Too Many Fingers in the Smart Grid Pie?

There has been much excitement about the advent of the "smart grid" recently, especially because of the strong push by the Obama administration. Despite the simple-sounding term, the smart grid is not a simple concept. It encompasses numerous complex elements. The smart grid has been touted as the means of, among other desirable objectives, reducing electricity demand and costs by giving consumers accurate price and usage signals, integrating renewable and distributed resources, improving the robustness of the system in the event of outages, and providing the infrastructure for the widespread use of electric vehicles.

Because the smart grid promises to address so many components across the industry, smart grid initiatives are being overseen by many — perhaps too many — different organizations and agencies, as I outline below. This raises the question of whether the smart grid effort could be advanced more efficiently by using a more centralized approach.

U.S. Department of Energy (DOE)

The Energy Independence and Security Act of 2007 (EISA), expanding on 2005 legislation, provides the statutory framework for much of the national smart grid effort. The EISA gave the DOE the responsibility to:

• Establish a Smart Grid Task Force made up of members of multiple federal agencies to coordinate federal efforts and make recommendations to Congress.

• Establish a Smart Grid Advisory Committee to include private and nonfederal governmental entities to advise relevant federal officials on matters involving smart grid development.

• Facilitate research on smart grid technologies.

• Establish smart grid demonstration projects.

• Study and report on infrastructure security aspects of the smart grid.

The American Recovery and Reinvestment Act of 2009 (ARRA) appropriated funds for smart grid grants, for which the DOE has issued solicitations of nearly $4 billion. ARRA also instructed the DOE to establish a Smart Grid Clearinghouse for the sharing of demonstration results and research.

National Institute of Standards and Technology (NIST)

The EISA instructed NIST (within the Department of Commerce) to develop standards and protocols for the "interoperability" of smart grid devices and systems. NIST is directed to seek input and cooperation from a number of federal agencies and private organizations, including the Gridwise Architecture Council, the International Electrical and Electronics Engineers, and the National Electrical Manufacturers’ Association. NIST has been working on this complex standards development task for some time, and a considerable amount of additional work will be necessary to complete it.

Federal Energy Regulatory Commission (FERC)

The EISA gives FERC a consultation role in many of the DOE’s smart grid activities. In addition, FERC is charged with instituting a rulemaking, after NIST achieves "sufficient consensus" on interoperability standards, to approve those standards. The FERC interoperability rulemaking is expected to commence later this year. Additionally, FERC will have responsibilities for oversight of system reliability and security issues associated with transmission aspects of the smart grid and will have to consider rate recovery for smart grid investments within its jurisdiction.

FERC issued a proposed policy statement in March to begin sorting out these issues and to advise NIST of criteria for acceptable standards. A Smart Grid Collaborative has been created between FERC and the National Association of Regulatory Utility Commissioners, and this group has made recommendations to the DOE on criteria for smart grid demonstration grants.

State Public Utility Commissions (PUCs)

Many smart grid technologies will be deployed at the local distribution level, which is subject to state PUC jurisdiction. The EISA instructed states to consider smart grid issues. The PUCs have made clear that they do not intend to relinquish their jurisdiction over advanced meters, rate recovery, pricing structures, and other issues affecting utilities and retail customers under their domain. State-federal turf battles are possible.

Other Players

The Federal Communications Commission will likely play a role in issues of wireless data transmission, broadband infrastructure expansion, and the potential for radio frequency interference. The EISA also designates the Department of Homeland Security as a consultation agency for grid security issues. The recently announced White House coordinator on cybersecurity issues may have responsibilities to address cyber vulnerabilities of smart grid equipment. And the North American Electric Reliability Corp. will necessarily be involved in reliability aspects of the transmission system.

Team Captain Needed

This quick overview of the disparate players involved in regulating the development of the smart grid clearly demonstrates the potential for balkanization of responsibilities with the possibility of overlapping and conflicting efforts. The relationships become much more complicated when the numerous hardware and software suppliers and consultants vying for a piece of the action are added to the mix.

While ensuring technology interoperability, perhaps we should also enable organizational interoperability by naming a single smart grid "czar" with implementation authority over all smart grid activities.

—Brian R. Gish ([email protected]) is of counsel in Davis Wright Tremaine’s Energy Practice Group.