Testimony

• Ms. Kateri Callahan

  President

  Alliance to Save Energy
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• Mr. Charles Zimmerman P.E.

  Vice President, Prototype and New Format Development

  Wal-Mart Stores, Inc.
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• Mr. Douglas Johnson

  Senior Director, Technology Policy and International Affairs

  Consumer Electronics Association
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• Dr. Martha Krebs

  Deputy Director for Research and Development

  California Energy Commission
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• Mr. Jay Birnbaum

  Senior Vice President and General Counsel

  Current Group, LLC
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  Testimony

  Mr. Jay Birnbaum

  Testimony of Jay Birnbaum

   Senior Vice President and General Counsel

  CURRENT Group, LLC

  Before the Senate Committee on Commerce, Science and Transportation

  Subcommittee on Science, Technology, and Innovation

   

  June 21, 2007

   

  Thank you, Chairman Kerry, Ranking Member Ensign, and Members of the Subcommittee, for the opportunity to testify about Smart Electric Grids.

  A Smart Electric Grid enables an electric utility to monitor and maintain a more stable, fully automated, self-healing distribution network that alerts immediately when problems arise – and then triggers prompt, or even automated, corrective action.  Smart Grids will dramatically improve the efficiency of the Nation’s electric distribution infrastructure, enable demand-side management and distributed energy resources, and increase the reliability and security of the Nation’s power supplies.  Smart Grids are crucial to any comprehensive clean-energy policy and have the following capabilities: 

  ·        Smart Grid enables electric utilities to –

  -         improve efficiency through automated control and load balancing

  -         save businesses billions of dollars by preventing, pinpointing and restoring power outages and power disturbances

  -         identify and prevent theft and tampering

  -         improve diagnostics and predictive maintenance based on rich data streams never before available

  -         provide real-time monitoring of electric grid and other critical infrastructure

  ·        Smart Grid helps energy consumers –

  -         enhancing demand-side management programs means lower costs, fewer new power plants, and lower emissions

  -         enabling real-time pricing and information about energy use gives consumers better control of their bills, lets market forces influence usage patterns, and lowers overall energy costs

  ·        Smart Grid promotes alternative energy sources

  -         provides monitoring and control that optimizes generation portfolios of dispersed renewable sources like wind and solar energy

  -         facilitates real-time net metering that enables distributed generation based on accurate market signals

  CURRENT Group, LLC (“CURRENT”) designs, develops and deploys Smart Electricity Grids.  Specifically, CURRENT deploys a network of advanced sensors capable of collecting and monitoring data from the substation, transformers, meters and other electric distribution devices along the power lines, all connected through a high-speed and low-latency communications system and a distributed computing system capable of real time analysis and event prediction.  The Smart Grid increases the efficiency, reliability, safety, and security of the electric distribution network and expands the capabilities and benefits of demand-side management that can lower consumers’ energy bills and reduce the need to build more greenhouse-gas emitting generation plants. 

  To deploy the Smart Grid, CURRENT overlays its state-of-the-art technology at points throughout the existing electric distribution network.  No retrofitting or conditioning of the distribution electric grid is required.  Once a CURRENT^® Smart Grid is deployed, it can communicate with points anywhere along the distribution grid as well as each electric outlet inside homes and businesses.  A utility therefore can monitor and control capacitor banks, transformers, switches, substations and other critical infrastructure, as well as manage Demand Response programs for end users and measure and coordinate available distributed and renewable energy sources.  CURRENT is headquartered in Maryland with offices in Texas, New York, Ohio and California.[1]

  What are the Efficiency Benefits of the Smart Grid?

  Each year, the Nation’s 131 million electricity customers (nearly every household and business) pay about $247 billion in electric revenues, at an average price of about 7 cents per kilowatt-hour.[2]  Demand for electricity is projected to grow 40 percent by 2030, which in turn will likely increase prices.  That is why Smart Grid is crucial – it offers a cost-effective way to increase the amount of electricity available through greater efficiency and network reliability.  In other words, a megawatt saved is even better than a megawatt generated because it costs less and because such efficiency-captured electricity is as at least as clean as solar, wind or other renewable energy resources.

