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Building a Smarter Grid: Challenges and Opportunities for the United States and Canada

March 18, 2010 // 9:00am1:45pm
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The current electricity transmission system in the United States will be challenged within the next 20 years to meet growing energy demand, said James Hoecker of Husch Blackwell Sanders at a conference hosted by the Canada Institute and Global Energy Initiative. The program provided a timely forum to discuss U.S. and Canadian efforts to transition to a more modern and efficient electric grid. Two panels explored sub-federal and federal initiatives in both Canada and the United States to modernize the North American energy grid, and explore opportunities for bilateral cooperation to enhance shared energy infrastructure. A keynote luncheon followed panel presentations. Patricia Hoffman, assistant secretary, Electricity Delivery and Energy Reliability, U.S. Department of Energy, delivered the keynote address.

Evaluating Smart Grid Initiatives at the Federal Level

Panelists noted that defining a "Smart Grid" is difficult to do since the term means different things to different people. For some a Smart Grid simply means the installation of smart meters, while for others it involves a major overhaul of the current North American transmission infrastructure. Regardless of how you define a Smart Grid, there is a critical need to update and modernize the United States' aging and deteriorating electricity transmission infrastructure, said Hoecker. Increasing demand for electricity, more dispersed resources for generation, and a shift in public policy toward renewable sources of energy are considerable challenges to the current system that must be overcome to meet future U.S. energy demand.

There remain several major obstacles to build new electrical transmission in the United States, particularly when attempting to construct new transmission lines across various jurisdictions, he said. State and local authorities across the United States, explained Hoecker, have inconsistent regulation with respect to transmission construction, uncoordinated environmental reviews, and may have different political views on whether new transmission sites are actually needed. State and local leaders also remain prone to bowing to resistance from constituents who do not want new transmission sites "built in their backyard." The inability to reach a consensus among stakeholders on cost allocation issues is another principal barrier to constructing new transmission lines, said Hoecker.

Despite these challenges, Hoecker noted that there are currently 90 transmission projects set to move forward in the United States. In addition, pending federal transmission legislation could address some of the planning, siting, and cost allocation issues that currently plague efforts to modernize the grid.

Jean-Thomas Bernard of Laval University offered an overview of the state of Canadian energy production and distribution. The Canadian federal government, noted Bernard, has no policy with respect to electrical transmission since this falls under provincial jurisdiction. Though the federal government has some oversight over electricity exports to the United States, trade among provinces remains completely unregulated at the federal level. Bernard noted that although electricity exports to the United States fell slightly from 2008 to 2009, this was due primarily to the recession and falling natural gas prices. He also noted that wind power was increasing across Canada with Ontario currently leading the way with 1,208 MW of wind power generating capacity.

Bernard listed Quebec's energy priorities, which include increasing hydroelectric power capabilities by 4500 MW by 2012; increasing wind power by 4000 MW by 2015; and decreasing the province's energy use by 10-15 percent through enhanced energy efficiency by 2015. Quebec has also invested more than $7 billion to maintain, expand, and enhance its transmission system that would integrate additional wind power into the province's energy grid.

Bernard noted that new hydroelectric projects in Quebec are being constructed in more remote areas. The new sites will produce and distribute electricity at a higher cost than existing hydro facilities in the province. Consequently, said Bernard, the era of producing low-cost hydroelectric power in Quebec will likely come to an end in the near future.

Efforts to shift to a Smart Grid could be transformational and revolutionize how we use and distribute power, said Barry Worthington of the United States Energy Association. He cautioned, however, that not everyone will welcome Smart Grid technology, which has the potential to disrupt business as usual in the energy sector. Transmission system planners and operators tend to be particularly risk averse and may prove extremely hesitant to use the unproven technology necessary to shift to a Smart Grid, said Worthington.

The United States will fail to realize the potential benefits of a Smart Grid unless "smart regulations" are put in place to oversee its development. Technology on its own will not be enough to successfully modernize the U.S. grid, said Worthington. He also stated that industry must do a better job of communicating to consumers the potential benefits of a Smart Grid to prevent a public backlash over the costs of its implementation. Worthington echoed Hoecker's concern that unless policymakers are able to streamline the process to develop and site long distance transmission lines, the United States will have a very difficult time meeting its projected 30 percent increase in electricity demand by 2030.

Getting Power Where It's Needed

Growing energy demand, efforts to lower greenhouse gas emissions, and technology advancement are among the key market drivers steering the United States toward the implementation of a Smart Grid, said David Leeds of GTM Research. He stressed, however, that much greater investment is needed to successfully transition to a Smart Grid. Federal investments, noted Leeds, have increased thanks in part to the Obama administration's stimulus package, which contributed $8.1 billion in direct investment in Smart Grid. Venture capital investment, however, totaled just $260 billion in 2009 and will have to increase substantially for the construction of a Smart Grid to become reality.

Leeds presented the results of a survey that asked North American utility companies what the primary challenges were to implement a Smart Grid. Of those polled, 48 percent highlighted regulatory concerns, while another 39 percent cited a lack of current interoperability standards. Technological and security issues also figured prominently into utility companies major concerns for the successful transition to a Smart Grid.

Kimberly Harriman, assistant secretary for energy for the State of New York, offered an overview on how New York is currently developing a clean energy grid. New York's strategy to build the gird is built on three pillars. The first is to ensure that the proper regulatory framework is in place. To this end, Harriman highlighted New York's policy to improve energy efficiency by 15 percent and increase renewable energy use by 30 percent by 2015. According to Harriman, New York is on its way to achieve this goal as a result of more than $800 million of approved Smart Grid projects and an additional $440 million of Smart Grid investment and demonstration projects awarded through the U.S. Department of Energy.

The second pillar of New York's Smart Grid strategy revolves around sound transmission planning. Central to achieving this goal, explained Harriman, is the "New York State Transmission Assessment and Reliability Study," which aims to identify where to expand transmission capacity in a cost effective and environmentally sustainable manner, as well as assess the most efficient means of integrating renewable sources of energy.

The final pillar is the establishment of the New York State Smart Grid Consortium. The Consortium is a public-private partnership that is committed to sharing best practices and institutional knowledge toward the common goal of implementing a Smart Grid and accelerating technical and institutional interoperability. Members of the Consortium include major industry and utility companies, as well as government and academic institutions. Harriman stressed that all three pillars of New York's Smart Grid strategy must succeed to ensure the state's transition to a more modern and efficient energy grid.

The event featured a keynote address from Patricia Hoffman, assistant secretary, Electricity Delivery and Energy Reliability, U.S. Department of Energy. Hoffman's presentation provided an overview of the U.S. strategy to implement a Smart Grid. She stressed that the creation of a Smart Grid is more than just the implementation of smart meters, and must also enhance U.S. transmission capabilities, and increase renewable power generation. With respect to energy generation, Hoffman emphasized the need for a diverse energy portfolio in the United States and the development of renewables that offer reliable and predicable power. She also noted the importance of developing a secure and resilient energy grid that is more predictive than reactive to new challenges and potential threats.

By Ken Crist
David Biette, Director, Canada Institute

  

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