Grid modernization is a hot topic in the power sector as utilities across the country replace aging infrastructure and upgrade their systems for new energy technologies.

But until now, there was no easily-accessible tool to track the myriad regulatory actions on advanced metering, non-wire alternatives, ratemaking reform and the like.

That’s changed thanks to the North Carolina Clean Energy Technology Center (CETC), a think tank based at North Carolina State University. Already known for its authoritative “50 States of Solar” reports that track state solar policymaking across the U.S., the CETC is lending its expertise to the wider grid with a new “50 States of Grid Modernization,” published for the first time this month.

The report, like its solar counterpart, is meant to be a quarterly policy tracker, outlining regulatory and legislative efforts on grid modernization efforts in every U.S. state. Autumn Proudlove, manager of policy research at the CETC, said efforts to remake the grid across the country will open up opportunities for more distributed energy technologies.

“Policy is more controversial than technology but you can’t ignore policy because it enables technology,” Proudlove said. “Without the right policy support, barriers to deployment will remain and consumers may lack incentives to move to new technologies.”

The grid modernization policy landscape is crowded and diverse, according to the CETC report. There was some type of action in 37 states and the District of Columbia in Q1 2017, adding up to 148 state and utility-level enacted, pending, or proposed actions.

Advanced metering infrastructure (AMI) is where most of the policy action is, Proudlove said, with 19 pending or decided proposals in Q1. But while it is the “starting point” for grid modernization, the CETC report reveals a number of states are moving ahead on more sophisticated policies, such as performance-based regulation and new utility rate designs.

New report, broader focus

One of the most basic and important elements of the CETC’s new report may be its contribution to defining the phrase “grid modernization.”

Typically a general term to describe a variety of infrastructure upgrades and business model reforms, the CETC defines grid modernization as the transition from a traditional one-way power flow to “an interconnected web” that can offer valuable services to the system.

The new quarterly will catalog five types of policy actions. The first are those involving studies or cost-benefit analyses. Examples include studies that compare non-wires alternatives to traditional grid infrastructure. During Q1 2017, “16 states plus the District of Columbia took action to study or investigate grid modernization, energy storage, demand response or rate reform,” CETC reports.

The second type of policy action involves those that would alter utility planning or market rules. CETC found actions of that type in 12 states. Examples are recent rule changes intended to give energy storage equal footing in integrated planning.

The third type of action, reported in 13 states during Q1, are changes to how investor-owned utilities (IOUs) recover costs or how they structure rates. Proposals to institute performance-based ratemaking are an instance of the former, while shifts from volumetric rates to time-varying rates are an example of the latter.

Fourth are the broad proceedings now ongoing in many states to establish a policy framework for grid modernization. Only completed in Massachusetts to date, those proceedings typically investigate things like energy storage targets and clean peak standards. The report describes such proceedings in 16 states in Q1.

Fifth are legislative or regulatory actions on state incentives for energy storage, microgrids, and other advanced grid technologies. The report covers that type of action in 11 states.

The CETC reports will focus on IOU activity, but will also report on policies affecting municipal utilities and electric cooperatives if they promise to impact the concept of grid modernization. The initial focus on distribution system modernization will omit pumped hydroelectric storage and electric vehicles. The think tank will also leave the subject of distributed generation for its quarterly “50 States of Solar” updates.

State highlights

Barriers now prevent “advanced grid technologies” from enabling new utility and private sector opportunities, strengthening the power system, and lowering customer costs, CETC reports. A re-examination of “regulatory frameworks, business models, and rate designs” can remove those barriers.

“Over half of U.S. states are currently examining these regulatory frameworks or actively working to deploy advanced grid technologies,” CETC reports. “This activity is expected to continue, much like the ongoing evaluation of state solar policies, as states and utilities conduct studies, try new approaches, and learn from each other to achieve a more modern grid.”

Five state policy developments in Q1 2017 were especially noteworthy, according to the report.

Maryland

The first notable action was from Maryland’s legislature, which last year upped the state’s renewables mandate. In March, lawmakers enacted a tax credit for energy storage that is 25% of installed costs and can be up to $5,000 for residential systems and $500,000 for commercial systems.

“The top five developments are about overcoming barriers and stimulating the market,” Proudlove said. “A tax cut is more about driving the market.”

Demonstrating the momentum behind grid modernization policies, Republican Gov. Larry Hogan approved the tax credit. The credit will apply to the full range of electrochemical, mechanical, and thermal storage. Another new Maryland law authorizes a study on alternative supports for storage deployment.

Illinois and Ohio

The second of CETC’s top five state actions actually involves two separate but similar policy initiatives. In March, both Illinois and Ohio joined the ranks of states conducting grid modernization proceedings led by utility regulators.

Illinois’s “NextGrid” would create "a 21st century regulatory model that supports innovation, empowers customers and communities, drives economic development, and optimizes the electric utility industry,” according to CETC. The 18-month study, launched as a statewide collaboration with utilities, consumer advocates and other stakeholders, hopes to deliver “tangible recommendations” to the Illinois Corporation Commission and the state legislature.

