 to 25 percent from nuclear energy.

We have no place to send the spent rods. And then some 20 percent

or so would come from natural gas or from fuel oils and then one

or two percent from hydro and the wind and the solar. And now

we talk about a grid that would transfer all of the energy that we

are producing where the source may be in a more efficient and effective way where perhaps we can reduce the amount of generation, which means we would reduce the amount of pollution and

more efficiently and more effectively transfer electrical energy that

we are producing in certain locations throughout America. It is my

understanding today, and I live in the Tennessee valley area, I represent Kingston where the spill is located, and so obviously all of

us are trying to find some way to find a better use of that. So with

the grids that we have, my understanding is, we transfer now energy being produced from one particular company to another, from

one area and one region to another. How do we redo the grid system to where it can become more effective, and if we do with the

costs we are talking about, how much more can we wring out and

how much can we reduce the generation that we have today as a

result of that? One percent, two percent, three percent, five percent? Would you give me an estimation of how, if we had the perfect grid system based upon your knowledge and study, how much

can we save in production?

Ms. HOFFMAN. I don’t have an exact number for the savings, but

I will characterize it a little bit differently. If we can reduce the

peak on the system, we can show great savings. If we actually can

flatten the loads of customers and flatten the transfer on the transmission system, we will get the greatest value and benefit. There

are some numbers out for peak load reduction. I don’t remember

the exact savings numbers but I can provide that to you.

[The information follows:]

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INFORMATION FOR THE RECORD

A 2009 industry report (Faruqui and Sergici with the Brattle Group, ‘‘Household

Response to Dynamic Pricing of Electricity—a Survey of the Experimental Evidence,’’ funded in part by Edison Electric Institute/Electric Power Research Institute) analyzed the results from the most recent 15 pricing pilot programs. The study

concluded that, ‘‘Across the range of experiments studied, time-of-use rates induce

a drop in peak demand that ranges between three to six percent and critical-peak

pricing tariffs induce a drop in peak demand that ranges between 13 to 20 percent.

When accompanied with enabling technologies (i.e., programmable thermostats), the

latter set of tariffs lead to a drop in peak demand in the 27 to 44 percent range.’’

Mr. DAVIS. But when it gets to 100 degrees in Tennessee and it

is 150 percent humidity, we all turn our air conditioners on and we

want it to be about 75 degrees, and so that produces a peak. How

do we convince that customer—and what you are saying is, we

need to reduce the amount that we are consuming so therefore we

don’t have a peak. How do we do that? How does the grid system

bring about a reduction in peak use for those customers who feel

they need that energy?

Ms. HOFFMAN. Well, one of the technologies is, you actually can

cycle the air conditioners through peak price signals. They can

cycle some sort of incentive program for cycling the air conditioners, and that has been a common program.

Mr. DAVIS. And that works, because I just put like a 16 series

in my house from propane to electricity and we just changed all of

the light bulbs, so we are not talking about grid now, we are talking about actually efficiency and conservation.

Ms. HOFFMAN. And consumers’ decisions. You can have the air

conditioning running and there might be a price signal but the consumers may say okay, well, I am not going to start my dishwasher

at this time, so you look at all the factors that pull together and

not just the air conditioning.

Mr. DAVIS. Yes, Ms. Kelly.

Ms. KELLY. Thank you, Congressman Davis. FERC recently completed a study which the Energy Independence and Security Act

asked us to do on assessing the national potential for demand response, and in that study we determined that in a perfect world,

we could reduce peak 20 percent over the next 10 years. Those are

the numbers I think that Ms. Hoffman was talking about. Now,

that would be a perfect world but that perfect world would be all

consuming entities having a smart meter and having that smart

meter send the real-time price signals, dynamic pricing, and having

the devices and appliances have smart chips in them that could

automatically respond to the price. But that estimate, 20 percent,

is very significant.

Mr. DAVIS. Yes.

Ms. KELLY. It would be 120 gigawatts. Today we consume on

peak about 820 gigawatts, so it would be very significant.

Mr. DAVIS. At our home, it has reduced more than 20 percent the

actual consumption of energy as a result of those two. So we are

not necessarily talking about a grid that makes it smarter use, we

are talking about customers who will be smarter users of the energy that we produce and that is a task for us.

Thank you, and I apologize for running over my time.

Chairman BAIRD. Thank you.

Mr. Rohrabacher.

68

POTENTIAL ENERGY SAVINGS

Mr. ROHRABACHER. Thank you very much, Mr. Chairman. It has

been a very educational hearing, and again, I agree with Mr.

Ehlers that all of the panelists have contributed to our knowledge

base on this issue which I consider to be vitally important because

I think that in the future, our country will be relying on electricity.

Electrifying America even more than it is is probably the answer

to the pollution problems that we face, the challenges that we face

today. I might add that those of us who don’t believe that global

warming is a problem caused by CO2 are very concerned with pollution and very concerned with America’s energy independence as

well.

I would like to get back to the question that my colleague just

brought up about how much energy we are talking about here. You

guesstimated that with the smart grid, we would have 20 percent

more efficiency in operating. What about today? How much of the

electricity that is put into our system is dissipated in some way

that wouldn’t be dissipated if we were handling it in a smarter

way? And I don’t know, whoever can answer that. How about the

guy from Southern California Edison? They know all that.

Mr. DE MARTINI. Thank you, Congressman. I don’t have the

exact number for our system but it is not unusual to have a system

loss from the time it goes from generation down to the customer,

somewhere in the neighborhood of maybe seven percent.

Mr. ROHRABACHER. Seven percent?

Mr. DE MARTINI. Yes.

Mr. ROHRABACHER. Okay. And so we are actually producing

seven percent that never goes into some electric device in your

home and things like that, that is just not used for the benefit that

it could be used for?

Mr. DE MARTINI. That is right. That is through the losses in the

transmission of the power over the power lines as well as through

the transformer, so in the transformation from one higher voltage

to a lower voltage we are stepping up in that transformation. And

actually superconducting materials both applied to the conductors

but we think that there is a lot of potential to apply it to the transformers and that is an area that we are putting a lot of focus on

to see if we can’t get some of that developed because that could be

pretty easy to replace over the next decade.

FINANCIAL BENEFIT TO CONSUMERS

Mr. ROHRABACHER. So one of the goals of a smart system would

be to bring that seven percent number down, which could pay for

itself actually, when you think about what we are talking about

here. And when we talk about smart meters and two-way meters,

would a customer in the future be expected if he put solar power

panels on his roof or finds a way of producing electricity with whatever method that would be, would that customer be expected to receive a financial benefit from that other than just the fact that he

is not buying it? In other words, putting into the grid, would he receive some benefit? Is that what the goal is, or is that not the goal?

Mr. DE MARTINI. Yes, Congressman, that is what we mean by

two-way flow of power.

69

Mr. ROHRABACHER. So what would that be? Would someone be

able to receive payment back or credit for that would be in the

same dollar amount as what it would cost him to take out—he or

she?

Ms. KELLY. Congressman, it really depends on the nature of the marketplace that they are selling into. If it is a traditional regulated utility, then it would be an offset from the bill. If they are

in an organized—we have seven organized markets within the

United States, doesn’t cover all of the United States but two-thirds

of the consuming areas of the United States. If they sold into that

organized market, they would get the clearing price of that market,

the market price at the time they sold into it.

Mr. ROHRABACHER. So they get the market price, so if

someone——

Ms. KELLY. They could get the market price.

Mr. ROHRABACHER. So if someone has like Dr. Bartlett here has

a farm and he produces more electricity because he has got all the

solar and the wind going, he would actually make the same

amount of money as Southern California Edison in producing what

he is producing. Is that right?

Ms. KELLY. Particularly if he sold it back on peak when the price is higher.

Mr. ROHRABACHER. Okay. Well, thank you very much. Again, this has been very educational. I appreciate your leadership, Mr.

Chairman.

Chairman BAIRD. Mr. Tonko.

JOB CREATION AND WORKFORCE DEVELOPMENT

Mr. TONKO. Thank you, Mr. Chair. I apologize that I had to leave the hearing to go off to another meeting, so if I ask a question that

has been asked, just tell me. Workforce development as it relates to smart metering and in upgraded grid, has any discussion been had in that regard? Are

there things you would advise this committee in terms of the

human infrastructure that is required in order to do this in the

most effective way, whether it is retraining workforces out there or

entering some new, and what potential exists in the future? Are

there career developments we should be doing as early as high

school? In the State of New York, we have an operation that will

deal with some of the developments of more trade-related aspects.

Are there any comments that any of you would wish to share?

