    [House Hearing, 114 Congress]
    [From the U.S. Government Publishing Office]

                       THE 21ST CENTURY ELECTRICITY CHALLENGE:
                        ENSURING A SECURE, RELIABLE, AND MODERN
                        ELECTRICITY SYSTEM

    =======================================================================

                                    HEARING

                                   BEFORE THE

                        SUBCOMMITTEE ON ENERGY AND POWER

                                     OF THE

                        COMMITTEE ON ENERGY AND COMMERCE
                            HOUSE OF REPRESENTATIVES

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 MARCH 4, 2015

                                   __________

                               Serial No. 114-18

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

          Printed for the use of the Committee on Energy and Commerce

                            energycommerce.house.gov

                                   _____________

                             U.S. GOVERNMENT PUBLISHING OFFICE
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                        COMMITTEE ON ENERGY AND COMMERCE

                              FRED UPTON, Michigan
                                     Chairman

    JOE BARTON, Texas                    FRANK PALLONE, Jr., New Jersey
      Chairman Emeritus                    Ranking Member
    ED WHITFIELD, Kentucky               BOBBY L. RUSH, Illinois
    JOHN SHIMKUS, Illinois               ANNA G. ESHOO, California
    JOSEPH R. PITTS, Pennsylvania        ELIOT L. ENGEL, New York
    GREG WALDEN, Oregon                  GENE GREEN, Texas
    TIM MURPHY, Pennsylvania             DIANA DeGETTE, Colorado
    MICHAEL C. BURGESS, Texas            LOIS CAPPS, California
    MARSHA BLACKBURN, Tennessee          MICHAEL F. DOYLE, Pennsylvania
      Vice Chairman                      JANICE D. SCHAKOWSKY, Illinois
    STEVE SCALISE, Louisiana             G.K. BUTTERFIELD, North Carolina
    ROBERT E. LATTA, Ohio                DORIS O. MATSUI, California
    CATHY McMORRIS RODGERS, Washington   KATHY CASTOR, Florida
    GREGG HARPER, Mississippi            JOHN P. SARBANES, Maryland
    LEONARD LANCE, New Jersey            JERRY McNERNEY, California
    BRETT GUTHRIE, Kentucky              PETER WELCH, Vermont
    PETE OLSON, Texas                    BEN RAY LUJAN, New Mexico
    DAVID B. McKINLEY, West Virginia     PAUL TONKO, New York
    MIKE POMPEO, Kansas                  JOHN A. YARMUTH, Kentucky
    ADAM KINZINGER, Illinois             YVETTE D. CLARKE, New York
    H. MORGAN GRIFFITH, Virginia         DAVID LOEBSACK, Iowa
    GUS M. BILIRAKIS, Florida            KURT SCHRADER, Oregon
    BILL JOHNSON, Ohio                   JOSEPH P. KENNEDY, III,
    BILLY LONG, Missouri                 Massachusetts
    RENEE L. ELLMERS, North Carolina     TONY CARDENAS, California7
    LARRY BUCSHON, Indiana
    BILL FLORES, Texas
    SUSAN W. BROOKS, Indiana
    MARKWAYNE MULLIN, Oklahoma
    RICHARD HUDSON, North Carolina
    CHRIS COLLINS, New York
    KEVIN CRAMER, North Dakota

                        Subcommittee on Energy and Power

                             ED WHITFIELD, Kentucky
                                     Chairman
    PETE OLSON, Texas                    BOBBY L. RUSH, Illinois
      Vice Chairman                        Ranking Member
    JOHN SHIMKUS, Illinois               JERRY McNERNEY, California
    JOSEPH R. PITTS, Pennsylvania        PAUL TONKO, New York
    ROBERT E. LATTA, Ohio                ELIOT L. ENGEL, New York
    GREGG HARPER, Vice Chairman          GENE GREEN, Texas
    DAVID B. McKINLEY, West Virginia     LOIS CAPPS, California
    MIKE POMPEO, Kansas                  MICHAEL F. DOYLE, Pennsylvania
    ADAM KINZINGER, Illinois             KATHY CASTOR, Florida
    H. MORGAN GRIFFITH, Virginia         JOHN P. SARBANES, Maryland
    BILL JOHNSON, Ohio                   PETER WELCH, Vermont
    BILLY LONG, Missouri                 JOHN A. YARMUTH, Kentucky
    RENEE L. ELLMERS, North Carolina     DAVID LOEBSACK, Iowa
    BILL FLORES, Texas                   FRANK PALLONE, Jr., New Jersey (ex
    MARKWAYNE MULLIN, Oklahoma               officio)
    RICHARD HUDSON, North Carolina
    JOE BARTON, Texas
    FRED UPTON, Michigan (ex officio)

                                      (ii)
                                 C O N T E N T S

                                  ----------
                                                                       Page
    Hon. Ed Whitfield, a Representative in Congress from the
      Commonwealth of Kentucky, opening statement....................     1
        Prepared statement...........................................     2
    Hon. Jerry McNerney, a Representative in Congress from the State
      of California, opening statement...............................     3
    Hon. Frank Pallone, Jr., a Representative in Congress from the
      State of New Jersey, opening statement.........................     5
    Hon. Fred Upton, a Representative in Congress from the State of
      Michigan, prepared statement...................................   103

                                   Witnesses

    Thomas Siebel, Chairman and Chief Executive Officer, C3 Energy...     7
        Prepared statement...........................................    10
        Additional material submitted for the record \1\
    Dean Kamen, Founder and President, DEKA Research and Development
      Corporation....................................................    27
        Prepared statement...........................................    30
        Additional material submitted for the record \2\
        Answers to submitted questions...............................   105
    Michael Atkinson, President, Alstom Grid, Inc., on Behalf of
      GridWise Alliance..............................................    34
        Prepared statement...........................................    36
    Christopher Christiansen, Co-Founder and Executive Vice
      President, Alevo Energy, Inc...................................    48
        Prepared statement...........................................    50
    Joel Ivy, General Manager, Lakeland Electric, on Behalf of
      American Public Power Association..............................    54
        Prepared statement...........................................    56
    Paul Nahi, Chief Executive Officer, Enphase Energy...............    65
        Prepared statement...........................................    67
        Answers to submitted questions...............................   107
    Naimish Patel, Chief Executive Officer, Gridco Systems...........    72
        Prepared statement...........................................    75
        Answers to submitted questions...............................   111

    ----------
    \1\ The information has been retained in committee files and also
      is available at  http://docs.house.gov/meetings/IF/IF03/
      20150304/103072/HHRG-114-IF03-Wstate-SiebelT-20150304-
      SD001.pdf.
    \2\ The information has been retained in committee files and also
      is available at  http://docs.house.gov/meetings/IF/IF03/
      20150304/103072/HHRG-114-IF03-Wstate-KamenD-20150304-SD002.pdf.