  The strain on the Nation’s nearly 100-year old electric distribution grids is expected to worsen in coming years as already old distribution networks age further and demand for electricity outpaces the construction of new facilities.  Peak demand for electricity is projected to rise by 19 percent nationally over the next decade, but capital committed to electric generation, transmission and distribution is expected to grow by only 6 percent during the same period.[3]  Yet at the same time the Nation looks to meet rising demand, 10 to 20 percent of electric energy is lost before it reaches the end user due to network faults or inefficiencies – inefficiencies that can be reduced by a Smart Grid.

  The Electric Power Research Institute (EPRI) estimates that power outages and “blink of the eye” power quality disruptions cost U.S. businesses at least $100 billion per year.[4]  Smart Grid can immediately increase the efficiency of businesses nationwide by providing utilities with real-time actionable intelligence about their networks that can be used to prevent such costly disruptions. 

  What are the Demand Response Benefits of Smart Grid?

  Forty percent of the Nation’s energy consumption is used to produce the electricity that is essential for economic prosperity and national security and electric power generation produces roughly 40 percent of the Nation’s carbon dioxide emissions.  As stated above, increased efficiency of existing distribution and consumption equates to making additional power available at lower costs and with less environmental impact.  Such efficiencies reduce the need for constructing new generation plants and associated transmission facilities.  Smart Grids can provide the communications and monitoring necessary to manage and optimize a portfolio of distributed and renewable energy resources.  Indeed, since a Smart Grid is capable of reducing electricity consumption up to 10 percent by 2020, leading to a reduction of 25 percent in CO₂, it should be considered a renewable energy resource in its own right – after all, the cleanest power of all is power you do not have to use due to captured efficiencies.

  The Electric Power Research Institute projects that Smart Grid-enabled distribution could reduce electrical energy consumption by 5 percent to 10 percent, carbon dioxide emissions by 13 percent to 25 percent, and the costs of power-related disturbances to business by 87 percent.[5] 

  A Smart Grid enables electric utilities to increase the efficiency of their existing electric distribution networks by enabling utilities in real time to collect and analyze power supply and usage data from distribution network elements and from millions of end user devices.  A Smart Grid can collect such data as often as every minute or “on demand,” which provides much more information and control than systems that allow less frequent reads fewer devices or of only end user devices or distribution elements.  A Smart Grid’s real-time capability allows utilities and end users to partner in shaving peak loads enough to reduce the need for expensive new generation plants.  This saves end users money and helps to reduce greenhouse gas emissions over time – the Electric Power Research Institute (EPRI) has projected that the Smart Grid can reduced electricity consumption by up to 10 percent (comparable to or more than the supply available from renewables), reduce emissions by up to 25 percent and reduce the costs of power-related disturbances by 87 percent.[6]

              Many members of Congress are encouraging is renewable energy resources like wind and solar energy.  The Smart Grid can improve the value of such renewable resources, which in the case of wind and solar are often dependent on the time of year or prevailing conditions that can vary throughout any 24 hour period.  With Smart Grid, real-time information about the availability of renewable-generated power can be combined with real-time information about the demand in any given part of the grid.  For this reason, any Renewable Portfolio Standard (RPS) considered by the Congress should treat Smart Grid efficiencies as eligible for inclusion in RPS. 

  Although we will continue to need new and improved generation plants, including those that provide renewable energy resources like wind, biomass, and solar, the United States also must maximize the efficiency, reliability, security, and safety of the electric distribution network.  Another benefit of Smart Grid is its ability to ensure that plug-in electrical vehicles are truly a clean-energy option.  Although 70 percent of all cars, trucks, vans and SUVs could be powered from the electric grid, the time-sensitive demand response enabled by Smart Grid and its ability to measure distributed generation sold back into the distribution grid is necessary to maximize the environmental and economic benefits of widespread plug-in electric vehicle adoption.[7]  Automobiles can be charged during the lowest rate periods, say at night, and be used to distribute energy back into the grid at high peak times, thereby saving money and mitigating the need for peak power plants. 