Ms. HOFFMAN. Let me start, Congressman. Thank you for the

question. It is a very important question as we look at our aging

workforce today. In the American Recovery and Reinvestment Act

there is $100 million that is set aside for workforce training. The

issues surrounding workforce training, I think as we look at putting more advanced technologies on the system, we will need to retrain workers that traditionally may do line work, but may have

to also be able to handle solar cells on a pole on an electric system,

as well as we need to have more sophisticated workforce coming

into the electric industry as we start advancing power electronics.

And as we look at cyber security, the information technology is

probably not the way current line workers have utilized information technologies. There will be significant advancements with reVerDate 11-MAY-2000 13:37 Jan 22, 2010 Jkt 050954 PO 00000 Frm 00073 Fmt 6633 Sfmt 6601 C:\DWORK\E&E09\072309\50954 SCIENCE1 PsN: SCIENCE1
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spect to computer use and information technology on electric systems that we need to make sure we advance the workforce in having them up to speed, and I think that—I believe that requires education at the high school level and at the starting point with respect to computers, mathematics and following that all the way

through the two-year colleges.

Mr. TONKO. Anyone else?

Mr. DE MARTINI. Southern California Edison agrees, you know,

with Ms. Hoffman. We believe this is actually one of the larger

issues when we start to look at a smart grid. As Ms. Hoffman

pointed out, there are fairly large challenges with the workforce

that we have today. You know, the average age of our workforce

is nearing retirement or already retirement eligible.

Mr. TONKO. And that is a pattern across the country, I think, especially in states where they deregulated?

Mr. DE MARTINI. Well, across the industry, so we are not unique

in that regard, and one of the things that we have seen is that over

the last 15 years when construction and growth of the electric industry slowed down after the 1980s, you know, the university systems largely dropped their power system certificate programs for

the electrical engineering curriculum so there hasn’t been a lot of

graduates of electrical engineering programs specializing in power

systems development. The other thing that we see clearly as we

move forward, it is not just enough to reinstitute those curriculum

because today a power system engineer also needs to understand

computing systems. So we are working with a number of universities to try and reestablish the certificate programs and expand

that to include computing systems, computing sciences as part of

that. The line worker is a real challenge because most of our line

workers and field workers are basically high school graduates and

so they haven’t had extensive, you know, sciences or certainly not

electronics, and it isn’t just the solar cells, although that would be

a challenge as well. We are going to have a lot of power electronics

out in the system, out on a circuit, as Mr. Stoessl highlighted. So

as we have that, our folks need to understand, you know, electronics, which means that there is more education, so this is something we look at both with the labor unions in their development

of their apprenticeship programs, community colleges we are reaching out to. This is a very large issue that the industry across the

board is trying to——

Mr. TONKO. Is the planning element of that all structured

enough or should the Feds step in or states step in and make certain that all this is getting accomplished in the most effective way?

Mr. DE MARTINI. I believe most utilities are very well aware of

this, and we have been looking at this issue and starting to put in

place plans to develop it. Obviously, you know, certain budgets and

many of the locations across the United States for education are,

you know, under pressure and so developing new programs can be

quite challenging to be able to move this forward.

Mr. TONKO. Thank you. I had one second left, Mr. Chairman. I

wanted to point that out.

Chairman BAIRD. Well done, Mr. Tonko.

Mr. TONKO. I am following our leader there.

Chairman BAIRD. Mr. Olson.

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Mr. OLSON. Thank you, Mr. Chairman, for allowing me to participate in this hearing today. I greatly appreciate that.

I would like to follow up on my colleague from New York’s questions about workforce development and specifically job creation. In

April of 2009, Vice President Biden announced funding in the

amount of $4 billion through the American Recovery and Reinvestment Act for smart grid initiatives. He did so under the premise of

job creation. And that same day, a notice of intent was released by

the Department of Energy which stated that job creation would be

a primary criterion for ranking projects receiving funding under

the program. However, revised guidance issued on June 26 has

eliminated job creation as a primary criterion for funding. The

funding opportunity announcement for smart grid initiative grants

in the section entitled ‘‘frequently asked questions,’’ it states that

DOE remove the criterion on the extent of jobs creation and will

now require applicants as stipulated within the Recovery Act to report quarterly on the number of jobs created and retained. And we

were told during the debate we had on the Floor in the stimulus

package that the urgency behind the measure was due to the need

for job creation, and yet we have seen, it looks like the exact opposite is occurring, and so my question for you, Mrs. Hoffman, why

the change in criteria?

Ms. HOFFMAN. The final funding opportunity announcement that

came out recognizes that job creation is recognized throughout the

solicitation. The major goals of the solicitation as listed in the introductory section says job creation is a goal. The proposers have

to write towards those goals and recognize job creation as part of

the proposals as well as the companies themselves must define the

workers they require to implement projects in that solicitation, so

we thought that—or we included job creation in almost every aspect of the technical requirements and the evaluation criteria of

the proposal.

Mr. OLSON. I appreciate that answer, but let me read to you from

the document that was issued on June 26. ‘‘The question is, will

DOE use the number of jobs estimated to be created and/or retained as a criterion for rating a proposal on funding,’’ and the answer is no. And then they downgrade it and say, ‘‘Although job creation is not included in the technical criteria used to rate proposals, it plays an important role throughout the grant process and

grant recipients again are required to submit the numbers of jobs

created and retained in their quarterly reports to

DOErecovery.gov,’’ and to me, that is a significant de-emphasis of

job creation as part of the smart grids initiative.

And following up on that, Ms. Hoffman, if jobs creation, as you

say, is still a factor driving the force behind these grants, how

many jobs do you foresee will be created using the smart grid initiatives?

Ms. HOFFMAN. We are following the Council of Economic Advisors’ methodology for job creation, and I don’t have the number off

the top of my head that they have quoted as part of their methodology.

[The information follows:]

72

INFORMATION FOR THE RECORD

We anticipate that the Smart Grid Investment Grant Program and the Smart Grid Demonstration Program will result in 36,712 and 6,685 job-years (full-time

equivalents), respectively. These estimates were derived from the methodology provided by the President’s Council of Economic Advisors, which prescribes that

$92,000 of federal spending equates to one job-year. Job creation was applied within our review process to determine relative merit.

Based on our review of applications, we expect that the funding provided by these

programs will produce highly skilled jobs within the engineering, information technology, and business analysis professions.

Mr. OLSON. I appreciate if you could get that to us. And a follow- up for you, Dr. Arnold, as well. In your testimony, you stated that

smart grid is a critical piece of this Administration’s overall goal

of fostering and creating millions of jobs in the green economy, and

again, how does that statement coincide with the shifting standard

that I have been talking about?

Dr. ARNOLD. Well, I can talk about the role that standards play in that, and one aspect is enabling global market opportunities for

U.S. manufacturers. And addressing Chairman Baird’s question,

we are working very actively with the key international bodies

such as the International Electrotechnical Commission, the IEEE

and others as a vehicle for promulgating standards that we are

going to use in the U.S. smart grid. We are also engaging directly

with other countries that are really following what we are doing.

I would say we are in the lead in the world on this so that we can

collaborate in the creation of international standards that will provide those global market opportunities for U.S. manufacturers.

Mr. OLSON. Thank you very much. I see my time is ending. I just want to encourage you all not to de-emphasize the jobs creation

part of this. That is critical. If this is going to go forward, we need

to create jobs and it appears it is being de-emphasized. And Mr.

Chairman, I yield back my time.

Chairman BAIRD. I thank the gentleman. I am told by staff we

may have votes in about 10 or 15 minutes. I know, Dr. Bartlett,

you had a follow-up. I would like a brief follow-up. We will go

ahead and start. I will try to shorten my time a little bit as well

and ask colleagues to do the same.

INCORPORATING SOCIAL BEHAVIORAL ASPECTS

We had a markup in this committee this week earlier on a proposal to put social behavioral science program within DOE’s work,

and I am thinking about smart grid here and I am thinking, for

goodness sake, please don’t make this like programming my VCR

or I am going to have a thermostat that flashes 12 constantly at

me. The question really on a more serious note is, how are we

working either at NIST or various companies here to incorporate

the behavioral, cognitive, emotional even aspect of—I say ‘‘emotional’’ because my wife and I go round and round about what the

heat should be in our home—of this technology? It is not a frivolous

question at all. How do we incorporate that human behavior interface with smart grid work? Please, Mr. Stoessl.