Ohio’s “PowerForward” will similarly chart “a path forward for grid modernization projects and innovative regulations to improve the consumer experience.” That proceeding, kicked off last month, also aims to deliver actionable suggestions to the Public Utilities Commission of Ohio.

“A technology review just for the sake of a technology review, that won’t get us to where we need to be,” PUCO Chairman Asim Haque told Utility Dive. “We need to find a way to incent this technology to be deployed, so how we go about that and how we go about the ratemaking is something that needs to be explored.”

New Hampshire

The third important action came when New Hampshire’s Grid Modernization Working Group submitted the final report on its multi-year investigation to the state Public Utilities Commission. “The report includes many areas of consensus among stakeholders, as well as distinct stakeholder viewpoints on areas of non-consensus,” CETC reports.

“Studies and investigations are generally very broad and holistic,” Proudlove said. “They can cover technologies as well as policy, regulatory structures, utility business models, rate structures, and other aspects of grid modernization.”

The New Hampshire proceeding (Docket IR 15-296) covered “distribution system planning, advanced metering functionality, rate design, customer data and education, and utility cost recovery and financial incentives,” CETC reports.

The Q1 update provides a valuable summary of the state;s Working Group report, which “recommends that each utility develop grid modernization plans with a stakeholder engagement process.”

The Working Group agreed that “fixed customer charges should recover customer-related charges based on a cost of service study.” It also agreed “demand charges should not be assessed on residential customers for now, and that location-based pricing be limited to DERs.”

One disagreement was on rate reform. “Utilities suggested that time-varying rates for transmission and distribution (T&D) are not practical to implement at this time,” CETC reports. “Non-utility stakeholders suggested time-varying T&D rates should be implemented in the near future.”

Another important disagreement was on AMI policy. “Utilities concluded that AMI should be installed only to achieve the level of rate complexity proposed by the utility to avoid excess cost,” according to the report. “Non-utility stakeholders concluded AMI be installed to enable the full range of competitive energy products and services alternatives.”

“It is too early to know what will come next in New Hampshire,” Proudlove said. “We may see comprehensive proposals from utilities, like those submitted in Massachusetts.” If stakeholders get their way, however, “there may be rate reform proposals to help overcome barriers and open markets.”

Washington

The report’s fourth highlighted policy action was the Washington Utilities and Transportation Commission’s draft policy statement on how utilities should handle energy storage in integrated resource plans (IRPs). Six states took on grid modernization in the IRP process in Q1, CETC reports.

Washington's commission will require utilities to recognize all costs and benefits of energy storage “as an alternative to new resource investments,” NCCETC reports. To make that possible, the commission will require utilities to begin modeling sub-hourly dispatch.

“The way utility planning is done right now, it does not consider all the options or at least does not consider them on a level playing field,” Proudlove said. “A policy framework that fairly evaluates all options is critical to enabling market access.”

Another example of policies that changed IRPs were two that addressed barriers to microgrid growth from “utility franchise rules,” she added.

Microgrids can “improve reliability, lower costs, and diversify energy sources,” a recent SEPA/EPRI paper reported. But utility-led microgrids face challenges “because of the way utilities are regulated,” lead author Ryan Edge told Utility Dive. “You see a lot of proposals but not many are built."

Under utility franchise rules, a microgrid may be classified as “a public utility and may not sell power within another utility’s state-granted jurisdiction,” NCCETC reports. Recent policy efforts in Hawaii and Maine would alter the IRP process to provide ways around this barrier.

New York

The final of the top five state actions was the “monumental” order on distributed energy resource compensation from the New York Public Service Commission. Its Value of Distributed Energy Resources (VDER) ruling included “compensation for behind-the-meter energy storage systems that are paired with renewable generation.” It is one of the first state rulings requiring a value-based approach to compensation.

The ruling requires utilities to use a Value Stack mechanism to determine DER compensation. The exact values are yet to be determined, but they’re meant to include avoided utility costs, wholesale energy values, distribution system values, and environmental values.

Federal questions loom

The CETC’s new quarterly focuses on state-by-state policies, but will not include information on grid modernization on the federal level.

Even so, sector leaders say the Federal Energy Regulatory Commission (FERC) has an important role to play in the transition of the power system.

will not report on grid modernization at the bulk transmission system level. This could be a shortcoming.

“A regulatory framework with market rules that value all the services wind and other generation and technologies can offer system operators is part of a modern grid,” said EDF Renewables CEO Tristan Grimbert, who just became the American Wind Energy Association board chair. “Those include energy, ancillary services, capacity, and carbon reduction.”

New investment in the technologies that allow and provide those services would follow from such a framework, he added.

An example is FERC’s recent Notice of Proposed Rulemaking intended to amend its regulations and “to remove barriers to the participation of electric storage resources and DER aggregations in the capacity, energy, and ancillary service markets.”

Wholesale electric markets were not designed to consider energy storage, but the FERC proceeding “might solve that problem,” GTM Research Sr. Vice President Shayle Kann recently told Utility Dive. “The rules may not create the economic case but the potential is there to open the markets.”