     THE 21ST CENTURY ELECTRICITY CHALLENGE: ENSURING A SECURE, RELIABLE,
                         AND MODERN ELECTRICITY SYSTEM

                                  ----------

                            WEDNESDAY, MARCH 4, 2015

                      House of Representatives,
                      Subcommittee on Energy and Power,
                              Committee on Energy and Commerce,
                                                        Washington, DC.
        The subcommittee met, pursuant to call, at 10:17 a.m., in
    room 2123 of the Rayburn House Office Building, Hon. Ed
    Whitfield (chairman of the subcommittee) presiding.
        Members present: Representatives Whitfield, Olson, Shimkus,
    Pitts, Latta, Harper, McKinley, Pompeo, Kinzinger, Griffith,
    Johnson, Ellmers, Mullin, Hudson, McNerney, Tonko, Green,
    Welch, Loebsack, and Pallone (ex officio).
        Staff present: Nick Abraham, Legislative Clerk; Charlotte
    Baker, Deputy Communications Director; Leighton Brown, Press
    Assistant; Allison Busbee, Policy Coordinator, Energy and
    Power; Patrick Currier, Counsel, Energy and Power; Tom
    Hassenboehler, Chief Counsel, Energy and Power; Tim Pataki,
    Professional Staff Member; Chris Sarley, Policy Coordinator,
    Environment and the Economy; Christine Brennan, Democratic
    Press Secretary; Michael Goo, Democratic Senior Counsel, Energy
    and Environment; Caitlin Haberman, Democratic Professional
    Staff Member; and Rick Kessler, Democratic Senior Advisor and
    Staff Director, Energy and Environment.

      OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN
               CONGRESS FROM THE COMMONWEALTH OF KENTUCKY

        Mr. Whitfield. I would like to call the hearing to order
    this morning, and certainly want to thank our panel of
    distinguished witnesses. I am not going to introduce them at
    this time, but when you--right before your opening statements,
    I will introduce each one of you, and each one of you will be
    given 5 minutes to make your opening statement, and then we
    will have an opportunity to ask questions.
        Today's hearing is entitled ``The 21st Century Electricity
    Challenge: Ensuring a Secure, Reliable, and Modern Electricity
    System.'' And I recognize myself for 5 minutes, I see I am
    already started on the clock.
        As we all know, the U.S. was the first nation to electrify,
    and our system of generation, transmission, distribution, and
    related communication remains the best in the world.
    Nonetheless, new challenges are emerging, as are opportunities
    to modernize and improve the electric grid. The challenges are
    significant. Much of our grid is outdated. In fact, I have
    heard--I think I remember in someone's statement, 70 percent of
    our grid is over 25 years old. Coal-fired generation facilities
    are shutting down at an alarming rate, reserve margins are
    inadequate in several regions, intermittent and remote
    renewable capacity is coming online, and cyber threats pose a
    growing concern. Those are some of the challenges, but the--we
    have many opportunities also. Utilities are planning to invest
    more than $60 billion in transmission infrastructure through
    2024 to modernize the Nation's electric grid, while abundant
    fuel resources and advanced generation, storage, and
    distribution management technologies can help modernize and
    diversify the Nation's power portfolio. Further, big data
    energy analytics and new information technologies offer a
    diverse suite of novel products and services that can identify
    and mitigate inefficiencies in the electricity supply chain,
    while helping utilities meet changing consumer expectations.
        So we have many opportunities, and that is why we want you
    distinguished gentlemen here today to give us some insights on
    opportunities for the future.
        [The prepared statement of Mr. Whitfield follows:]

                    Prepared statement of Hon. Ed Whitfield

        Ensuring a secure, reliable, and affordable electricity
    system that meets the needs of the American people may very
    well be the most important task within this subcommittee's
    jurisdiction. Indeed, the National Academy of Engineering cited
    electrification as the greatest achievement affecting the
    quality of life in the 20th century. This morning's hearing is
    focused on improving our electricity system in the 21st
    century.
        The U.S. was the first nation to electrify, and our system
    of generation, transmission, distribution and related
    communications remains the best in the world. Nonetheless, new
    challenges are emerging, as are opportunities to modernize and
    improve the electric grid.
        The challenges are significant--much of our grid is
    outdated, coal-fired generation facilities are shutting down at
    an alarming rate, reserve margins are inadequate in several
    regions, intermittent and remote renewable capacity is coming
    online, and cyber threats pose a growing concern.
        But there are opportunities, as well. Utilities plan to
    invest more than $60 billion in transmission infrastructure
    through 2024 to modernize the Nation's electric grid, while
    abundant fuel resources and advanced generation, storage, and
    distribution management technologies can help modernize and
    diversify the Nation's power portfolio.
        Further, ``big data'' energy analytics and new information
    technologies offer a diverse suite of novel products and
    services that can identify and mitigate inefficiencies in the
    electricity supply chain while helping utilities meet changing
    consumer expectations.
        The availability of advanced, user-friendly communications
    technologies has disrupted the traditional business model for
    nearly every consumer sector from home entertainment to taxis.
    The electricity sector is witnessing a similar shift. New
    innovative products and technologies in the electricity space
    hold the potential to empower consumers to make smarter
    decisions in energy usage, while providing new, more efficient
    and responsive ways to generate and distribute power. As
    consumer expectations and technology evolve, new business and
    regulatory models within the electricity sector also may be
    necessary to better reflect changing market conditions.
        A more modern and resilient grid will be better positioned
    to withstand and minimize any impacts resulting from severe
    weather, cyber attacks or any other threats to the grid.
    However, as the grid becomes increasingly reliant on
    information technology and digital communications devices,
    thousands of potential new grid access points are being
    created. While encouraging technology and innovation in the
    electricity sector should be a priority, policies must ensure
    that new grid-related products do no leave the grid more
    exposed or compromise customer information and privacy.
        Given the shift taking place in the electricity sector, it
    is paramount that policymakers and regulators at the Federal,
    State, and local level carefully weigh policies that can adapt
    to these new challenges and opportunities to build a market-
    driven, modern, and flexible system while ensuring the
    continued safe, reliable and affordable delivery of electricity
    to consumers.

        Mr. Whitfield. So with that, I will yield back the balance
    of my time. And, Mr. McNerney, I will recognize you for a 5-
    minute opening statement.