Mr. STOESSL. If I may, I can give you one perfect example that

one of the electric co-ops in Delaware has taken the lead on. They

have a program called Beat the Peak, and it is going exactly to the

behavioral element of this. They know and anticipate when peak

73

costs are going to strike their membership, and they are looking for

a simple in-home display. Right now, what the head of that utility

does is literally send out an e-mail to his membership saying, we

expect peak rates from 4 to 6 p.m. this afternoon, please curtail

your usage, and his members do, and what we are now developing

for him and what he is looking for is a simple in-home display, just

a simple red-green kind of thing that when that light is red, please

curtail usage, whatever you can do. Go ahead and run your air conditioner if you want, but if you can curtail, please do. And that simple indication, which will be triggered by communications through

his meter and through his communication infrastructure, is a behavioral way of going at it. Very simple, no programming required,

just be aware if that light is on and you can do something, please

do it.

Chairman BAIRD. Are there other examples or comments?

Ms. HOFFMAN. Just one comment, sir. The way the technology

should be developed has to keep consumer behavior in mind and

consumer sophistication, and I think that is not a one-size-fits-all.

We must tailor the technology to the customer, so if a customer

just wants to know a price and have it automated on the system,

we should be able to do that, whereas if a sophisticated customer

that wants to go in and manipulate things just like he is sophisticated, say, on the stock market, we need to tailor the technology

to meet the needs of the customer.

Chairman BAIRD. Is that being incorporated in the work being

done by DOE for NIST, et cetera?

Ms. HOFFMAN. I am hoping we will see it as part of the projects

that are proposed.

Dr. ARNOLD. Chairman Baird, I would say that standards also

play a key role in this and creating a standard for customer access

to energy usage information. The standard I referred to earlier for

communicating pricing information will enable the creation of software tools that can put this information in formats, you know, on

a web browser or what have you that are easy for customers to see

or even a simple red light-yellow indicator for customers who don’t

want to be that sophisticated.

Chairman BAIRD. We go crazy over a 50 percent discount on cereal boxes at the grocery store, you know, you save your coupons

and all this stuff. If somebody said you can run your dishwasher

now but it is going to cost you much more now if you run it, and

back to this peak issue, it would help a great deal. Ms. Kelly, did

you want to comment?

Ms. KELLY. I was going to say that a follow-up to that is something that the collaborative is excited about, and that is the DOE

clearinghouse of information. Any of the demonstration projects

that receive stimulus funds will have to report information to the

clearinghouse, and it is one of our goals that the consumer acceptance, which I think is another way of describing what you are talking about, is something that will have to be monitored and followed

and reported so that we can understand what kind of consumer

interfaces work well as well as which ones don’t work.

Chairman BAIRD. That is encouraging.

Mr. ROSS. Mr. Chairman.

Chairman BAIRD. Yes, please.

74

Mr. ROSS. I was just going to add that there has been a lot of work done in this area that can be translated from Internet and

telecommunications technologies, and I think what you are seeing

now is a lot of companies that for a long time have been developing

new and innovative products in those areas moving into energy

management systems. And there is a lot of work to be done there.

There are some studies that have shown that, you know, programmable controllable thermostats, about 70 or 80 percent of people

don’t actually bother to go ahead and program them, and so the

new types of devices that are coming out are either portals for people to use online, in-home displays or some are even developing it

through television interfaces. What they are finding is with just

simple information, rather than waiting until the end of the month

on the utility bill, people are reducing their energy consumption 10

to 20 percent.

Chairman BAIRD. I would suggest we take a page out of the be- havioral economics retirement investment models which suggest

that if you preextract people’s retirement 401(k) match, you have

a much greater participation than if you wait for people to opt in,

and let us ship the thermostats with preset things and adjust that

to some easily, you know, wireless clock reset, and then if they

want they can go with the default, it is a lot easier. So thank you

for the insightful answers. Mr. Inglis.

Mr. INGLIS. Mr. Chairman, I have no further questions.

Chairman BAIRD. Mr. Bartlett.

ELECTROMAGNETIC PULSES

Mr. BARTLETT. Thank you very much. I was genuinely pleased at the panel’s knowledge of EMP. I would just like to note that the

usual things that we say that give us some comfort probably aren’t

relevant here, the mutually assured destruction. An EMP blast

over North Korea would have little or no effect on North Korea.

They just don’t have any infrastructure that would be affected by

EMP. As Vladimir Lukin said, with no fear of retaliation, if it

comes from the ocean, how do you know from where it came? Two

days ago, the Secretary of Defense was here and he made the observation that they were counting on deterrents to protect us from

EMP, and I said Mr. Secretary, that is not going to work, because

as Vladimir Lukin said, with no fear of retaliation. You know, we

keep watching for whether North Korea or Iran has a missile

which will reach us. That is irrelevant. Neither of them—I have

been to North Korea. I spent three or four days there. They may

be evil. They are not stupid. They are not going to launch a missile

from their soil. It is going to come from the ocean, and all one

needs is a tramp steamer, $100,000 to buy a Scud launcher and a

crude nuclear weapon. You couldn’t shut down the whole country

with that but you could shut down all of New England with that.

And, you know, if you missed by 100 miles, it is as good as a bull’s

eye because it really doesn’t matter.

You know, this is really a tough thing, but unless we protect ourselves against that—Mr. De Martini, you mentioned that it took

two or three years to get these big transformers, and that is the

kind of thing that Vladimir Lukin was referring to when he said

75

it would shut down our grid and our communications for six

months or so. Indeed, we don’t even make those in our country, do

we? You order them from overseas. So some of the smaller ones,

maybe 18 months or so, and some of the larger ones that long a

time. And in a cascading collapse of the grid, we would expect a

number of these to be destroyed, would we not?

Mr. DE MARTINI. In a very large—you know, depending on the altitude that as I understand it in terms of where it would be exploded, it could impact a much wider area as you described and so

yes, smaller distribution transformers, we actually have a lot of

those in stock and those can be done relatively quickly. It is the

very large high-voltage transformers that are essentially custom

made. Those would be longer and most of that manufacturing is

not done in our country.

Mr. BARTLETT. It is all done overseas and you order one and they will make one for us because these are on nobody’s shelf including

the manufacturer’s shelf. They make them when you order them.

This is such an incredible consequence that you just shy away from

it. You know, it is the old saying if it is too good to be true, it is

probably not true, and this is so horrible that maybe it is not true,

but the reality is that it could be true. As a matter of fact, there

is a new book out called One Second After, and the movie rights

have already been sold to the book and it looks at what happens

in our country to a—and their story is probably true to what will

happen if it happens, and we hope it does not. And by the way, if

we are immune to it, it is less likely to happen. Vulnerability invites attack. But the launch comes from the ocean and then the

ship is sunk. There are no fingerprints. What do you do? In any

event, what do you do when they have simply shut down your computers? And that is what it will do, just fry everything that is

microelectronics. And do you then vaporize their grandmothers and

their babies because they did that? It is a very difficult thing. You

know, if we really are prepared, it won’t happen because if we are

not vulnerable, there will be no benefit in doing it. So thank you

very much for your knowledge of this and hope you take it into account. Thank you very much. Chairman BAIRD. Dr. Bartlett, my strategy in that eventuality is to come to your place.

Mr. BARTLETT. Thank you, sir. You will be welcome. Chairman BAIRD. Mr. Tonko.

SUPERCONDUCTION

Mr. TONKO. The application of superconductive cable and the

promises that it might hold for dealing with some of our delivery

system, our transmission systems primarily, any vision as to when

we might be up and ready with the superconductive application?

Mr. DE MARTINI. The discussions we have been having with

manufacturers in terms of both cable and transformers in particular, it looks like, you know, the technology is getting to a point

where we can start to look at demonstrations within three to five

years, particularly on transformation. We think that is a real opportunity to focus on in the near term, and which could lead to

products being, you know, put into production into our service, you

know, within a decade. So we see a lot of promise there. We alVerDate 11-MAY-2000 13:37 Jan 22, 2010 Jkt 050954 PO 00000 Frm 00079 Fmt 6633 Sfmt 6601 C:\DWORK\E&E09\072309\50954 SCIENCE1 PsN: SCIENCE1
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6 American Superconductor Corporation

ready have today superconducting full current limiter that we have

put in our system earlier this year. It is one of the first in the country, and we are working with actually American Superconductor.6

This was part of the award that was announced by Secretary Chu

this week, a transmission-level superconducting full current limiter

that will be going in our system in 2012. So we see the technology

evolving and certainly over the decade we expect to see more of

this going into service.

Mr. TONKO. It seems to me we have trouble with the siting of

many lines oftentimes which traverses several communities,

expectedly. If we can do that with far greater capacity and the

same dimension of cable, that we should really speed our investment in R&D, and I know that in New York State there are those

companies who are breaking their own records in terms of development of the superconductive opportunity. Thank you.