  Encouraging a Smart Grid also will help American companies gain and preserve market leadership in what is fast becoming a worldwide market.  Countries all over the world need a modernized electric grid, and companies from the United States can be leaders in this global market.  Indeed, CURRENT and other American companies already are pursuing such international opportunities, which will create high tech jobs here at home.

  Why must Congress act to encourage Smart Grid?

  Smart Grid is a reality today.  For instance, in and around Dallas/Fort Worth, Texas, CURRENT is presently deploying the Nation’s first true Smart Grid with Oncor Electric Delivery.  This system, which ultimately will reach almost two million homes and businesses, is already reading advanced meters at 15-minute intervals; conducting network monitoring that can detect problems before they cause power outages, safety hazards or system quality problems; and providing power outage and restoration detection if outages do occur. 

  Although CURRENT is deploying the first Smart Grid today, utilities in general are slow to embrace new technologies largely because of regulatory uncertainty and economic disincentives.  Federal action to address both of these issues is essential to accelerate Smart Grid deployments.  Utilities often anticipate that their discretionary adoption of new technology may be politically challenged or that cost recovery will be denied after the fact.  An even greater disincentive faces a utility that might seek to create efficiency or encourage lower consumption.  Under traditional regulatory models, a utility profits by selling energy.  There is no real incentive for a for-profit entity to spend money in order to earn less.  As a result, utilities have strong regulatory and financial incentives to spend money on more traditional items, such as new power generation plants, rather than acquiring new technology to make more efficient use of existing power.  An added aspect of such disincentives is that a utility can earn a much higher rate of return on new generation plants than on conservation, so utilities accordingly can be expected to spend more on such traditional assets. 

              As a result of the aging distribution networks, skyrocketing demand, the increasing costs of building generation plants, and the existing disincentives for change, CURRENT believes Federal legislation in this area is essential.  We suggest Congress consider various incentives for utilities, including grant programs (particularly to small utilities that want to adopt Smart Grid), tax incentives, accelerated depreciation, financial incentives for energy efficiency spending, and inclusion of Smart Grid in any Renewable Portfolio Standard.  Suggested investment incentives would include the following:

  Renewable Portfolio Standard – since Smart Grid can reduce electricity consumption by up to 10 percent (an amount comparable to renewables), a utility’s deployment of a Smart Grid should be included in any Renewable Portfolio Standard.

  Cost Recovery – utilities should have the certainty of knowing that they can include in their rates the actual costs of investing in Smart Grid systems.

  Enhanced Return – utilities should be permitted to earn an enhanced return on their investment in Smart Grid systems, including a return on a portion of their operating and maintenance expenses, to induce utilities to spend on Smart Grid investments. 

  Retained Savings – As an alternative to an actual return on operating and maintenance expenses, utilities could be permitted to retain a meaningful portion of the savings resulting from such expenses to the extent they result in efficiencies that otherwise would be passed on to end users (thereby producing a return on the utility’s expenditure).[8] 

  Obsolete Equipment – A utility should be able to recover the costs of equipment rendered obsolete by its deployment of a Smart Grid system, based on the remaining depreciable life of the obsolete equipment.

  Regulatory Reform – States are vital players in the regulation of the Nation’s electric infrastructure, but should not be allowed to prohibit or impede a utility’s deployment of a Smart Grid system on its distribution facilities.  

              Although CURRENT encourages Congress to act now to encourage the further and nationwide deployment of the Smart Grid, it is important that any legislation first do no harm.  CURRENT would like to underscore the delays that will result if legislation were to focus too much on items that, although well-intended, would in fact delay Smart Grid deployments, such as additional studies, demonstration projects, and creation of additional agencies.  The technology needed for a Smart Grid already exists.  The savings available from a Smart Grid are also demonstrable today.  More study is not necessary.  What is needed is to remove existing regulatory constraints and to create affirmative incentives for rapid action.  As was the case decades ago when the Rural Electrification Act helped to wire the Nation, Congress should act to ensure that the benefits of a Smart Grid become available to all Americans as swiftly as possible.   

