By now we’ve all heard about the American Clean Energy and Security Act of 2009 (ACES), also known as the climate bill, the Waxman-Markey bill, and a variety of other names.  The bill prominently includes a nationwide renewable portfolio standard, a carbon cap and trade system, and a number of changes for the energy system.

But embedded in this same bill are a number of provisions that could have a dramatic effect on the Smart Grid. An examination of these sections reveals provides insight into how lawmakers are addressing Smart Grid issues and may offer a preview of things to come if the bill becomes law.

PHEV support (Section 121, 122)

Summary: The Waxman-Markey bill requires electric utilities to develop plans to support plug-in hybrid electric vehicles (PHEVs) and electric vehicles (EVs) through charging infrastructure and supporting grid infrastructure.  The bill also requires state regulatory authorities to “establish any appropriate protocols and standards for integrating PHEVs and EVs into the electrical distribution system, including Smart Grid systems and devices.”  The regulators must also determine how to deploy accurate billing for these vehicles, “regardless of the location that the vehicle is plugged in.”  The bill also authorizes the Secretary of Energy to use funds to help finance these projects or infrastructure necessary to support PHEVs and EVs.

Analysis: If utilities aren’t already doing this, they definitely should be.  Clearly they need to be coordinating with vehicle manufacturers and home builders to make sure the coming transition is manageable.  It’s unclear right now who will manage the development of appropriate protocols and standards.  NIST has already had its hand in this since being given the primary charter for Smart Grid standards in EISA 2007.

Energy Star Labeling and Smart Appliances (Section 143, 146)

Summary: This bill directs the EPA and DOE to assess the cost-effectiveness of incorporating a Smart Grid label into the Energy Star labeling program.  The label would be a mix of the Energy Star and Energy Guide labels in that it provides both a “Smart Grid capable” sticker as well as a list of features and an estimate of potential savings.  This would mainly apply to consumer appliances, which are the primary target of the Energy Star program.  The bill also designates smart appliances as eligible for the appliance rebate program set out in EPACT 2005, which is re-designated as the “energy efficient and smart appliance rebate program.”

Analysis: This is a major step by the government.  The Energy Star program has been extremely successful at promoting energy efficiency in computers and consumer appliances.  Expanding it to include new features like the Smart Grid is a logical next step for the program.  However, this will carry a number of important challenges for the program, as it must prepare for a different set of requirements and a different level of consumer interest.  Look for our forthcoming white paper from the NETL Modern Grid Strategy analyzing a Smart Grid certification and labeling program.

Peak Reduction Goals (Section 144)

Summary: Load serving entities or state entities are required to determine and publish their peak demand reduction goals.  Every load serving entity is required to create a plan for peak load reduction, which is to be reduced by an increasing percentage over specified timeframes.

Analysis: Obviously some regions are going to have an easier time reducing peak load than other regions, and one hopes this will be reflected in flexible expectations in the regulation’s implementation. It is interesting that the government has chosen peak reduction as a regulatory target, as if it were an end goal in itself.  It seems like this is already partially encompassed in other regulation, as it is in many ways an intermediate solution to larger problems like asset utilization, cost of electricity, and power quality and reliability.  

Transmission Planning Changes (Section 151)

Summary: The federal government aims to redesign the transmission planning process to put greater emphasis on federal goals, including increased deployment of renewable energy sources.  The bill also directs FERC to establish electricity grid planning principles and directs regional transmission planning entities to submit regional electric grid plans 18 months afterward.  These plans “should take into account all significant demand-side and supply-side options, including energy efficiency, distributed generation, renewable energy, and zero-carbon electricity generation technologies, Smart Grid technologies and practices, demand response, electricity storage, voltage regulation technologies, high capacity conductor and superconductor technologies, underground transmission technologies, and new conventional electric transmission capacity and corridors.”

Analysis: These changes are in line with the federal government’s other attempts to move more authority in transmission planning to the federal or regional level.  While the bill explicitly states that it does not remove authority or power from states and state regulators, it is apparent that a coordinated regional transmission planning system that transcends state boundaries is high on the government’s list.  This should begin to clear the way to new transmission lines to areas of high renewable potential by encouraging state and local transmission stakeholders to engage in transmission planning under a regional framework supported by FERC. In other words, they are being asked to play by the federal government’s rules instead of their own rules.  The bill also gives FERC a number of responsibilities as a coordinator and mediator for situations requiring conflict resolution.  While the bill does not explicitly grant the federal government authority to overrule states on these matters, and does not require parties to participate in the program per se, it is likely that most relevant entities will choose to join these regional transmission planning entities in order to avoid being left out.

Energy Innovation Hubs and Advanced Energy Research (Subsection H / Section 171, 172)

Summary: The bill uses these sections to establish interdisciplinary energy research hubs, involving “university and private research communities, industry, venture capital, national laboratories, and other participants in energy innovation to support cross-disciplinary research and development in areas not being served by the private sector in order to develop and transfer innovation clean energy technologies into the marketplace.”  The centers are to be funded through GHG permits from the cap and trade program and administered by a consortium including at least two research universities and one other entity.  Each center will work on a unique clean energy technology and issue awards in that area to the private sector as well.  The bill also establishes guidelines for accelerating clean energy development through the ARPA-E program.  The targets for ARPA-E are early-stage energy technologies, techniques, and processes that have potential energy applications, along with manufacturing technologies for them.  Finally, the bill provides for demonstration projects to test these new technologies in partnership with private firms.

Analysis: This provision is a late-comer to the bill, added after the bill exited committee.  This has potential to become an innovative measure, however the details are lacking.  It seems like the government is trying to recreate “silicon valleys” for energy in various parts of the country.  It will be interesting to see where these hubs are housed,.  The DOE has stated that it has no preliminary geographical biases on this measure, but the selection criteria appears to be biased towards states with multiple research universities, such as California and Massachusetts.  See my blog post on the energy innovation hubs for more information.

General Analysis

The bill’s impact on Smart Grid is fairly progressive, addressing a number of key issues that are about to hit the electric power industry anyway.  Yet, if one believes the EPA’s projections, the cap and trade provisions in the bill will actually reduce electricity consumption, and will, according to an analysis by the Breakthrough Institute, result in a net reduction in renewable energy built over the business-as-usual case (see link below).  If so, it may dampen the case for a Smart Grid, since growth in both electricity consumption and renewable energy have driven much of the interest in grid upgrades.  Reducing these driving factors with a cap and trade system will slow deployment of a smart grid as well.  While capping emissions may be great for reducing greenhouse gas emissions, it  may have larger negative impacts on the economy than originally expected, especially if some of its impacts run counter to parts of the same bill.

A theme throughout the bill has been the expansion of federal programs and powers, especially through the DOE, EPA, and FERC, to meet the expanded goals of the federal government in the energy sector. It’s not clear that these agencies currently have the capacities to efficiently execute the tasks that are set forth in this bill.  Expanding the responsibilities of these agencies in a way that makes them relevant, efficient, and not unwieldy will become increasingly difficult as they take on unprecedented new tasks and greatly expanded fiscal resources.

   Blog post on DOE’s Energy Innovation Hubs

   Breakthrough Institute on climate bill’s impact on renewables

   The current text of the Waxman-Markey bill