Chairman BAIRD. Mr. Tonko, thank you.

Dr. Ehlers.

PUBLIC EDUCATION

Mr. EHLERS.—secondary schools both before I got here and after

I got here, and it continues to amaze me, I meet parents who say

well, I don’t see why it is necessary, Johnny already has enough

math, he just doesn’t—but this is a good example. If you are going

to as I suggested earlier put digital devices on every appliance

showing what the rate of energy usage is and you have a smart

grid where you can also indicate the cost, you also have to have

people who know how to use it and who program their thermostats

and so forth, and there just has to be a basic level of intelligence

and training of the American public if we are really going to make

this work. I think also it is very important for the utilities. I think

you mentioned that, Mr. De Martini, of trained workers, and I had

an experience just in the past six months which surprised me. My

wife and I came home, turned on a few lights and she started preparing dinner, and suddenly some lights dimmed, a couple went

out and others were working fine. And I said aha, we have lost one

phase of our three-phase electricity. So I called the power company,

and the first question, she said are your lights out, and I said well,

some are, some aren’t, and I explained to her that we obviously had

lost one phase of the electricity. She had no idea what I was talking about. She says well, we don’t send trucks out immediately on

a rush unless all your lights are out, and I tried to explain to her

again what was going on. I just got nowhere and so I went out of

the house, went up and down the street knocking on neighbors’

doors and said please call in. She had told us that the more—if

they got more calls, then they would send a truck out. And so I

knocked on neighbors’ doors and said please call this number and

tell them your electricity is out, and as a result we got the truck

there quicker than we would have before. But it just struck me

that an employee of a power company would not, especially when

dealing with the public, would not understand someone calling in

like that. So at every level we have to have better training includVerDate 11-MAY-2000 13:37 Jan 22, 2010 Jkt 050954 PO 00000 Frm 00080 Fmt 6633 Sfmt 6601 C:\DWORK\E&E09\072309\50954 SCIENCE1 PsN: SCIENCE1
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ing the general public, but especially your employees in the utilities.

I thank you, Mr. Chairman. That is the end of a very good hearing and I thank you for calling it and thank the panel for being

here.

Chairman BAIRD. Thank you.

INTERAGENCY COORDINATION

I do have one last question, and it sort of integrates much of

what has been discussed and it is this. It seems to me there is,

hopefully, a positive synergy with the team that we see here, but

you represent a much broader spectrum, and it is this. So you have

got NIST working on standards, private sector working on innovative tools, electrical companies and distribution companies putting

all that in place, DOE doing research. Are you comfortable in

FERC regulating so much of this? Are you all comfortable that you

are working together well enough? In other words, is there crosspollination and cross-coordination? How is it going?

Ms. HOFFMAN. In my opinion, in working on several programs

within the Department of Energy, this has been one of the best

working groups I have had to work with.

Chairman BAIRD. Ms. Kelly.

Ms. KELLY. We are very, very satisfied with the way things have

been working.

Dr. ARNOLD. The teamwork has been incredible with both the

other agencies, federal and State level, and the private sector.

Mr. DE MARTINI. I think for utilities, we have all come together,

not just regionally but also across the Nation and working very

well with DOE, the regulatory agencies and NIST and this current

effort and obviously with our suppliers in terms of these new products and innovations that are coming to the market.

Mr. ROSS. I would just reinforce what the other panelists have

said. There seems to be a great deal of coordination among the federal agencies that are involved, and I think there is increased cooperation and participation in and among industry and with the

utilities.

Mr. STOESSL. And I will echo with the panel. I think there has

always been good cooperation from the utilities and suppliers but

with this particular issue with the government involvement that

there has to be, there has been very, very good interaction and

NEMA (National Electrical Manufacturers Association) has stepped

in to really help pull industry together to give us one voice when

we are interacting with the various councils, various standard bodies.

Chairman BAIRD. Government, private sector, industry working

together. Not a bad way to close the hearing. Thanks very much.

Have a great day.

[Whereupon, at 12:09 p.m., the Subcommittee was adjourned.]

(79)

Appendix 1:

ANSWERS TO POST-HEARING QUESTIONS

80

ANSWERS TO POST-HEARING QUESTIONS

Responses by Patricia Hoffman, Acting Assistant Secretary, Office of Electricity De- livery and Energy Reliability, U.S. Department of Energy

Question submitted by Chairman Brian Baird

Q1. This May, the House passed the ‘‘Waxman-Markey’’ bill (H.R. 2454) to regulate carbon emissions and promote energy efficiency and renewable energy sources.

How does the system of allowances and credits established therein, particularly

in the cap-and-trade carbon system, relate to incentives or disincentives for industry to promote smart grid technologies?

A1. Smart grid technologies do not directly cause or reduce emissions of carbon or other greenhouse gases. Thus, the cap-and-trade carbon proposal with its allowances

and credits does not provide either incentives or disincentives for smart grid technologies. Smart grid technologies are information and control technologies that can

enable more efficient operation of the electricity system from generation to delivery

and encourage customers to reduce their electricity consumption, particularly during

times when power is relatively expensive. Smart grid technologies can also facilitate

the integration of new renewable sources into the grid, thus indirectly supporting

the goals of cap-and-trade.

Questions submitted by Representative Daniel Lipinski

Q1. The National Association of Regulatory Utility Commissioners has reported that

the most effective place for initial investment in Smart Grid improvements is on

the electric grid itself, where energy and costs savings are immediate and do not

rely upon changes in customer behavior and do not need customers to purchase

and install in-home energy savings devices. During hearing questions, you and

Ms. Kelly indicated that you felt that improvements upstream of the customer

are worthwhile, other parts of the smart grid are at least as important.

Can you qualify the potential energy savings and costs associated with these two

categories of smart-grid technologies? Which will result the greatest savings for

residential customers?

A1. The costs associated with upgrading customer systems (meters and load management applications) for integration with a smart grid were estimated at $62 billion, based on a 2004 industry report by the Electric Power Research Institute

(EPRI). This estimate, although a bit outdated, fell within an order of magnitude

with a 2009 estimate of $40 billion for nationwide implementation of smart meters

(Faruqui and Sergici with the Brattle Group, ‘‘Household Response to Dynamic Pricing of Electricity—a Survey of the Experimental Evidence,’’ funded in part by Edison Electric Institute/EPRI). The benefits from implementing smart meters with

pricing programs with and without in-home energy saving devices are documented

in the 2009 report after analyzing the results from the most recent 15 pricing pilot

programs. The study concluded that, ‘‘Across the range of experiments studied, timeof-use rates induce a drop in peak demand that ranges between three to six percent

and critical-peak pricing tariffs induce a drop in peak demand that ranges between

13 to 20 percent. When accompanied with enabling technologies (programmable

thermostats), the latter set of tariffs lead to a drop in peak demand in the 27 to

44 percent range.’’ Thus, the peak demand reduction and associated energy savings

from customer systems are highly significant, reflecting a non-zero price elasticity

of demand for electricity.

The net costs associated with upgrading the transmission and distribution (T&D)

grid for smart-grid readiness were estimated to be $165 billion (not including those

concurrent investments needed for meeting load growth and correcting deficiencies),

from the same 2004 EPRI report. The $165 billion in T&D modernization included

a portion of the $62 billion for customer systems above; however, the exact portion

was not known. Although the report concluded with an overall benefit to cost ratio

of 4:1 to 5:1, the benefit breakdown used a different set of attributes, not those of

peak demand reduction and energy savings.

These industry studies evaluate the potential benefits of smart grid technologies

deployment based on limited pilots. As part of its American Recovery and Reinvestment Act efforts, the Office of Electricity Delivery & Energy Reliability is developing

a consistent cost/benefit analysis methodology to be applied to all smart grid

projects to assess a broader experience. All cost/benefit data will be stored in the

Smart Grid Information Clearinghouse to allow direct, comparative analysis, which

81

will also address the question of what investment would benefit the residential customer most.

Q2. What percentage of the stimulus funds that DOE is awarding goes toward smart

grid technologies that improve the efficiency of the electric grid itself, as compared to technologies that produce savings only when consumers change their

behavior?

A2. The $3.4 billion in the Recovery Act Smart Grid Investment Grant (SGIG) funding opportunity covers six topic areas: smart grid equipment manufacturing; customer systems; advanced metering infrastructure; electric distribution system; electric transmission system; and integrated and/or crosscutting systems (i.e., covering

two or more of the preceding topic areas). The SGIG does not prescribe a funding

range for each topic area; rather, all proposals will be evaluated based on their respective merits, including costs and benefits (economic, reliability and power quality,

environmental, and energy security) and other performance merits. The selection of

these proposals is still under way. The portion of the funding that will be allocated

to programs that affect customer behavior, such as dynamic pricing, is not known

at this time.