     OPENING STATEMENT OF HON. JERRY MCNERNEY, A REPRESENTATIVE IN
                 CONGRESS FROM THE STATE OF CALIFORNIA

        Mr. McNerney. Well, thank you, Mr. Chairman.
        Hey, this is a really exciting hearing. It is an area I
    care a lot about. You know, the American grid is one of the
    great engineering challenges of the--great engineering
    achievements of the 20th century. It has provided us reliable
    electric power, it has helped our industry grow, and yet at
    today's hearing we are going to get a look at what the 21st
    century grid might look like, but also what the transition
    between where we are today and what the 21st century grid is
    going to look like. It is going to be an opportunity and some
    very big challenges.
        Some of the factors that I want to bring to our attention
    are, coal is still our number one energy producer. Produces
    about 38 percent of our power. And to the chagrin of some of
    our colleagues, that number is decreasing over time. New--
    natural gas is our number two energy--electric energy supplier,
    and that is growing rapidly. There are some challenges with
    natural gas. We have the distribution challenge, especially in
    New England States, and--but the price of natural gas is going
    down, or is low now because of all the abundance of natural
    gas. So it is a real opportunity for us. Nuclear is number
    three, and I think nuclear is kind of stagnant right now. That
    may change over time. And fourth, renewable energies. It is
    growing rapidly, but it is only 13 percent of our capacity, and
    that includes hydro. So we have--with renewable energy, there
    is cost competitiveness. We can produce renewable energy pretty
    cheaply now, but we can't dispatch it. It is not going to be
    there necessarily when we need it, so there needs to be some
    account taken to that and--when we integrate renewables into
    the grid. But if you look at what is happening, California is
    going to require 33 percent nuclear power by 2020, so we have
    to rise up for this challenge.
        We also have the specter of climate change sitting there in
    front of us. It is going to require us to reduce fossil fuels,
    but it is also going to require us to increase efficiency. We
    have a need to make our grid more resilient. We are seeing that
    with our bigger storms now. We also have physical and
    cybersecurity. We want to make sure that our grid is strong, is
    safe. If there are physical attacks, if there are cyber
    attacks, if there are storms, if there are earthquakes,
    whatever the--nature throws at us or whatever our fellow human
    beings throw at us, we have to be able to maintain our grid, so
    this is a pretty big challenge.
        There are big opportunities. I just want to tick off some
    technology. Some of these I don't even understand myself. We
    have the automated circuit breakers and feeder switches. That
    is going to allow us to switch problems, we can--it is just
    like a transistor in a radio. I mean it is going to allow us to
    switch back and forth, and that gives us quite a bit of
    flexibility. There are mapping systems that will allow us to
    stop grid problems from spreading from one part of the Nation,
    and one sector to another. We have load management tools like
    megawatts that are being adopted in San Francisco. We also have
    smart meter technology, which I helped develop for a period of
    years in California.
        So there is a lot of technology out there, but a big
    opportunity is if we can provide cheap power for our customers,
    then manufacturing is going to be able to continue to grow and
    thrive in this country, and without it, we are going to be
    hamstrung. So this is a big challenge for Congress. It is going
    to require continued investment and commitment in Congress and
    in industry. We need to understand the big picture challenge
    before we do anything drastic here in Congress. We need to
    understand the engineering challenges. We need to put money out
    there so that the engineering challenges can be met. We need to
    incentivize that. We need to make the investment, and that
    means investment here in Washington, but it means also
    investment in our States, and it means investment by private
    investors. And how are we going to invest--incentivize private
    investors in grid innovation and grid technology, and
    development and grid infrastructure development if they are not
    sure they are going to get their money back? So we have to be
    able to figure that out. So this is part of the big picture
    challenge.
        But my colleague, Renee Ellmers, and I have started the
    Grid Innovation Caucus. That is giving us here in Congress
    several members that are interested in this area an opportunity
    to talk about some of these issues. So--and think about the big
    picture.
        I do have a story from my past when I developed wind energy
    technology, I started in the business in about 1980 when the
    industry was just at the beginning. And, you know, we went out
    there and we got an investment from some folks out there. We
    designed a wind turbine from a plain piece of paper. It was a
    wonderful experience. We put it up in the hills of New
    Hampshire, turned it on, had all the investors come out, turned
    it on, and then things started turning, the blades all flew off
    and everyone had to run for cover. But, you know, the investors
    stuck with us, and year after year we put a little bit more
    understanding in the blade roots, in the foundations, and the
    transmission, and in all engineering parts of that machine, and
    how, because of that kind of work, wind energy is very cost-
    effective, it is growing very rapidly. So you have to make the
    investment, you have to stick with it, and if you do, you get
    rewarded.
        So that will be my opening statement. Mr. Chairman, I yield
    back.
        Mr. Whitfield. Mr. McNerney, I am glad to see you so
    enthusiastic this morning. So, you know, I want to also give a
    warm welcome to our former Secretary of Energy, Spencer
    Abraham. Appreciate you joining us today, very much. And Mr.
    Charlie Bass, a former member of this committee, we appreciate
    him being here as well.
        Our chairman, Fred Upton, is going to be a little late
    arriving today, so at this time, I would like to recognize Mr.
    Pallone for his 5-minute opening statement.

    OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE
                IN CONGRESS FROM THE STATE OF NEW JERSEY

        Mr. Pallone. Thank you, Mr. Chairman, for holding this
    hearing on the future of the grid. I don't know if I can be as
    energized as Mr. McNerney, but I did notice how energized you
    were and I was happy to see it.
        The National Academy of Sciences has referred to the U.S.
    electricity grid as the greatest engineering achievement of the
    20th century because it delivers critical energy services to
    consumers in an instantaneous, affordable and dependable
    manner. In fact, as a society, we have come to expect that
    every time we flip the switch in a dark room, light will
    appear. But our grid is changing as we speak. There are ever-
    growing demands on the grid to power our new technologies, to
    accept new forms of generation, while at the same time
    conventional attacks, cyber attacks, climate change, and other
    new threats require the grid to become more resilient. And the
    grid is now the subject of almost constant innovation and
    entrepreneurship as well as--as many of our witnesses are going
    to attest. How we unleash that innovative spirit and at the
    same time ensure overall system reliability is the challenge
    for the grid of the future.
        Fortunately, advanced technologies exist to address these
    challenges, with substantial benefits for both the electricity
    sector and, in most cases, consumers. These new technologies
    are working smarter and promise electricity generation and
    delivery that is more efficient, economic and environmentally
    responsive. And while this transition will not be quick or
    easy, our witnesses today make clear that the move towards
    smart grid technology is already here.
        Today, you can already find this technology deployed around
    the Nation. You can see it in the deployment of smart meters
    and other technologies that facilitate greater energy
    efficiency and cost savings, as well as in the deployment of
    solar and other distributed generation. These technologies will
    also help us move forward in the fight against climate change,
    providing new ways to reduce greenhouse gases emissions, while
    at the same time enhancing overall system resiliency and
    reliability.
        In my home State of New Jersey, you can also see the
    deployment of smart grid technologies in the work DOE has done
    to set up a microgrid to prevent transit service outages in
    northern New Jersey, like the one we experienced during Super
    Storm Sandy. And while the movement to these new technologies
    is important in many cases, its near-turn adoption is not
    inevitable, nor is it necessarily a panacea for all the
    problems we face. And we will need to work with our State and
    local counterparts, including State regulators, to develop
    workable solutions. For instances, while a microgrid may help
    preserve power for a portion of a community during an extreme
    weather event, policymakers will be the ones tasked with
    deciding who gets the benefits of that power, and who pays for
    establishing the infrastructure. Similarly, the rate of
    adoption for many of these new technologies often depends on
    the incentives put in place by policymakers. For example, real
    time smart metering can provide consumers with critical
    information about their energy use during hours of peak demand,
    yet without the proper structures in place to encourage
    residential or commercial customers to use energy during off-
    peak hours, there is little motivation for someone to charge
    their electric vehicle at night instead of in the morning, or
    to alter their business plans to ensure others can consume
    electricity during the day.
        And so policy questions still exist, but there is little
    doubt that adopting these new technologies to move us towards a
    smarter grid could spur benefits for consumers, our economy and
    the environment, and the witnesses before us today can help us
    navigate these obstacles to quickly realize the benefits of
    these technologies in a cost-effective manner. So I look
    forward to hearing your views.
        I would like to yield the remainder of my time to the
    gentleman from Texas, Mr. Green.
        Mr. Green. Thank my colleague for yielding to me--our
    ranking member colleague. I want to thank all our panelists for
    being here today, and I look forward to discussing this
    critical component of our economy.
        The electrical system and grid are technological wonders,
    and the--it is the bedrock of our industrial and commercial and
    domestic way of life. When folks turn on the switch, they never
    question whether America's power sector will perform.
        In the 20th century, we expanded rapidly, constructing
    lines and establishing functioning markets. The complexity and
    vastness of the U.S. utility transmission and distribution
    system is unmatched across the globe.
        In the 21st century, we face challenges and opportunities
    from a changing marketplace. Traditional utilities face new
    challenge because the integration of renewable resources,
    implementing the new environmental regulations built on the
    rapid expansion of cheap natural gas. Transmission and
    distribution companies are looking at new dynamics of
    distributor generation.
        Finally, consumers are increasingly savvy and informed
    about consumption management and household efficiencies. As
    legislatures, we must provide these constituents the tools
    required to meet the challenges and capitalize on the
    opportunities of the new marketplace. Today, it is my hope we
    can elicit some information that would help us better
    understand the rapidly changing atmosphere, and assist us in
    crafting solutions so as to remain innovative, flexible, but
    100 percent reliable.
        And I yield back my time.
        Mr. Whitfield. The gentleman yields back. And that
    concludes the opening statements.
        So now I would like to introduce our panel. And once again,
    we thank all of you for joining us today, and we look forward
    to your testimony.
        Our first witness this morning is Mr. Tom Siebel who is
    chairman and CEO of C3 Energy, also one of the founders of
    Oracle.
        Each one of you will be given 5 minutes, then the little
    red light will come on when 5 minutes is up, but we won't go
    strictly by that red light. But, Mr. Siebel, thanks for being
    with us, and you are recognized for 5 minutes.

