LEGISLATION AND/OR INITIATIVES

WHAT U.S. LEGISLATION/INITIATIVES ARE DRIVING SMART GRID DEVELOPMENT?

Past Federal Legislation and Policies

ENERGY POLICY ACT (EPACT) OF 2005

With the Energy Policy Act of 2005, Congress took the first steps to develop a policy directly related to the establishment of a smart grid. This act encouraged utility companies to offer customers demand response or time-based electricity rates. [1]

ENERGY INDEPENDENCE AND SECURITY ACT (EISA) OF 2007

Section 1301 of EISA established a national policy for grid modernization to maintain a reliable and secure electricity infrastructure to meet future electricity demand growth. The Act outlined requirements for the smart grid, including increased use of digital information and control technology to improve reliability, security, and efficiency and the dynamic optimization of grid operations and resources with full cybersecurity. [2]

AMERICAN RECOVERY AND REINVESTMENT ACT (ARRA) of 2009

ARRA, an economic stimulus package created in response to the 2008 Great Recession, provided DOE with $4.5 billion to update the electric power grid. Through the largest program – Smart Grid Investment Grant (SGIG) – DOE and private industry jointly invested billions in cost-shared projects to modernize the electric grid, strengthen cybersecurity, enhance interoperability, and collect data on smart grid operations. [3]

FEDERAL ENERGY REGULATORY COMMISSION (FERC) SMART GRID POLICY STATEMENT of 2009

Periodically, the Commission issues Policy Statements (found here) to provide guidance and regulatory certainty regarding energy orders, rules, and regulations. The FERC 2009 Smart Grid Policy Statement provided guidance regarding the development of the smart grid, focusing on the development of key standards to achieve interoperability and functionality of smart grid systems and devices. [4] To learn more about FERC’s role, see the FERC Fact Sheet: Strategic Plan FY 2022-2026

 

Current Federal Legislation and Initiatives

2021 BIPARTISAN INFRASTRUCTURE LAW

In November 2021 President Biden signed a $1 trillion bipartisan infrastructure bill into law to fund infrastructure projects across the Nation. The Bipartisan Infrastructure Law includes the largest investment in clean energy transmission and the grid in American history. [5] Per the White House:

“It will upgrade our power infrastructure, by building thousands of miles of new, resilient transmission lines to facilitate the expansion of renewables and clean energy, while lowering costs. And it will fund new programs to support the development, demonstration, and deployment of cutting-edge clean energy technologies to accelerate our transition to a zero-emission economy.” [6]

2022 DOE “BUILDING A BETTER GRID” INITIATIVE

Citing independent estimates that indicate that the Nation needs to expand electricity transmission systems by 60% by 2030, and may need to triple it by 2050, the U.S. Department of Energy launched the “Building a Better Grid” Initiative in January 2022,  harnessing the new funding made available by the Bipartisan Infrastructure Law. With this DOE initiative, the agency begins  the buildout of long-distance, high voltage transmission facilities, crucial to reaching President Biden’s goal of 100% clean electricity by 2035 and a zero emissions economy by 2050. This program will also build more grid resilience to the impacts of climate change, increase access to affordable, reliable clean energy, and create good-paying jobs. To accomplish this, DOE will collaborate with states, tribal nations, industry, unions, local communities, environmental groups, and other stakeholders to identify high-priority transmission projects and provide funding through innovative financing mechanisms to support smart grid technology research and the development and implementation of this transmission infrastructure build-out. Transmission projects will be financed through more than $20 billion in federal financing tools. [8] [9] Per the White House January 12, 2022 FACT SHEET, the pillars of this transmission deployment program are:

• Financing transmission lines and other grid upgrades, including through the Bipartisan Infrastructure Law’s new $2.5 billion Transmission Facilitation Program, a revolving fund for new, replacement, or upgraded transmission lines; $3 billion expansion of the Smart Grid Investment Grant Program, focused on advanced technologies that increase capacity and enhance flexibility of the existing grid; and more than $10 billion in grants for states, Tribes, and utilities to enhance grid resilience and prevent power outages. DOE will also leverage existing financing, including the $3.25 billion Western Area Power Administration (WAPA) Transmission Infrastructure Program, which facilitates deployment of renewable energy in WAPA’s 15-state service territory, and a number of loan guarantee programs through the Loan Programs Office.
• Strengthening coordination with state and local governments, Tribal nations, and other stakeholders, including through participation in regional convenings with independent system operators (ISOs), regional transmission organizations (RTOs), state regulatory commissions, utilities, and others.
• Modernizing transmission planning to drive investment to the highest-need projects, including through a new National Transmission Planning Study, National Transmission Needs Study, Offshore Wind Transmission Study, and expanded technical assistance to help states and regions with policy implementation.
• Improving permitting processes, in coordination with the Infrastructure Implementation Task Force and other federal initiatives, including by helping developers provide early information to permitting agencies; using public-private partnerships to advance new transmission lines and system upgrades; and designating National Corridors in areas with transmission capacity constraints that harm consumers.
• Supporting research, development, and demonstration (RD&D) of next-generation transmission technology, including through collaborations with the National Laboratories and industry partners. [10]

Learn more.

2022 USDA RURAL ENERGY FOR AMERICA PROGRAM AND ELECTRIC LOAN PROGRAM

Through these two Department of Agriculture pograms, announced in September 2021,  the USDA will invest $464 million to build and improve rural renewable energy infrastructure and help agricultural producers and rural small businesses purchase and install renewable energy systems and make energy efficiency improvements. $335 million of these investments will be made through the Electric Loan Program. The loans will help build or improve 1,432 miles of line in rural areas. The loans include $102 million for investments in smart grid technology, such as digital communications to detect and react to local changes in electricity usage. The Rural Energy for America Program (REAP) offers loans and grants. Examples of funded projects for both programs can be seen here. [11]

Role of the States

State legislatures, working with public utility commissions (PUCs), will need to redesign their state regulatory frameworks and business models to better align with the modern grid. State legislatures have significant power to steer the adoption of the smart grid through statutory and regulatory requirements.  The introduction of many smart grid technologies means utilities must invest in grid modernization and adjust their business models, since traditional utility business models were shaped when electricity moved in one direction – from power generating utilities to energy consuming customers. Utilities are now required to consider two-way energy flows, issuing payments to multiple energy generators, in addition to billing consumers. [12]

For an in-depth discussion on the role of states and utilities in modernizing the grid, see the National Conference of State Legislatures’ September 2021 resource: Modernizing the Electric Grid: State Role and Policy Options. Per this NCSL report:

“The challenge for legislators will be to craft policies—whether focused on rate design, distributed energy, energy efficiency, demand response or resiliency—that are flexible enough to adapt to an increasingly complex grid and the sudden market transitions, changing consumer preferences and unforeseen developments that are likely to occur.” [13]

Updated by Peter Matos, December 2023