In regard to the approximately $615 million in Recovery Act funds for new Smart

Grid Demonstrations, $415 million of the total will support regional demonstrations

and the balance will fund grid-scale energy storage demonstration projects. All proposals are still being evaluated, in accordance with the merit-review criteria including savings benefits. Again, it is too early to tell what portion of the $415M will

be allocated to dynamic pricing programs.

Question submitted by Representative Lincoln Davis

Q1. During the re-hearing, we discussed the potential savings in power production

that could be realized with smart grid deployment. Can you please provide

EERE’s numbers on this potential savings at peak load or otherwise?

A1. The Federal Energy Regulatory Commission (FERC) issued a report in June

2009 that assessed demand response potential. The study projects that the peak demand in 2019 could be reduced by 44 GW, 100 GW, and 150 GW under the expanded business-as-usual, achievable participation, and full participation scenarios,

as compared to the base scenario of business-as-usual. The differences among these

scenarios are defined by varying deployment levels of smart grid technologies and

practices (advanced metering infrastructure, dynamic pricing offering, enabling

technologies, and customer participation in the above). The 150 GW of peak demand

reduction in 2019 under a full-participation scenario is equivalent to elimination of

the need for 2,000 peaking power plant operations (based on 75 MW of output by

a typical peaking power plant) or represents 16 percent of peak demand in 2019.

Peak demand reduction from modernization of the T&D grid will be tracked by

DOE through its data collection/analysis efforts to be implemented on all smart grid

projects funded under the Recovery Act.

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1 Commission Staff Report, A National Assessment of Demand Response Potential, at 27–28

(June 2009), available at http://www.ferc.gov/legal/staff-reports/06-O9-demand-response.pdf 2See Rob Pratt, PNNL, Potential Energy and Carbon Benefits of a Smart Grid, at 3 (Sept.

2009), available at http://www.pointview.com/data/2009/09/31/pdf/Rob-Pratt-4771.pdf

ANSWERS TO POST-HEARING QUESTIONS

Responses by Suedeen G. Kelly, Commissioner, Federal Energy Regulatory Commission

Questions submitted by Chairman Daniel Lipinski

Q1. The National Association of Regulatory Utility Commissioners has reported that

the most effective place for initial investment in Smart Grid improvements is on

the electric grid itself, where energy and costs savings are immediate and do not

rely upon changes in customer behavior and do not need customers to purchase

and install in-home energy savings devices. During hearing questions, you and

Ms. Hoffman indicated that you felt that while improvements upstream of the

customer are worthwhile, other parts of the smart grid are at least as important.

Can you quantify the potential energy savings and costs associated with these

two categories of smart-grid technologies? Which will result in the greatest savings for residential customers?

A1. There are significant opportunities for potential energy savings and other benefits that would be enabled by smart grid investments both on the transmission and

distribution grid level (that do not involve any actions by customers) as well as on

customer premises. It is, however, difficult to quantify these benefits with precision

and, therefore, to identify whether one is greater than the other. However, there is

evidence that shows that the installation of new systems and devices at customer

locations can potentially produce significant energy savings. At the hearing, I cited

a recent report by the Commission that estimated that pervasive installations of

smart meters and other enabling technologies such as smart thermostats could lead

to as much as a twenty percent reduction in peak demand.1 At the recent GrldWeek

2009 conference, a senior researcher from the Pacific Northwest National Lab reported preliminary results of an ongoing study showing that overall energy savings

could be as high as twelve percent.2 In addition, savings that result from smart grid

investments upstream of the customer will likely also be substantial. I therefore believe that both types of investments should be pursued in order to maximize the efficiency of the Nation’s transmission and distribution system.

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ANSWERS TO POST-HEARING QUESTIONS

Responses by George W. Arnold, National Coordinator for Smart Grid Inter-operability, National Institute of Standards and Technology, U.S. Department of

Commerce

Questions submitted by Chairman Brian Baird

Q1. During the hearing, I noted the need for international compatibility with electric

appliances. How is NIST coordinating with other nations to ensure global standards for consumer goods and power plugs and sockets?

Q1. NIST recognizes the importance of international compatibility for the various

elements of the Smart Grid. The use of internationally accepted standards will

enable U.S. manufacturers supplying components to the Smart Grid to access

foreign markets on an equitable basis. Extensive use of internationally accepted

standards will also help reduce the cost of procurement, while increasing choices

for customers looking to source products, components and assemblies for the

Smart Grid in the U.S. The lack of common standards can significantly increase

the cost for U.S. manufacturers, who would be forced to adapt their products

for different countries.

As you have noted, the existing electric infrastructures throughout the world use

a variety of voltage levels, plugs and sockets, so there is a need for appliances to

have different physical and electrical connections. Unfortunately such differences

will continue to exist since it is not practical to rewire plugs and sockets built into

the legacy physical infrastructure. However, it is possible to achieve international

harmonization of the communications and information management aspects of

smart grid applications and products, which are independent of electrical voltage

levels and electrical plugs and sockets.

NIST is working closely with relevant international standards organizations, such

as the International Electrotechnical Commission (IEC), the International Organization for Standardization (ISO), and the International Telecommunication Union

(ITU) to ensure that communications and information management standards for

smart appliances are internationally harmonized wherever possible. The NIST effort

is also engaging many other standards developing organizations domiciled in the

U.S. which develop international standards, such as the Institute of Electrical and

Electronics Engineers (IEEE), the Internet Engineering Taskforce (IETF), Open

Geospatial Consortium (OGC), and others. Numerous multinational companies that

have an inherent interest in the adoption and use of international standards are directly involved in the NIST process. Many standards identified in the draft NIST

roadmap are international standards that are already used around the world (e.g.,

BACNet ANSI ASHRAE 135–2008/ISO 16484–5 for Building Automation, IEC

61850 for Substation Automation and Protection, IEEE 1547 for Physical and Electrical Interconnections between Utility and Distributed Generation, ISO/IEC 18012

providing guidelines for product inter-operability, and ITU Recommendation G.9960

covering in-home networking over power lines, phone lines and coaxial cables, etc.).

Recognizing the importance of collaboration with other countries, NIST is also engaged in bilateral discussions with counterparts in other countries and regions

about Smart Grid standards. NIST is partnering with the American National Standards Institute (ANSI) to engage the national committees of key countries (China,

India, Japan, Russia, Germany) and the European standards body CENELEC in

discussions about Smart Grid at the International Electrotechnical Commission

(IEC) General Assembly in Tel Aviv, in October 2009. NIST is partnering with its

sister DOC bureau, the International Trade Administration, to initiate a dialogue

about Smart Grid standards with the European Commission and its relevant offices.

Dr. George Arnold, the National Coordinator for Smart Grid Inter-operability, will

provide a key note address at the Latin American Smart Grid Forum, in Brazil, and

the Smart Grids Asia conference in Singapore in November 2009.

Q2. This May, the House passed the ‘‘Waxman-Markey’’ bill (H.R. 2454) to regulate

carbon emissions and promote energy efficiency and renewable energy sources.

How does the system of allowances and credits established therein, particularly

in the cap-and-trade carbon system, relate to incentives or disincentives for industry to promote Smart Grid technologies?

A2. As outlined in the Energy Independence and Security Act (EISA) of 2007 (Public

Law 110–140), the National Institute of Standards and Technology (NIST) is responsible for developing a framework for protocols and standards to achieve the interoperability of Smart Grid devices and system. Inter-operability—the ability of diVerDate 11-MAY-2000 13:37 Jan 22, 2010 Jkt 050954 PO 00000 Frm 00087 Fmt 6601 Sfmt 6621 C:\DWORK\E&E09\072309\50954 SCIENCE1 PsN: SCIENCE1
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verse systems and components to work together—is vitally important to both the

performance of the Smart Grid and the development of Smart Grid technologies.

Given this focused, well-defined role, NIST does not have a position on how the system of allowances relate to the incentives or disincentives for industry.

That said, H.R. 2454 does promote the development of Smart Grid technologies

in a number of areas:

• State regulatory authorities and utilities will establish standards and protocols for integrating plug-in electric drive vehicles into the electric grid, including Smart Grid systems.

• Inclusion of Smart Grid technologies and capabilities in the Energy Star program.

• Inclusion of Smart Grid capabilities and potential energy savings information

on appliance Energy Usage labels.

• Appliances with Smart Grid features will be eligible for rebates under the Appliance Rebate Program outlined in the Energy Policy Act of 2005.