     STATEMENTS OF THOMAS M. SIEBEL, CHAIRMAN AND CHIEF EXECUTIVE
      OFFICER, C3 ENERGY; DEAN KAMEN, FOUNDER AND PRESIDENT, DEKA
        RESEARCH AND DEVELOPMENT CORPORATION; MICHAEL ATKINSON,
     PRESIDENT, ALSTOM GRID, INC., ON BEHALF OF GRIDWISE ALLIANCE;
        CHRISTOPHER CHRISTIANSEN, CO-FOUNDER AND EXECUTIVE VICE
       PRESIDENT, ALEVO ENERGY, INC.; JOEL IVY, GENERAL MANAGER,
         LAKELAND ELECTRIC, ON BEHALF OF AMERICAN PUBLIC POWER
       ASSOCIATION; PAUL NAHI, CHIEF EXECUTIVE OFFICER, ENPHASE
      ENERGY; AND NAIMISH PATEL, CHIEF EXECUTIVE OFFICER, GRIDCO
                                SYSTEMS

                     STATEMENT OF THOMAS M. SIEBEL

        Mr. Siebel. Good morning. Mr. Chairman, thank you for the
    opportunity.
        I am here from Silicon Valley, and I have spent the last 4
    decades in the information technology business, and we have
    been working for the better part of the last decade to think
    about the problem of applying the state-of-the-art of
    information technology and communication technology to the
    value chain associated with power generation, transmission,
    distribution, metering, and consumption. And if we are to look
    at this value chain, it would be--today, it would be largely
    recognizable by Thomas Edison, because we are dealing with late
    19th century and early 20th century technologies, where at one
    end of the value chain we are boiling water and spinning a
    turbine, OK, we are rotating a magnet within a coil, creating a
    voltage, stepping up the voltage to, you know, higher voltage,
    transmitting it over long distances at high voltage, medium
    distances at medium voltage. It goes to a meter and then to the
    consumer. This is pretty much what it looks like. And it works
    great until it breaks. OK, and then when it breaks, whoever,
    Baltimore Gas and Electric or Constellation Energy or Pacific
    Gas and Electric, sends trucks out with people with volt meters
    to climb telephone poles and go down manhole covers, to find
    boxes that don't conduct electricity, and they keep replacing
    boxes until the lights go back on. And this is pretty much how
    it works.
        Now, this infrastructure--these--the way that utilities are
    operated is then tend to run these businesses of generation,
    transmission, distribution, metering, customer care and
    billing, as separate business units, and as separate business
    units they have these separate enterprise information systems
    that have been supplied over the years by companies like Oracle
    and General Electric and Siemens and others. There are lots of
    reasons we can get into some other time why these enterprise
    information systems don't want to communicate with one another.
    It makes it very difficult to share information, but let it be
    said that, you know, this has all been kind of driven by
    Moore's law. Now, this decade, worldwide, this infrastructure
    is being upgraded so that all the devices are becoming remotely
    machine-addressable, so we can remotely sense their state. The
    most common being the smart meter. So we don't have to send a
    truck out to read it once a month, we can read it once a minute
    or once every 15 minutes. But what is significant is not the
    smart meter, the entire value chain is being sensored, from the
    vibration sensor on the nuclear reactor to the thermostat, the
    variable speed fan at Wal-Mart, OK, the single phasers, the
    step transformers, the stepdown transformers, and the
    substations. So as this becomes sensored, this begins to look
    like a fully sensored--basically, a fully connected sensor
    network. A guy named Bob Metcalfe out of Xerox PARC, he
    invented something called Ethernet, OK, and he coined something
    called Metcalfe's law. So the power of that network is the
    function of the square of the number of nodes that are
    connected.
        So when this is--the amount that is being invested, I don't
    know if I mentioned this, in upgrading this network worldwide
    this decade is $2 trillion. So this is the largest and most
    complex machine every built. The amount being invested in the
    U.S. this decade upgrading this infrastructure is $1 trillion.
    So as we do this, if we read a meter every 15 minutes, it is
    being read 32,000 signals a year. If we read it once a month,
    it is 12 signals a year. That is four orders of magnitude.
    Actually, we are increasing the amount of data by six orders of
    magnitude. So we have massive amounts of data that is being
    collected, and so what we can do now is we can apply the
    sciences of big data, cloud-scale computing, analytics, machine
    learning, and these new social human-computer interaction
    models to dramatically, you know, to optimize the entire value
    chain to, you know, if we balance--it reduces the amount of
    fuel that we need to generate by a percent. OK, if we use these
    technologies for predictive maintenance, we can replace devices
    before they fail, dramatically increasing safety, increasing
    reliability, we can, you know, increase the security
    infrastructure, and by the way, we can reduce the environmental
    consequences of the value chain by, say, order of 50 percent.
        So this is what we are doing today all over the world. I
    would say that Europe is probably ahead of the U.S. as it
    relates to this today. We are doing this now, and now putting
    this in the perspective of a company based in Rome, they have
    67 million meters in 40 countries, and so they are a 100-
    billion-euro company. It is a utility roughly the size of the
    U.S. market. And there, we are aggregating I think 7 trillion
    rows of data into an 800 terabyte cloud image. We process these
    data at the rate of 800,000 transactions per second, OK. Apply
    machine learning to optimize the value chain and the economic
    benefit to do this across the world is 6.3 billion euros a
    year. We are doing this at Exelon. The economic benefit to
    them, $2.7 billion. This is the economic benefit to their
    consumers. Baltimore Gas and Electric, Pacific Gas and
    Electric, Socal Edison, Commonwealth Edison, we are doing--GDF
    Suez, so we are doing this all around the world today. This is
    what will make the smart grids smart, is the information
    technology, the ability to apply big data, analytics machine
    learning, and new human-computer interaction models. And the
    economic, social and environmental benefits are significant. So
    this is the exercise upon which we have been engaged, and it is
    fascinatingly difficult and fascinatingly exciting.
        Thank you.
        [The prepared statement of Mr. Siebel follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Whitfield. Well, thank you very much.
        And our next witness is Mr. Dean Kamen, who is the Founder
    and President, inventor and--also, but he is the Founder and
    President of DEKA Research and Development Corporation. And,
    Mr. Kamen, thank you very much for joining us, and you are
    recognized for 5 minutes.