  
  

  Summary of the Testimony of Jay Birnbaum, Senior Vice President

  and General Counsel, CURRENT Group, LLC

  Before the House Committee on Energy and Commerce

  Subcommittee on Energy and Air Quality

  May 24, 2007

   

   

  CURRENT Group, LLC (“CURRENT”) specializes in the development and provision of Smart Grids.  Smart Grids are capable, in real time, of collecting and analyzing power supply and usage data from devices deployed all along the distribution network and from end user devices.  Smart Grid is a reality today.  CURRENT is presently deploying the Nation’s first true Smart Grid with Oncor Electric Delivery in Texas.  This system, which ultimately will reach almost two million homes and businesses, is already reading advanced meters at 15-minute intervals; conducting network monitoring that detects problems before they cause power outages, safety hazards or system quality issues; and providing power outage and restoration detection if outages do occur. 

   

  Increasing the efficiency of existing distribution and consumption equates to making additional power available at lower cost.  Such efficiencies reduce the need for constructing new generation plants and associated transmission facilities.  Smart Grid can provide the communications and monitoring necessary to manage and optimize distributed and renewable energy resources and to maximize the environmental and economic benefits of widespread plug-in electric vehicle adoption.

   

  For these reasons, CURRENT believes Federal legislation in this area is essential.  Suggested investment incentives include the following:

   

        Renewable Portfolio Standard  - since Smart Grid can reduce electricity consumption by up to 10 percent (an amount comparable to renewables), it should be included in any Renewable Portfolio Standard.

  Cost Recovery – utilities should have the certainty of knowing that they can include in their rates the actual costs of investing in Smart Grid systems.

  Enhanced Return – utilities should be permitted to earn an enhanced return on their investment in Smart Grid systems, including a return on a portion of their operating and maintenance expenses, to induce utilities to spend on Smart Grid investments. 

  Retained Savings – As an alternative to an actual return on operating and maintenance expenses, utilities could be permitted to retain a meaningful portion of the savings resulting from such expenses to the extent they result in efficiencies that otherwise would be passed on to end users (thereby producing a return on the utility’s expenditure). 

  Obsolete Equipment – A utility should be able to recover the costs of equipment rendered obsolete by its deployment of a Smart Grid system, based on the remaining depreciable life of the obsolete equipment.

  Regulatory Reform – States are vital players in the regulation of the Nation’s electric infrastructure, but should not be allowed to prohibit or impede a utility’s deployment of a Smart Grid system on its distribution facilities.  

  
  

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  [1] Further information about CURRENT is available at http://www.currentgroup.com.

  [2] Overview of the Electric Grid, U.S. Department of Energy, Office of Electricity Delivery and Energy Reliability, Gridworks Program, available at: http://www.energetics.com/gridworks/grid.html.

  [3] The Brattle Group, The Power of Five Percent: How Dynamic Pricing Can Save $35 Billion in Electricity Costs, Discussion Paper filed with the Maryland Public Service Commission (May 16, 2007) (citing North American Electric Reliability Council, 2006 Long Term Reliability Assessment).

  [4] http://www.energyfuturecoalition.org/preview.cfm?catID=57 (citing EPRI estimate).

  [5] See Electric Power Research Institute, Electricity Sector Framework for the Future: Achieving the 21^st Century Transformation (Aug. 2003), page 42 (“EPRI Report”), copy available at:  http://www.globalregulatorynetwork.org/PDFs/ESFF_volume1.pdf.

  [6] See EPRI Report, page 42.

  [7]   Pacific Northwest National Laboratory Study, available at: http://www.pnl.gov/news/release.asp?id=204   (Dec. 11, 2006).

   

  [8] This is especially applicable since O&M expenditures to implement a Smart Grid will cost the utility, and therefore its rate payers, less than if the utility were to capitalize the entire cost of building the Smart Grid.

• Mr. Tom Hicks

  Vice President of Leadership in Energy and Environmental Design

  U.S. Green Building Council
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