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Appendix 2:

ADDITIONAL MATERIAL FOR THE RECORD

86

STATEMENT OF KATHERINE HAMILTON

PRESIDENT

THE GRIDWISE® ALLIANCE

Chairman Baird, Ranking Member Inglis, Members of the Subcommittee, thank you for allowing me to submit testimony for your hearing ‘‘Effectively Transforming Our Electric Delivery System to a Smart Grid.’’ On behalf of the GridWise Alliance,

I would like to thank you for your support and attention to our vision and goals,

including crafting the Smart Grid Title XIII in the Energy Independence and Secu- rity Act of 2007 (EISA), enacting the American Recovery and Reinvestment Act with

significant funds for smart grid, and recently passing the American Clean Energy and Security Act of 2009 which provides incentives for smart grid deployment. The GridWise Alliance is a coalition of 95 organizations advocating for a smarter grid for the public good. Our members broadly represent the Nation’s interest in

smart grid, including leading utilities, independent system operators, large IT and

communications companies, small technology companies, manufacturers, consultants, investors, universities, and research organizations. We operate on a consensus

basis and remain technology neutral, focusing on the policy issues surrounding the

deployment of a smarter grid. We believe the market should determine which technologies prevail. The GridWise Alliance advocates for making the entire grid smarter—from the power plant bus bar through the transmission lines and substations, along the distribution lines, and all the way to the meter and appliances and equipment that

consume electricity. A smart grid is dynamic and interactive. The smart grid has

monitoring, control, and optimization capabilities that manage assets and demand,

integrate distributed resources, and route power flows to maximize operation efficiency. All stakeholders on a smart grid can participate and make informed energy

choices. Two-way communication allows system operators to observe what is happening on the grid and adjust operations to increase grid reliability while improving

delivery and use efficiency. Smart grid technologies can provide increased

functionality and intelligence to existing distribution devices. A smarter grid will include a variety of technologies and solutions, depending upon the regional and local

systems, as well as the goals of the system. The GridWise Alliance thinks of a smarter grid as a means to an end—not an end unto itself. A smart grid can increase reliability, improve security, optimize the

entire electricity system from generation to consumption, and contribute to the

decarbonization of the electricity industry. A smarter grid can also enable the integration of dynamic forecasting, energy storage, clean distributed generation, and energy efficiency technologies, including plug in hybrid vehicles. A smarter grid allows

for a more effective deployment of energy from renewable sources, reaping the full

benefits of wind, solar, geothermal, hydropower, and biomass power. Smart grid

technologies can provide more dynamic power flow control, increased bulk transfer

and improved system efficiencies. The GridWise Alliance believes that critical issues for deployment of the smart grid through the Recovery Act funds includes establishing: 1) clear guidelines for

funding projects, ensuring the incorporation of the language of EISA as amended

in the Recovery Act; 2) an expedited contracting process consistent with the Office

of Management and Budget Initial Implementing Guidance for the Recovery Act; 3)

a rational approach that fully respects both preexisting Intellectual Property rights

and new intellectual property that emerge from the deployment of existing intellectual property in research and development, demonstration or investment projects ;

4) minimum smart grid standards for other energy infrastructure projects that are

undertaken pursuant to provisions of the Recovery Act apart from those that contain the specific smart grid language; and 5) a transparent, but not onerous, process

for monitoring allocations among different types of smart grid endeavors and altering new allocations to secure balance as appropriate in light of the overall Recovery

Act and EISA objectives.

Since the purview of this committee includes National Institute of Standards and

Technology (NIST) oversight, the GridWise Alliance agrees that the Recovery Act

appropriately funded development and harmonization of critical inter-operability

standards framework through NIST. In EISA, NIST was given an unfunded mandate to develop a framework for smart grid standards; the Department of Energy

(DOE) funded the Pacific Northwest National Laboratory to begin the process and

created the GridWise Architecture Council to work closely with NIST and industry

to develop the architecture for system inter-operability that could be used as a foundation in developing standards. While some of the groundwork had begun before the

Recovery Act was passed, the generous funding and aggressive support of the NIST

process has been critical.

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NIST has the appropriate mission, experience, and skills for coordinating the de- velopment of consensus-based standards and protocols in domains like building systems automation. These skills transfer easily to smart grid inter-operability standards with the funding in place. Dr. George Arnold, the National Coordinator for

Smart Grid Inter-operability, is fully engaged in the process and the GridWise Alliance believes that NIST is on the right track in developing this standards process.

The Alliance has participated by attending the meetings as well as providing detailed comments from the industry perspective. The inter-operability process will benefit from and be accelerated by stimulus funding for projects. Since utilities and others deploying smart grid technologies

want to reduce the risk of stranded asset investments, they are driving early interoperability standards development in domain expert work groups that feed into the

NIST process. They are also designing deployments such that firmware and software could be revised, usually remotely, rather than change out entire equipment

investments. This is common practice in other industries and is an effective means

of driving deployment without excessive redeployment cost once the standards are

finalized. Finally, the industry recognizes that standards should be applied where

they are relevant, cost effective and appropriate to the intended function of the system. Too many times, we tend to assume all standards apply everywhere. Through

the many industry domain working groups, the industry has established standards

that are applicable for certain uses. Additional work will be needed to assess the

cost effectiveness of those standards during deployment. It may be in the best interest of energy costs to phase in additional standards over time rather than replace

legacy systems to accommodate new standards. The GridWise Alliance prefers open standards and protocols so that all players are enabled equal accessibility to compete in the market. Because of the increased

scrutiny on cyber security and data privacy issues, certain criteria in developing

technologies are critical. Industry has been collectively engaged in this process

through several partnerships so that the security architecture for all smart grid

technologies will be consistent. Developing standards and protocols for smart grid

is important, yet entrepreneurs, utilities, universities, and other businesses developing smart grid technologies will continue to implement smart grid in advance of

the NIST standard setting process. We do not want to hold up these efforts that

can, among numerous other benefits, stimulate the economy, by waiting for standards to be developed and adopted.

We agree that cyber security issues are paramount and should be carefully ad- dressed when installing intelligent two-way communication devices on the grid. Best

practices exist for segmenting different business functions such as generation, transmission, distribution, customer operations, and corporate and operational IT to ensure grid reliability. Strong access control, secure authentication, confidentiality, integrity, monitoring and non-repudiation mechanisms have existed for many years

and can be applied to securing the smart grid. Further, security for smart grid technologies is being ‘‘baked-in’’ from the start instead of ‘‘bolted on’’ as in the past; the

security of the grid will benefit from this up-front, holistic approach. Digital devices

have already been installed in many transmission substations; smart grid investments will serve to upgrade cyber security for these systems. The GridWise Alliance

supports the coordination of the Federal Energy Regulatory Commission (FERC),

North American Electric Reliability Corporation (NERC), and the National Association of Regulatory Utility Commissioners (NARUC) with the Department of Homeland Security and industry efforts as critical to the development of cyber security

standards.

Smart grid can be implemented differently in different places. The design and implementation of a smart grid can vary depending on the technologies and solutions

deployed and the needs of the regional utility, transmission operator, and customer

mix. For example, in some areas smart meters are a good first step in providing

information to allow consumers to make energy choices and to allow utilities to have

more data on consumer loads. In other areas, it would be wiser to start developing

the smart grid with transmission technologies like phase shifting transformers. The

issue is not so much which specific technology application is better, but what improvements can be made to the entire system and in what order the various applications are to be developed to meet strategic roadmap objectives.

The GridWise Alliance believes that implementing smart grid technologies on the

current grid will provide a multitude of benefits—from helping alleviate congestion

and integrating distributed renewable energy, more efficiently managing both the

transmission and distribution systems, and engaging consumers with information

exchange and new pricing programs. While we recognize the need for additional

transmission to alleviate congestion and take renewable energy generation to load

centers, we strongly believe that planning for this increase should include inteVerDate 11-MAY-2000 13:37 Jan 22, 2010 Jkt 050954 PO 00000 Frm 00091 Fmt 6601 Sfmt 6621 C:\DWORK\E&E09\072309\50954 SCIENCE1 PsN: SCIENCE1
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grating smart grid technologies. New transmission coupled with smart grid applications like dynamic forecasting and energy storage can enhance the ability to deploy

renewable energy and distributed generation sources onto our grid. While the electric grid has the same basic mechanical components everywhere, the entities operating and using the grid vary according to region, as do the goals

of those systems. For example, a rural cooperative may have higher need for distribution system monitoring and control because of radial nature of their systems.

A municipal utility may need to contain costs and have consumers adjust demand

using rate incentives and smart meter technologies. A data center may require redundancy and increased security measures. The stimulus funding will only go so far.