                        STATEMENT OF DEAN KAMEN

        Mr. Kamen. Thank you, Mr. Chairman, and I think everybody
    here knows we are not here to talk about whether there will be
    disruptive change in the grid, but how it is going to happen
    and hopefully how to make it happen in the best possible way.
        Though we are here to talk about energy, I am a technology
    guy and I thought a very quick review, and it will be a very
    quick review, of a few other industries that were dramatically
    transformed at the intersection of new technologies that were
    properly embraced to take over from old systems that suddenly
    seemed inefficient and terrible. So as an example, I will give
    you computing. We all grew up, I think, with big computers that
    sat some place and, you know, the average kid today doesn't
    know about what Mr. Watson and his company were about, they
    have tablets and cell phones, and they changed an industry and
    they wiped out an old infrastructure. There were interestingly
    three major infrastructures that were built in the 1880s--were
    established in the 1880s; photography, communications, and
    energy.
        So quickly, looking at this one, Alexander Bell in the
    1880s decided we can let everybody talk to everybody, all you
    needed was a wire from your ear to anybody else's ear. And it
    took about 100 years to build up that massive infrastructure.
    Then the technology came along, and that was really neat. Most
    kids don't know that a house has a phone. You have a phone. And
    technology like wireless and cellular and fiber optics have
    just transformed the communication industry, I think we would
    all agree, for the better.
        Photograph, again, in the 1880s it was a wonderful thing.
    We all remember our Kodak moments. We remember we could get
    that stuff to actually develop in only one day. You ask the
    average kid for a selfie today, they don't know what film is,
    and the Kodak moment is--Kodak is history, it is a memory. So
    it is because technologies came along that were just
    breathtakingly better.
        What about energy. That is what we are here to talk about.
    Well, in the 1880s there was this guy Edison and Tesla, and
    they gave us big centralized plans, like Ma Bell, photography,
    what do we know about that great model that we have already
    heard is from virtually everybody out there and the first
    speaker, it is 150-year-old architecture. What do we know about
    it? Is it ready for disruption? Well, it is old, it is
    inefficient, it is unreliable, it is expensive, and it is
    dirty.
        Quick facts about what the grid is today. We have about 1
    terawatt, 1,000 gigawatts, of production capacity at an average
    of $1 a watt to produce that. That is $1 trillion in generation
    assets. Well, more than 50 percent of that stuff is 30 years
    old, and if you only replace the stuff that is that old at $1 a
    watt, it is $500 billion. Once you make that energy, you have
    to move it. And you just heard, at high voltage, transmission
    lines, they cost about $1 million a mile, and oops, sometimes
    they are not quite what we would like them to be. And 70
    percent of those things are 25 years old or more, and there are
    280,000 miles of that high voltage stuff, so if you replace the
    really old stuff, it is another $200 billion. Then you have the
    low voltage stuff in all your neighborhoods. Wires hanging on
    wooden poles. What could possibly go wrong? So those things are
    a real deal, they are only $140,000 a mile, and there are 2.2
    million miles of that stuff and 50 percent of that is at least
    30 years old. And if you just replace the stuff that old, it is
    another $150 billion. And then, of course, you have the annual
    capital cost of that infrastructure. Now, that is $90 billion
    is what we are spending in this country right now to keep that
    architecture operating, and we have all heard how critical it
    is, but by the way, that $90 billion, that is not one drop of
    oil or one pound of coal, that is just to keep that system up.
        So is there a better, more efficient way to do to this
    industry what has happened to communications, for instance? I
    think so. Everybody loves solar panels, and I think you will
    hear from this whole panel, between solar panels, battery
    technology, wind technology, controls technology, megawatts,
    all of these things are going to change. The question is how do
    we catalyze them to work together instead of frustrate each
    other, both technically and in a regulatory environment.
        Well, everybody I know loves solar panels. Very few people
    I know have put up enough solar panels that they have
    disconnected themselves from that grid that we all complain
    about. It is our lifeline. So how do you catalyze more people
    to do this? Well, the more you put those up without doing
    something else, you are actually hurting the grid because they
    add instability, unless you add good technology, and they lower
    the amount of power coming through the grid, but the models by
    which the grids are funded is by selling electricity. The more
    of this stuff you put up, it is a competitive perverse
    alternative to the grid. You have to do something that can
    catalyze this stuff to happen in a way that helps everybody,
    including the people supplying the power. So we said, why don't
    we make an appliance, like all the other appliances in a house,
    that might help. This appliance makes 10,000 watts of
    electricity. We call--it is a sterling thermal technology. It
    is about as quiet literally as your hot water heater or your
    furnace, and the ones that we have made now 20 of, and placed
    them with a great visionary partner, David Crane, the chairman
    of NRG, have already produced 300 million watt hours of power
    directly where it is needed in places where we can also use the
    waste heat because after all, it brings the same fuel as your
    hot water heater. 100 million of those things could produce as
    much power as the whole grid. I don't think we need to go that
    far, but is 100 million a lot? No. Americans have 140 million
    appliances bigger than this. Much more relevant, they have 117
    million hot water heaters and 182 million furnaces, together
    that is 200 million appliances that use exactly the same
    infrastructure as us, except we will make your electricity and
    your heat. Where else could you put these things? This is why I
    think it can work to make the grid a great new future. Don't
    put them in the houses, put them out on those transformer pads.
    By the way, there were 40 million of those transformer pads
    sitting there now between the grid at that last stop and the
    user, and it is close enough to the user that we can still
    recover the heat, so we said put them out there, you lower the
    installation cost, you will make them easier to service, you
    will get higher efficiency, higher reliability, because houses
    can share them. Neighborhoods can start putting these things in
    under an intelligent control plan, and as you put a bunch of
    them near a set of houses, you don't need another one of those
    wooden poles with the wires draped through your trees. You put
    enough of those neighborhoods together, you don't need that
    substation. Over the next few years you, in a controlled way,
    get rid of enough substations, you start eliminating
    transmission lines, and finally you eliminate the power plants
    that aren't the efficient ones, and then America has a bright
    future.
        [The prepared statement of Mr. Kamen follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Whitfield. Marvelous. Thank you, Mr. Kamen. We
    appreciate that.
        Our next witness is Mr. Michael Atkinson, who is the
    President of Alstom Grid, Incorporated, who is testifying on
    behalf of GridWise Alliance. So you are recognized for 5
    minutes, Mr. Atkinson.

