Grid modernization isn’t just a technology challenge

The challenges facing utilities and the energy sector as a whole are well-documented. 

Unprecedented peak demand and load growth, an influx of distributed energy resources, and the looming surge of electric vehicles are already straining the system. And that strain is being compounded by more extreme weather events and aging infrastructure. 

While long-term plans are underway to build out new and much-needed transmission capacity and renewable generation, many grid-enhancing technologies (GETs) that utilities can use to optimize existing systems and alleviate constraints are already available today. So why aren’t these solutions — such as advanced flexible transformers and dynamic line rating — being more widely piloted and deployed at scale? 

Well, a lot of the reason has to do with outdated utility incentive models and technology adoption frameworks that don’t adequately encourage the use of GETs.

This was clear at a recent Northeast Clean Energy Council and Massachusetts Clean Energy Center event in Boston. Part of a series dubbed “Transitioning to the Future Grid in Massachusetts,” the session unpacked challenges identified in an earlier event on the subject. It set out to explore grid modernization approaches other states and utilities are employing, and to begin workshopping potential solutions that Massachusetts can use to address the challenges the state and industry face. 

The discussion spanned human-centric challenges — like improving accessibility and transparency during policy development, and employing change management processes — to more tactical, process-based challenges, like utility-incentive model reform and updated technology adoption frameworks. 

But throughout the wide-ranging conversation, a single takeaway was clear: people and legacy systems need to play catch up to better enable and accelerate the deployment of existing GETs.

Modernizing utility incentives

While aligning economics and incentives to present-day customer and system needs sounds simple on the surface, the challenges associated with untangling and modernizing legacy utility incentive models are, to understate it drastically, complex. 

At the event, Cara Goldenberg, principal in RMI’s electricity practice, laid out the outdatedness of legacy cost-of-service regulation (COSR), as well as how the capex-centric nature of these models often deters and disincentivizes utilities from adopting many GETs. The issues with COSRs are layered, but the crux of the misalignment centers around existing models driving utility preference for capital-intensive projects like new generation or distribution to maximize earnings. Alternative solutions, including GETs, are instead funded through operating expenses.

Some progress is being made in many states, Massachusetts among them, to move away from COSR. The alternatives are performance-based regulation (PBR) models, though those come with challenges of their own, including the additional costs associated with collecting the necessary data for metric tracking; the risk of counterproductive outcomes associated with reduced utility earnings opportunities for electrification investments; and likely implementation delays, given the complexity and contentiousness of program reform. 

Despite these, PBRs are already helping states push utilities to consider non-capex options. Performance-based approaches including revenue decoupling, performance incentive mechanisms, and multi-year rate plans are enabling states like Hawaii, New York, and Colorado to better promote AMI utilization, facilitate DER interconnection and utilization, and reduce peak loads.

While there are still technical challenges to overcome before GETs can be deployed system-wide, updating legacy COSR models to align with modern-day challenges needs to be a priority to overcome the uphill battle these solutions have faced to-date.

Accelerating technology evaluation and deployment 

Beyond incentive misalignment, the event also highlighted how inefficiencies in utilities’ current technology evaluation and deployment approaches hinder widespread GET adoption — and approaches that can be taken to accelerate the process. 

While the tech space’s “fail fast” mantra is often viewed as a blueprint to deploying new solutions across different industries, utilities don’t have the luxury of being able to fully employ a trial and error approach to innovating. With that in mind, emerging efforts center around ways to accelerate evaluating, testing, piloting, and deploying new solutions, while minimizing service disruption risks and enabling utilities to maintain operations. 

Three weeks into the role, Massachusetts’ newly appointed assistant secretary of energy, Josh Ryor, walked the gathering through Connecticut’s Innovation Energy Solutions program, which he previously helped run. The program’s primary purposes were two-fold: support the Public Utilities Regulatory Authority’s framework for an equitable, modern grid, and deploy high-value project solutions that might not otherwise be possible or expedient within the current regulatory environment. 

Embracing the “fail fast” approach, the program runs through four phases, spanning ideation and screening, prioritization and selection, project deployment, and assessment and scale. It’s core priority: break away from traditional, often never-ending pilot cycles and instead move toward an accelerated, pilot- to full-scale deployment process.

So far, the program has awarded funding to companies including GridEdge Networks, KrakenFlex, Piclo, Smarter Grid Solutions, and Tantalus for solutions that span vehicle-to-grid, DER management services, and broader grid services.

While it’s only a single example, Connecticut's IES program demonstrates ways other states can design programs that embrace the urgency of the moment and accelerate technology deployment, while balancing utility reliability concerns. And — given the response in the room from a diverse coalition of policy makers, utility executives, line workers, technology vendors, and other industry representatives in attendance — industry stakeholders seem eager for a path to doing just that.

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Matt Casey is the managing director of Latitude Intelligence, the market research arm of Latitude Media.