Our government has additional resources that can assist in developing the smart

grid. We have experts in State energy offices, Department of Commerce Manufacturing Extension Partnership offices, and Department of Energy Industrial Assessment Centers. Many universities—like Florida State, George Mason University,

Northern New Mexico College, University of Colorado, Washington State University,

and North Carolina State University, as well as many community colleges and trade

centers—have smart grid technology research and education programs. Edison Electric Institute has worker training centers as does the International Brotherhood of

Electrical Workers (IBEW). This technical expertise coupled with public utility commissions and regional planning authorities should enable this country to maximize

the grid we have and make it smarter, stronger, efficient, more reliable, and freer

of carbon.

As with all technology development, the business case associated with commercial success often drives continued research and development. While we have substantial

smart grid technology available today that creates benefits for our grid, we can continue to enhance these applications through research and development and demonstration. Research and development does not end when commercialization begins,

but can continually improve performance, price, and other benefits from any given

technology. Smart grid demonstration projects can serve to both spur widespread investment in these technologies and, as well as to provide greater clarity of the need

for any additional research and development. Certainly continued robust funding for

this research beyond the stimulus funds will be important to the continued development of new technologies for our grid. The full benefits of a smart grid will not be realized without allowing the con- sumers to make informed decisions on how they use electricity. Modern information

technologies have transformed almost every other sector of our lives; many of those

same technologies can change the way we use our electricity. Most consumers will

not change behavior without energy consumption information or price signals, education, and technological assistance. Because our electric system is so ubiquitous

and robust, we take it for granted when we flip the light switch on the wall. Electricity has become an integral part of our lives and a necessity for our nation’s economic growth, prosperity, and our personal lifestyles and well-being. Most people do

not think about where electricity comes from other than the outlet in their wall.

They get their bill at the end of the month and react based on the size of the bill,

but don’t know what they did to make it go up or down. With increased information,

and technological innovation, consumers could see in real time the impact of their

electricity use and take action to reduce their bills. Utilities in states like California

and Texas that have experimented with smart grid technologies have received positive results and feedback from their customers. As we move forward it is important

that we not just deploy a smarter grid but build coalitions with consumers and other

stakeholders so that they are fully engaged in the implementation of that smart

grid. There are many knowledge gaps the GridWise Alliance has identified in the im- plementation of a smart grid that perhaps House Science Committee could take

under consideration.

• One such gap is an understanding of how consumers respond to continuous

requests to curtail demand and how a multitude of participants on the grid

will figure into implementing smart grid technologies;

• Another gap is in understanding how transmission and distribution markets

will establish a common basis for regulatory innovation to support smart grid

deployment;

• We will need to have an ability to quantify smart grid benefits in order to

demonstrate economic benefits, energy efficiency, and operational flexibility

as well as customer service, outage management and enhanced emergency operations;

• We will need to understand the framework for system inter-operability between new smart grid communications and markets and existing systems;

89

• We will need measurements to understand how demand side controls impact

the supply side during outages;

• We also need to know what regulatory support will be necessary to provide

meaningful demand response as renewable generation increases;

• Another gap exists in understanding what is needed to protect customer data

privacy in a two-way communications system; and,

• Finally, we will need more research to understand new digital transmission

monitoring systems evolve into control systems and how these smart grid

monitoring systems allow for lower reliability risks at the interconnection

level.

Smart grid was included in the Recovery Act because Congress correctly identified

the smart grid as a key potential economic stimulator. The proof will be in the implementation, of course. We expect DOE to fund a variety of competitively solicited

projects that can show a plethora of smart grid technologies and gather information

about how smart grid affects the system operators, utilities, and consumers. We also

expect that the projects will be spread around the country to see how smart grid

differs by location. These projects should stimulate economic growth—by helping

utilities retain jobs, by spurring offshoot industries, and by increasing jobs through

installation of clean energy technologies. These projects are also expected to further

technological advancement and spur greater investment in grid modernization and

automation. But this is just the beginning. The GridWise Alliance believes that,

since a smarter grid is a means to an end, additional smart grid policies need to

be included in legislation that involves our electricity system, as they were in the

American Clean Energy and Security Act. We will work with the House Science

Committee to make sure that a smart grid is the foundation to fulfill our nation’s

energy independence, national security, and carbon mitigation goals.

In conclusion, the GridWise Alliance reiterates that smart grid projects funded

through the Recovery Act will create the cornerstone of a more reliable, affordable,

and cleaner grid. In addition, smart grid provisions included in energy and climate

legislation will help those goals to be met. The House Science Committee is uniquely

qualified to ensure that the research and development process for our evolving grid

is managed in a way that can transform the way in which we think about and use

energy. Our Alliance is always available to help define what policies are important

to the deployment of smart grid and we can provide expert guidance as you move

forward with your policy initiatives. We thank you for allowing our voices to be

taken into consideration; we look forward to working closely with this committee.

90

STATEMENT OF GORDON W. DAY, PH.D.

2009 PRESIDENT,

THE INSTITUTE OF ELECTRICAL AND

ELECTRONICS ENGINEERS—UNITED STATES OF AMERICA

(IEEE–USA)

On behalf of nearly 210,000 engineers, scientists and allied professionals who are IEEE’s U.S. members, which includes many who are responsible for designing,

building and operating the Nation’s electric delivery system, IEEE–USA appreciates

the opportunity to provide input to the Subcommittee for its hearing to highlight

the critical issues involved in transforming the electric power delivery system into

a Smart Grid. Our comments will focus on the overall needs and opportunities associated with this transformation, with a specific focus on associated workforce, cyber

security and standards issues.

Why the Smart Grid Transformation is Essential

Today, the U.S. electric grid is a network of 10,000 power plants, 150,000 miles of high-voltage (>230 kV) transmission line, millions of miles of lower-voltage distribution lines, more than 12,000 substations and millions of customers. Our national electric power system is comprised of two key infrastructures:

• An electric infrastructure—that generates and carries the electric energy in

the power system, and

• An information infrastructure that monitors, controls, and exchanges information between the utility and the customer.

Over recent decades, the grid has been severely stressed by increases in electric demand and a declining rate of new investment. Since 1982, growth in peak demand

for electric power has exceeded growth in transmission capacity by almost 25 percent every year. The result is grid congestion and higher transmission losses, which

can result in higher rates for electricity and lower reliability. The Department of

Energy recently estimated that the cost of power outages ranges from $25 billion

to $180 billion annually. The increasingly complex and competitive bulk power market is also adding additional stresses to the grid. Inadequate capacity, control and

reliability are impediments to the deployment of new sources of alternative energy

and limit our ability to increase the use of electricity in transportation. Transforming the existing electric power system into a Smart Grid is essential to mitigating these problems and promises several important political, economic, and

environmental benefits for the Nation:

• By supporting the interrelated goals of price transparency, clean energy, efficiency, grid reliability and vehicle/transportation electrification, a Smart Grid

will help reduce the Country’s dependency on imported oil.

• Enabling the real-time pricing of electricity will allow consumers to make informed decisions about their energy usage and reduce their energy costs.

• Providing the information and control needed to better manage electrical demand will help facilitate the integration of alternative energy sources by providing a means to help mitigate the variability caused by their intermittency,

as well as enabling increasing electrification of our transportation sector including the integration of plug-in hybrid electric vehicles into the grid.

• Greatly expanding the connection of end-user loads to grid information and

control will facilitate energy efficiency improvements.

• Adding intelligence (including sensors, communications and software systems)

to our electric grid will enhance the ability of systems operators to detect and

address problems before they become widespread grid disturbances, limiting

the effects of disruptions and significantly improving the system’s overall efficiency and reliability.

There are also likely to be numerous benefits of having a Smart Grid that are

difficult to quantify at present. Examples include the flexibility to accommodate new

requirements, the ability to accommodate advances in grid and electric generation

technology, and the ability to support innovative new regulatory concepts, all without major replacement of existing equipment.

Congress and the Administration recognized Smart Grid’s potential by passing the

Energy Independence and Security Act (EISA) of 2007 into law. Title XIII of the

EISA Act mandates a Smart Grid that is focused on modernizing and improving the

information and control infrastructure of the electric power system. The Smart Grid

encompasses the information and control functionality that will monitor, control,

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manage, coordinate, integrate, facilitate, and enable achievement of many of the

benefits of innovations envisioned in national energy policy.

Making an Effective Transformation

In our 2009 National Energy Policy Recommendations (http://www.ieeeusa.org/

policy/positions/energypolicy.pdf), IEEE–USA outlines the following Smart Grid-related recommendations for governmental action, which we believe are essential to

make the transition to a stronger and smarter electrical energy infrastructure:

• Fully funding previously authorized EISA legislation to support the Smart

Grid development effort.