                     STATEMENT OF MICHAEL ATKINSON

        Mr. Atkinson. Good morning, Chairman Whitfield, Ranking
    Member Rush, full committee Chairman Upton, and Ranking Member
    Pallone, Congressman McNerney, and distinguished members of
    this subcommittee. I am Michael Atkinson, President of Alstom
    Grid, Incorporated, and also I am here on behalf of the
    GridWise Alliance. I appreciate the opportunity to testify at
    today's hearing.
        The U.S. electric system is undergoing a transformation
    unlike anything we have experienced in the past 100 years. This
    transformation will create opportunities to enhance
    reliability, efficiency, resiliency and security of the grid.
    The grid will continue to serve as the backbone of the Nation's
    electric infrastructure. It will enable innovation to flourish,
    and the supply and demand of electricity across the
    transmission and distribution networks, all while continuing to
    provide safe, affordable, reliable power.
        The future grid will optimize the management and operations
    of the entire electric system value chain, which includes power
    generation, delivery and consumption. For example, new smart
    grid technologies help to enhance situational awareness,
    prevent outages, accelerate restoration, and--in the case of
    extreme events, and also integrate distributed energy
    resources. In addition, other technologies--other related
    technologies and capabilities such as energy storage, power
    electronics, and microgrids will also improve the performance
    of the grid.
        The Electric Power Research Institute has estimated that
    the total benefit of smart grid is in the trillions of dollars.
    More importantly, for every dollar invested, $2.80 to $6 in
    benefits are realized.
        GridWise and DOE's Office of Electricity work with hundreds
    of public and private stakeholders to develop a shared vision
    for the grid, which includes the following. The grid will be
    the key component of the future electric system. This system
    will include both central and distributed generation sources.
    Powering communications will flow in multiple directions.
    Residential, commercial and industrial customers will use the
    grid in different ways, becoming both consumers and producers
    of electricity. This will help achieve the following three
    outcomes to accelerate the transformation to the 21st century
    electricity system. First, building on this shared vision,
    enable policies to ensure the markets, regulations, and new
    technologies are all aligned. Congress can exercise its
    leadership to facilitate ongoing and new public-private
    collaboration to achieve the grid of the future. Second, the
    pursuit of this future grid will continue to spur innovation
    and attract ideas, talent and resources from a range of
    industries. And I think you only need to look to my right to
    see that. Third, create additional highly skilled jobs. The
    transformation of the grid will necessitate advanced skills to
    implement these technologies.
        In conclusion, we have an important opportunity to
    accelerate the modernization of our Nation's electric grid.
    This will drive economic growth, strengthen our global
    competitiveness, and create highly skilled jobs. Action is
    needed now because this is a complex issue, and the technology
    and policy changes required could take years to implement. I
    want to underscore that access to a reliable, efficient,
    resilient and secure grid is a major source of our Nation's
    competitive advantage. Congress can play a key leadership role
    in facilitating the acceleration of grid modernization, and
    ensuring that we maintain this competitive advantage into the
    future.
        Mr. Chairman, thank you for the opportunity to testify. I
    look forward to any questions.
        [The prepared statement of Mr. Atkinson follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Whitfield. Thank you, Mr. Atkinson.
        And our next witness is Mr. Christopher Christiansen, who
    is Executive Vice President, Alevo Energy. And you are
    recognized for 5 minutes, Mr. Christiansen.

                 STATEMENT OF CHRISTOPHER CHRISTIANSEN

        Mr. Christiansen. Thank you. And, Chairman Whitfield,
    Ranking Member Rush, and members of the committee, thank you
    for inviting me to testify on behalf of Alevo, Inc. You will
    hear from me today how Alevo believes that energy storage will
    play a crucial role in ensuring a secure, reliable and modern
    electricity system.
        I will also discuss how Federal policymakers can help to
    accomplish this goal by reducing regulatory barriers to the
    development of energy storage to benefit electricity ratepayers
    and consumers.
        My name is Christopher Christiansen, and I am the co-
    founder of Alevo, and I serve as the executive vice president
    of the Energy Division, which means I am responsible for all
    the energy daily activities, which include production design,
    business development, and sales strategies. I am also
    overseeing the development of over 200 megawatts of battery
    energy storage projects, which we are implementing in the next
    12 months.
        Alevo is a leading provider of energy storage systems
    designed to deliver grid-scale electricity on demand. Alevo
    couples grid analytics with our innovative battery technology,
    the Alevo GridBank. Alevo GridBank features a nonflammable,
    long life inorganic battery that enables a new source-agnostic
    architecture for electrical grids that reduce waste, greenhouse
    gases, create efficiencies and lower costs for the world's
    energy producers and their consumers. Our mission is to
    maximize the value, availability, usability and cleanliness of
    electricity to better serve mankind and the environment.
        Alevo's manufacturing plant is located in a former
    cigarette plant in North Carolina in Concord, in the district
    of Congressman Hudson. We are on track to employ 500 people in
    2015, and we expect to employ over 2,500 by the end of next
    year. We are also set up for significant growth, as Congressman
    Hudson knows, because we have a 3 \1/2\ million-square-foot
    facility that can, at full capacity, produce 16 gigawatt hours
    a year. Within the next 12 months, we are manufacturing and
    commissioning more than 200 megawatts of energy storage
    batteries.
        Alevo is building a vertically integrated manufacturing and
    deployment organization, creating a global energy storage
    business to work with the world's leading and largest energy
    companies.
        The electric grid is the only system of production that has
    not had a way to store its product efficiently. Energy storage
    changes that equation, allowing us to store that electric
    production and then use it when we need it, where we need it,
    and at the best price. Energy storage technologies, like the
    battery Alevo is manufacturing, will change the way our
    electric grid works, to enable greater efficiency of our
    existing generation fleet by optimizing heat rates, reduce
    ramping, to allow for increased resilience and reliability of
    the system, and to lower the cost of electricity for every
    consumer. Additionally, the increased efficiency provided by
    storage lowers emission and water usage, 2 important and
    environmental benefits realized without adding cost to
    ratepayers.
        According to market research firm, IHS, energy storage
    growth will explode from 340 megawatts in 2012 to 2013, to 6
    gigawatts by 2017, and over 40 gigawatts by 2022. To put that
    in perspective, 40 gigawatts is equivalent to 40 new coal or
    gas fire power plants, and it is enough power to power a home--
    over 32 million homes for 1 hour. This explosion would create
    jobs in manufacturing, as with Alevo, right here in the U.S.,
    allowing us to put our innovation to use to the benefit of the
    electric grid and consumers.
        As the theme of this hearing suggests, energy storage
    technologies like Alevo's GridBank will secure a reliable and
    modern electric grid. The 21st century grid will be exposed to
    increased generation from variable sources, and also increased
    fluctuations in load. States hit by Hurricane Sandy, like New
    Jersey and New York, are already building these technologies
    into their resilience plans to ensure that emergency services
    are kept functional during catastrophic events. Even during
    ordinary power blips or outages, energy storage can help a
    system and its consumers ride through those events seamlessly.
    Southern California Edison recently issued a series of awards
    to accommodate local capacity requirements for their electric
    customers. They were required to consider 50 megawatts of
    storage; instead, they awarded 50--sorry, they awarded 260
    megawatts of storage, since it was competitive and provided the
    flexibility the utility needed for the system. As utilities and
    system operators consider their needs both now and in the
    future, and with the right policies in place, more and more
    energy storage is being deployed, decreasing the perceived risk
    inherent in new technologies, and reducing the cost of those
    technologies through increased scale. Alevo is positioned to
    drive down those scales--those costs even further with the
    manufacturing of hundreds of megawatts of energy storage
    capacity in the first year alone. One key policy that this
    committee can change is to reduce regulatory barriers for
    energy storage facilities, including exemption for Federal and
    State regulations in the same way those barriers are currently
    used for qualifying coal generation facilities. Congress could
    also ask FERC to valuate the value generated by energy storage,
    and ensure that FERC's current policies recognize and award
    those values.
        I look forward to addressing any questions the committee
    has about Alevo and our innovation, or about energy storage
    technologies more generally. And I thank you for the
    opportunity to present this testimony.
        [The prepared statement of Mr. Christiansen follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Whitfield. Thank you, Mr. Christiansen.
        At this time, I would like to recognize Mr. Joel Ivy, who
    is General Manager of Lakeland Electric, who is testifying on
    behalf of the American Public Power Association. You are
    recognized for 5 minutes.

