Tuesday, February 1, 2011

Smart Grid Task Force Releases Report as Directed by Colorado Senate Bill 10-180

Colorado Senate Bill 10-180 (the Bill), created the Colorado Smart Grid Task Force (Task Force) for the purpose of producing a report containing recommendations and analysis on the feasibility, cost, and timing of transitioning to a secure, resilient, and technologically advanced electric grid, referred to in the Bill as the "Smart Grid." The Bill directed the Task Force to make recommendations pursuant to defined issues related to each, the utility side of the meter and the customer side of the meter, in the development of the Smart Grid. The Bill provided for delivery of an initial report on or before January 20, 2011. Pursuant to this mandate, the report entitled Deploying Smart Grid in Colorado: Recommendations and Options, has been released by the Governor's Energy Office. A copy of the report can be found here: http://rechargecolorado.com/images/uploads/pdfs/Deploying_Smart_Grid_in_Colorado_Recommendations_and_Options.pdf

In accordance with the Bill, the Task Force defined Smart Grid as "a system for electric transmission or distribution within the certificated service territory of an electric utility that incorporates one or more of the following functionalities: (a) enabling consumers to participate actively in managing their electric consumption by using information, control, and options for energy efficiency not previously available to consumers; (b) integrating electrical systems using universal interoperability standards; (c) monitoring, diagnosing, and responding to power quality deficiencies; (d) optimizing the use of system assets and enhancing overall efficiency through improved load factors and better management of outages; (e) anticipating and automatically responding to system deficiencies; (f) operating resiliently when confronted with a cyber-attack or natural disaster; and/or (g) optimizing efficiency and demand response."

The report identified two key challenges to widespread investment in the Smart Grid: (1) the Smart Grid is relatively new and there is little consensus or understanding about its benefits; and (2) the current energy market is not designed to optimize Smart Grid investments.

To address the first challenge, the report emphasized that Colorado's university research institutions, utility sector, organizations such as NIST and NREL and collaborative structures such as the Colorado Renewable Energy Collaboratory (a research partnership among NREL and the state's premier research universities: CSU, SU and CSM), create a significant competitive advantage and recommended leveraging this in-state talent to create a tool to understand the range of potential costs and benefits, as well as risks and opportunities associated with Smart Grid. According to the report, this tool should be: (1) sufficiently broad; (2) focus on the multiple interactions that occur among stakeholders along the Smart Grid value chain; (3) be completed quickly enough to be useful and inform development and deployment; and (4) delineate and describe the economic-development opportunities that stem from creation an ecosystem of products and services in this new industry.

To address the second challenge, the Task Force identified the need to modify economic incentives for the utilities. "The current energy market rewards utilities for delivering more energy to the consumer. In order to drive widespread investment in Smart Grid, the economic incentives for utilities will need to be modified to promote Smart Grid investments." Market structures will need to evolve to enable the utilities to recover costs from energy efficiency and renewable energy gains that are mandated by legislation. Accordingly, the Task Force recommended that "appropriate governing bodies should explore options and market structures that would provide incentives for Smart Grid development." On March 3, 2010, the Colorado Public Utilities Commission opened an investigatory docket (10l-099EG) in order to explore the key regulatory issues relating to Smart Grid implementation including analysis of new rate designs, impact on low-income consumers, methodologies for evaluating utility investments in Smart Grid technologies, the required components of a utility Smart Grid CPCN application and PHEV rate design.

In addition to identifying these challenges, the Task Force provided a number of recommendations and articulated three pathways that Colorado policy makers could use to guide the transition to Smart Grid in Colorado. Under the Bill, the Task Force is now required to meet annually.

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