• Supporting development of reference implementations (field test) of Smart

Grid standards to help rapidly resolve technical issues and ambiguities either

prior to or immediately following adoption by Standards Developing Organizations (SDOs).

• Working with Standards Developing Organizations to help them address

issues that delay development of Smart Grid standards or act as barriers to

their widespread deployment.

• Working with State regulators, the National Association of Regulatory Utility

Commissioners, and the Federal Energy Regulatory Commission Smart Grid

Collaborative to resolve issues of ratepayer involvement, especially for standards having benefits focused on national security and energy independence

issues.

• Providing R&D funding to address issues regarding implementation of Smart

Grid functionality by technologically or economically challenged residential

customers. Some Smart Grid technologies may require residential customers

to acquire and use relatively sophisticated devices. R&D will be needed to design user-friendly devices, minimize their cost, and identify Smart Grid concepts that best match the capabilities of users of all capabilities.

• Coordinating Smart Grid development efforts with advanced broadband deployment. Coordination of these efforts is essential to insure that the evolving

broadband infrastructure is available and can support Smart Grid communication requirements.

• Devoting necessary attention and adequate resources to the issue of cyber security for Smart Grid control systems and software. Increasing our reliance

on the Smart Grid’s information infrastructure also increases the risk of malicious cyber attack and potentially increases the consequences of a successful

attack. Examples of potential attackers include hostile foreign governments,

organized crime, terrorists, market manipulators, and disgruntled employees.

In recent years, cyber security in electric power systems has received increased attention at the federal level. The North American Electric Reliability

Corporation (NERC) has adopted Critical Infrastructure Protection (CIP)

standards enforceable under the 2005 Energy Policy Act. EISA 2007 mandates

cyber security throughout the Smart Grid. A high level of continued focus on

cyber security is warranted.

The Importance of Standards and IEEE’s Role

A key focus of the Smart Grid effort will be to identify the requirements for the

new information and communications infrastructure needed to support the Smart

Grid and to define a body of compatible (inter-operable) standards to be used in its

implementation. From an operational perspective, standards will be needed to enable the Smart Grid to meet a variety of new requirements, including integrating

renewable energy sources, supporting new market concepts, helping improve energy

efficiency, and accommodating new uses of electricity such as plug-in hybrid electric

vehicles. Multiple standards stakeholder organizations are being leveraged to help

define these key infrastructure requirements, which will enable a successful Smart

Grid implementation by industry and regulatory authorities.

IEEE is active in supporting the technologies and setting the standards necessary

for the evolution and deployment of the Smart Grid. IEEE was identified as a key

organization in the EISA 2007 and has been part of the NIST Smart Grid standards

effort since its 2008 initiation. IEEE experts have been continuously involved in the

NIST workshops and will lead multiple breakout sessions including Electric Storage

Interconnection and Wireless Communications for the Smart Grid during the 3–4

August NIST workshop.

IEEE is uniquely positioned to support the Smart Grid program because:

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• IEEE leverages the global expertise and synergy of its broad spectrum of organizational resources. IEEE integrates 44 technical societies and councils

supporting technology development, education, publication, in synergy with a

global standards community.

• IEEE Standards Association enables technology integration across a spectrum

of fields, necessary for a forward looking platform, e.g., power, communications, digital information management controls technology, networking, security, reliability assessment, interconnection of distributed resources including

renewable energy sources to the grid, sensors, electric metering, broadband

over power line, and systems engineering.

As part of its new technology development effort, IEEE has mobilized its various constituencies into a coordinated Smart Grid effort, which includes a spectrum of

activities and initiatives such as technical publications (i.e., ‘‘IEEE Transactions on

Smart Grid’’), conferences, education, and industry recognized standards. In March of this year, a new project focused on the smart grid was approved by the IEEE Standards Board: IEEE P2030, Guide for Smart Grid Inter-operability of

Energy Technology and Information Technology Operation with the Electric Power

System (EPS), and End-Use Applications and Loads under the leadership of Dick

DeBlasio and the sponsorship of a cross IEEE Standards Coordinating Committee

(SCC21). This project addresses a body of IEEE 2030 standards supporting functional, inter-operability, and testing for verification of Smart Grid attributes and

end use applicability. This project will leverage the work NIST is conducting in developing a standards framework. The first meeting was held in June 2009 involving

over 300 participants, both on-site and remote. This program is projected to support

the NIST September Smart Grid report. More information is available at the following web site: http://grouper.ieee.org/groups/scc21/2030/2030¥index.html

The ‘‘NIST-Recognized Standards for Inclusion in the Smart Grid Inter-operability Standards Framework Release 1.0,’’ incorporated several IEEE standards and

standards series:

• IEEE C37.118 Phasor measurement unit (PMU) communications

• IEEE 1547 Physical and electrical interconnections between utility and distributed generation (DG)

• IEEE 1686–2007 Security for intelligent electronic devices (IEDs).

Other IEEE standards and standards projects are referenced in the EPRI ‘‘Report to NIST on the Smart Grid Inter-operability Standards Roadmap,’’ e.g., the IEEE

802ΤΜ.

The Workforce Component

The U.S. engineering and technician workforce is not yet prepared for planning, building, operating and maintaining a Smart Grid. This will make it difficult to realize the promised benefits of a Smart Grid soon. The aging workforce is a major

concern. Nearly 50 percent of engineers and technicians currently employed in the

electric utilities and over 40 percent of the university power engineering faculty is

eligible to retire in the next five years. Increased and effective efforts are needed

to attract young people to power and energy careers, and to becoming our next generation of educators.

The vision is that Smart Grid technologies will become widely implemented in our

nation’s electricity delivery system. As a result, federal policies must support education and training in the electricity delivery field:

• to prepare an engineering and skilled trades workforce that has the necessary

knowledge and skills to design, plan, construct, operate, and maintain a modern electricity delivery system, including power system infrastructure , and

information systems, as well as to manufacture the necessary components of

that system,

• to enable retraining that will allow unemployed and under-employed workers

in other fields to find new job opportunities in electricity delivery, and

• to enhance, build and sustain the education infrastructure at accredited educational institutions, including community colleges and universities, offering

credit and non-credit education in electric power and energy.

A Smart Grid is transformative technology for the electric power industry. Our

nation’s educational institutions have to be transformed to respond to this technology advance. The Smart Grid will require engineers, computer scientists, and

technicians among others who possess new and enhanced skill sets in information

technology, communications, alternative energy resources, cyber security and other

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relevant technical fields. This workforce also must be prepared to be highly innovative. Most of the benefits of a Smart Grid will come through new applications that

are not yet envisioned or developed.

Appropriate curricula need to be developed. To develop those curricula effectively,

a comprehensive study is needed to identify the new workforce skills for successful

deployment of a Smart Grid and the training needed to equip the workforce with

those skills. New and innovative ways of delivering these curricula need to be developed to meet the wide-ranging needs of learners. Support is also needed to increase

access to these new education programs through increased financial assistance, and

through effective and widespread communication of training opportunities throughout the Nation.

The American Reinvestment and Recovery Act (ARRA) of 2009 (P.L. 111–5) anticipated the need for preparing the workforce for a Smart Grid by appropriating $100

million for ‘‘worker training activities’’ related to electricity delivery and energy reliability funded through the Department of Energy. These funds should be used for

putting in place the critical education infrastructure that supports job creation, professional development, career advancement, and workforce mobility. IEEE–USA’s

recommendations for the use of these funds can be found at http://

www.ieeeusa.org/policy/positions/electricityworkforce.pdf

Conclusion

The engineers, computer scientists and associated technical professionals responsible for creating the Smart Grid will do their part to ensure the Smart Grid is designed, built and operated to maximum advantage.

The Federal Government can ensure an effective transition by bringing key stakeholders and participants together as needed to ensure consensus and collaboration

on key decisions, by encouraging the development of the needed standards, and by

supporting research and development needed to develop necessary technology, address user needs, and ensure the security of the system. New standards will provide

the foundation on which the Smart Grid must be built. To make sure that a welltrained engineering and technical workforce is available to build and sustain the

Smart Grid, targeted investments should be made in education and training on the

Smart Grid combined with broad support for STEM workforce development.

IEEE, through its standards, technical publications, conferences and members

will play a key role in supporting efforts to create Smart Grids in the United States

and in other countries around the world. Working through IEEE–USA, we stand

ready to assist Congress and the Administration with information and advice as you

wrestle with Smart Grid-related issues for the Nation.

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