                         STATEMENT OF JOEL IVY

        Mr. Ivy. Thank you, Mr. Chairman. Good morning, everyone. I
    bring you warm greetings from sunny Florida.
        The American Public Power Association, based in Washington,
    DC, is the national service organization for the more than
    2,000 not-for-profit community-owned electric utilities in the
    United States. Lakeland Electric in Lakeland, Florida, is an
    APPA member, serving approximately 122,000 customer accounts in
    central Florida for the past 110 years. Like other public power
    utilities represented by APPA, Lakeland Electric was created to
    serve the needs of its local community by providing low-cost,
    reliable electric service on a not-for-profit basis.
        Public power utilities have been improving our grid-based
    technologies for some time now. As fiber optic systems started
    to become more prolific, the application of smarter tools and
    equipment became truly viable. Together with newer wireless
    technologies, we have been able to greatly expand access to
    information, perhaps like never before.
        I will discuss initiatives being, excuse me, under--I will
    discuss initiatives being undertaken nationwide by public power
    utilities related to grid innovation, but focus the bulk on my
    testimony on what Lakeland Electric has done and why. I am
    defining grid innovation as including deployment of smart meter
    technologies and communication systems to support those and
    other technologies, deployment of distributed generation, or
    DER, distributed energy resources, including storage. Increased
    real- and near-time real-time monitoring of power systems,
    which enhances situational awareness, and management of the big
    data being accumulated through the use of smart grid
    technologies. In addition, I want to discuss briefly some of
    the challenges to deploying these technologies, including
    cybersecurity.
        So the deployment of AMI, or automated metering
    infrastructure, is significantly more mainstream than a decade
    ago. It has become almost the default choice for upgrades to
    meters, leaving on the question of using fiber or wireless, or
    in Lakeland's case, both. This effort was kick-started with
    Federal grants and loans, of which my organization was a proud
    recipient. In fact, we completed our deployment in 2013, and
    are now offering customer access to their information via our
    Web portal, and have some creative alternative rate programs
    for earlier adopters to use to save money and energy in their
    homes and businesses.
        The APPA and Lakeland are generally supportive of
    distributed energy resource technologies, such as rooftop
    solar, but the concepts of rate programs that will continue to
    spur this investment, while allowing utilities recovery of our
    fixed cost, is among the fastest growing issues in our
    industry. Excuse me. Net metering in some locations such as
    Lakeland provides a customer credit based on the full retail
    rate, which may allow customers to reach a net-zero bill on an
    annual basis. Changes to our rates must not punish the early
    adopters who invested in older, more expensive solar
    technologies. At the same time, we must ensure utilities have
    proper revenue to recover the cost of our poles, wires and
    generators. This rate design issue is going on appropriately at
    local and State levels across the country, including in
    Lakeland.
        Regarding distributed energy resources, utilities are also
    concerned about customers having access to good information
    that allows them to make sound decisions without future
    regrets. Business practices that may be leading to the
    provision of erroneous information to customers, including
    information provided by certain solar leasing companies related
    to the payback of the leases, which are in turn being tied to
    unrealistically high assessments of annual electricity price
    increases, are at the heart of our concern.
        The future construct of the smart grid is full of unknowns
    as we look out longer into the future, and continued Federal
    support for funding innovative projects will be very important
    as our Nation's entrepreneurs provide the newest and best
    support equipment and processes.
        Finally, Lakeland--Federal, State, and local collaboration
    is essential to maintaining physical and cybersecurity. While
    Lakeland has adopted cybersecurity as an essential business
    practice, the collaboration with governments at all levels
    remains a critical component, particularly related to
    information sharing.
        In summary, public power utilities like Lakeland Electric
    are deploying a variety of technologies to optimize a grid for
    more efficient and reliable service. In so doing, we worked
    very collaboratively with our customers, our policymakers, and
    our communities to determine what is most appropriate at the
    local level. The Federal Government can help in terms of
    targeted grants, and research and development, as well as in
    the area of cybersecurity, by sharing actionable and timely
    information with the industry.
        Mr. Chairman, thank you for allowing me to be here.
        [The prepared statement of Mr. Ivy follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Whitfield. Well, thank you, Mr. Ivy.
        And at this time, I would like to recognize Mr. Paul Nahi,
    who is CEO of Enphase Energy. And you are recognized for 5
    minutes.

                         STATEMENT OF PAUL NAHI

        Mr. Nahi. Thank you, Mr. Chairman. Chairman Whitfield and
    fellow subcommittee members, than you for the opportunity to
    testify at the Subcommittee on Energy and Power's 21st century
    electricity challenge hearing.
        Enphase Energy provides solar energy solutions for the
    residential and commercial market, as well as energy services
    for utilities. Through the most sophisticated power electronics
    and communications technology in the world, we are able to
    bring a level of visibility, intelligence and control to our
    solar systems, which are deployed in over 80 countries. This
    has enabled us to leverage our solar assets to help strengthen
    and increase the resilience of the grid, while providing clean,
    affordable energy for our customers in the U.S. and all over
    the world. A public utility company located in the San
    Francisco Bay area, Enphase has grown to over 600 employees
    since 2006, and plans to employ over 750 employees by the end
    of 2015. Our products are now installed by tens of thousands of
    workers across the United States each day. We have a profitable
    business, and continue to invest in new technologies and new
    markets to enable more consumers to enjoy the benefits of
    clean, affordable energy, while helping our utility partners
    strengthen and stabilize the grid. In doing so, we are creating
    both blue- and white-collared jobs in our country, and creating
    competitively priced products that make the United States a
    global leader in our technology class.
        Our advanced technology solutions turns solar systems into
    assets on the grid, and our energy management system addresses
    the grid's needs via our intelligent communications technology.
    In fact, we just completed an upgrade with a utility partner to
    remotely modify the operating characteristics of thousands of
    solar systems to substantially strengthen their distribution
    and feeder networks. In essence, we enable solar systems to
    observe and then respond to the potential grid issues, thus
    increasing its reliability. By optimizing the grid in this
    manner, we can either delay or eliminate significant capital
    costs, thereby reducing cost for consumers.
        As is implied by our product offering, it is clear that our
    number one job at Enphase is to help provide clean, affordable
    energy, while increasing grid stability. At the same time, we
    recognize the urgent need to increase the security of our
    energy supply. Energy security is fundamental to the health of
    our country. It is also a specific focus of this Congress. It
    must be recognized that new, clean energy resources can play a
    significant role in enhancing our energy security. Solar and
    wind are abundant and limitless, and it is our responsibility
    to harness these resources responsibly. That said, Enphase and
    others in this new energy economy will play a fundamental role
    in ensuring the energy security of our country. The
    technologies we develop leverage years of innovation in the
    semiconductor and information technology markets, and include
    many of our own advances. Because of this, each system we ship
    is embedded with the most advanced security protocols, and can
    be remotely updated as necessary to prevent new cyber threats.
    We take our role as a though leader in the energy security
    seriously, and believe this arena will become increasingly
    critical over time.
        In order to ensure that our efforts to provide clean energy
    to consumers, while strengthening the resiliency and security
    of the grid, continue unabated, we must also maintain our
    relentless pursuit of more cost-effective solutions. Providing
    clean, secure energy is not enough. We must make it affordable
    for everyone. We have been able to dramatically lower the cost
    of our solar solutions, and are now applying the same
    technology to storage, where we also expect to see a dramatic
    decrease in costs. The same processes and semiconductor
    technologies used for developing and scaling the consumer
    electronics market are now being applied by Enphase to the
    renewable energy market. Technologies like the Enphase energy
    management system have the ability to realize significant cost
    reductions through economies of scale and continued innovation.
    It is my opinion that solar and other energy technologies will
    play a fundamental role in the new energy economy as a result
    of our ability to innovate and scale, resulting in highly cost-
    competitive, reliable and secure energy generation.
        Enphase Energy is built on a foundation of collaboration.
    We believe that a health industry lifts all market
    participants. We have no doubt that the creation of a new
    energy economy will result in hundreds of thousands of new jobs
    for Americans, and we are looking forward to enabling those
    interested in participating in this industry to make a smooth
    and successful transition. The result will be a strong and
    vibrant industry, abundant access to clean, affordable energy,
    a large, well-paid workforce, and a prosperous future for all
    Americans. The success of our company and other new energy
    participants is a testament to the increasing demand for
    affordable, clean energy, and we do not expect this to subside.
        That said, I believe our role as job creators now and in
    the future cannot be underestimated. With this role comes the
    responsibility to help others transition to this new and
    growing industry. We must recognize the amazing accomplishments
    of those in the industry who carved the path before us, and
    provide the support necessary to enable them to participate in
    this new energy paradigm.
        Lastly, we aim to remain competitive internationally to
    ensure the United States retains a position of leadership in
    the world's energy ecosystem.
        I appreciate the opportunity to testify before this
    committee, and look forward to working with Congress as we
    continue to add jobs, increase grid stability, protect our
    citizens against cyber threats, and ensure the United States
    maintains its position as a global technology leader. Thank
    you.
        [The prepared statement of Mr. Nahi follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Whitfield. Thank you.
        Our next witness is Mr. Naimish Patel, who is the CEO of
    Gridco Systems. And you are recognized for 5 minutes.

