Administration Offers Fluff on Grid Policy

By Kennedy Maize

Washington, D.C., June 16, 2011 — The Obama administration’s latest genuflection toward the smart grid, announced with considerable fanfare and a dog-and-pony show put on the by White House’s science office this week, was an empty spectacle. It featured a cast of stars: science advisor John Holdren, energy secretary Steve Chu, ag secretary Tom Vilsack, Nancy Sutley, chair of the White House council on environmental quality.

As for substance, there was considerably less than meets the eye. It was, in fact, rhetorical smoke and mirrors, old policy wine in new bottles, yawn-inducing stuff. The announcement of “the president’s plan for a 21st century electric grid” was a rehash with a dash of not-very-interesting almost-news: plans by the ag department’s Rural Utilities Service to put another $250 million in loan guarantees into a number of worthy projects, most of which have justifications that have little to do with smarts on the grid. For example:

* Blue Grass Energy Cooperative Corp. in Kentucky will get almost $38 million in a loan guarantee to build some 152 miles of distribution lines. The co-op will use $2.7 million of that for smart meters (which, if they count as “smart grid,” they are on the low-IQ side of the definition).
* Jasper County Rural Electric Membership Corp. in Indiana will get a $4 million guarantee to build 17 miles of new distribution line and make improvements on 19 miles of existing distribution lines. They will use $15,000 for advanced meters.
* Benton Rural Electric Association in Washington state will get $10 million in loan guarantees for 32 miles of new distribution lines.


And so it goes, money from RUS (not taxpayer money, by the way, but loan guarantees) for projects that make sense without hanging the sweet-smelling smart grid greenery around their necks.
There’s a reason why the White House highlights rural electric cooperatives, and not projects involving large, investor-owned electric companies. That’s because the cooperatives are generally exempt from federal and state regulation. Their distribution lines are largely under their control, as are the rates they can charge to recoup their costs. So there’s almost no chance that the loan guarantees will ever result in a claim against the government.

That’s not the case for the IOUs. Distribution lines, and most of the allegedly smart grid stuff involves distribution and not transmission (the official regulatory distinction is 100 KV), requires state regulatory approval. For transmission lines that are involved in interstate commerce — and I would argue that its this transmission grid that’s in real trouble in the U.S. — FERC has sway. Sort of. As most readers probably know, FERC is unable to assert national interests over state concerns in siting large, long lines, the 2005 Energy Policy Act to the contrary notwithstanding.


In the most telling and genuine moment in the event, Chu cited what he sees as the need for “an honest conversation” about the vexing federalism issues. Does it make more sense to build wind farms in North Dakota and ship the power long distance to Chicago, or build the generation close to the load?
And then Chu committed the major truth, which gets in the way of any fruitful attempt to deal with the problems facing the electrical grid in the U.S. “We have no authority,” the low-key Chu lamented, almost in passing.


Indeed, the problems of the U.S. transmission grid — which won’t be resolved by the peripheral and ephemeral smart grid — can’t be solved under the current system of divided powers between the states and the national government. The U.S. has no grid today. It has at least three — the Eastern Interconnection, the Western Interconnection, and Ercot. As I see it, the big task is to integrate and interconnect the transmission grid, creating a national grid. That’s impossible today, and administration-staged opera bouffe — complete with tarted-up studies describing phony policy “pillars” that have less substance than the mythical pillars of Hercules — make no contribution to the honest conversation.