                       STATEMENT OF NAIMISH PATEL

        Mr. Patel. Thank you, Mr. Chairman, and the other
    distinguished guests or congressional members of this
    committee.
        This is an important topic we will be speaking about today.
    My name is Naimish Patel. I am the CEO of Gridco Systems, a
    leading provider of agile grid infrastructure, that is
    consisting of advanced control and power flow technologies for
    the electric grid.
        Since the Pearl Street Power Station first went online in
    Manhattan in 1882, the electric grid in the U.S. has become
    pervasive in its reach, essential to the sustainable growth of
    our economy and national security, and a services platform that
    we have become intimately reliant upon, yet often take for
    granted; all testament to the work of the numerous utilities
    that maintain and operate our grid.
        Today, however, utilities are operating in a changing
    environment that poses a wide variety of challenges, but also
    opportunities for innovation. Much as our telephone system
    experienced a transformation in the 1990s, catalyzed by
    customer adoption of computing and demand for information
    services, so too are we seeing the beginning of a customer-
    driven evolution of the electric grid. Consumers of power are
    increasingly also becoming producers, through adoption of
    rooftop solar or small-scale wind power, requiring the
    distribution grid to accommodate two-way power flow for the
    first time, counter to the assumptions underlying its original
    architecture. Customer adoption of electric vehicles is
    creating new demand for power, each vehicle equivalent to
    entire home while charging, requiring new utility demand
    control measures to avert overloading existing infrastructure.
    Customer adoption of energy efficiency measures and home
    automation offer new resources that utilities can potentially
    harness for systemic benefit, blurring the nature of the
    relationship between utility and customer. Finally, increasing
    diversification of customer demand is creating stress on
    regulatory frameworks that have traditionally been oriented
    towards one-size-fits-all power delivery. All of these changes
    are compounded by the fact that centralized base-load
    generation and transmission capacity are growing tighter, and
    increasing volatility in global weather patterns is driving the
    need for higher levels of grid resiliency. In the face of these
    challenges, utilities must continue to deliver on their
    fundamental mission of supplying safe, reliable, and affordable
    power, while also introducing system flexibility in order to be
    adaptive to a more dynamic and diverse demand/supply
    environment. Emerging at this intersection of requirements is a
    historic opportunity for regulators, utilities and technology
    suppliers to jointly innovate.
        Not surprisingly, given the aforementioned trends are
    occurring at the edge of the grid where customers connect, the
    electric grid's distribution system is on the forefront of
    change. Historically, investment in the distribution system has
    targeted upgrades of wires, poles and transformers; what is
    typically referred to as grid reinforcement. While these
    investments in grid capacity are indeed necessary, the
    flexibility to accommodate a more dynamic demand/supply
    environment relies on investment in infrastructure that can
    efficiently utilize existing capacity in order to curb costly
    grid reinforcement and, thus, electricity rates, while assuring
    reliable delivery of power under rapidly changing conditions.
    Much as the Internet is based on devices that actively and
    dynamically manage the flow of information across fiber optic
    or copper wires, the electric grid will increasingly require
    devices that actively and dynamically manage the flow of power,
    all under the control of a reliable, secure and scalable grid
    operating system. Fortunately, the technology building blocks
    needed to provide these functions are available, and at the
    cost, efficiency, and reliability metrics expected of electric
    utilities. Advancements in power electronics technology
    borrowed from hybrid and electric vehicles, wind convertors and
    solar inverters, can now be leveraged to provide dynamic
    regulation and routing of power flows at utility scale. While
    ruggedized distributed controllers, coupled with advanced
    networking techniques borrowed from the telephone sector,
    enable an emerging grid operating system to manage both utility
    and customer-owned assets, including power regulators,
    distributed energy resources, and home automation gateways,
    amongst many others. These core functions make the grid not
    just smart, but agile. It is brains and brawn in combination,
    or smarts in conjunction with action, that underlies agility,
    and most importantly, provides for a strong, standalone
    business case.
        We at Gridco Systems are singularly focused on providing
    these essential building blocks of the agile grid. We are
    working with utilities throughout the Nation in deploying our
    empower solution to address the challenges of today, while
    providing the foundation to adapt to the challenges of
    tomorrow. Strong economics drives our customer engagement
    process. Gridco's focus is on delivering solutions that are
    more cost-effective, and delivering more compelling benefits to
    cost ratio than business-as-usual approaches, avoiding the need
    for subsidies and rate increases. As such, many utilities are
    able to leverage existing budgets to implement our solutions to
    address DER integration, increase asset and capacity
    utilization, improved energy efficiency, and deliver higher
    power quality, all justified on the fundamental economic
    benefits rendered.
        Technology availability is currently not the limiting
    factor in driving modernization of the electric grid. Missing
    are the financial incentives for utilities to invest in new
    technologies to address diversification of customer demand. And
    to be clear, I am not suggesting that use of subsidies. The
    cost of service-based regulatory compact that has guided the
    evolution of the distribution system since the Public Utility
    Holding Company Act of 1935, has proved highly effective during
    times of simultaneous load growth, relatively uniform customer
    demand, and increasing economies of scale and supply. Such
    macroeconomic conditions generally present from the 1930's to
    the 1980's, maintained low electricity rates and reliable
    service for end customers, while strong predictable returns for
    investors. Over the last 2 decades, however, average load
    growth in the U.S. has slowed, becoming less coupled to GDP
    growth, owing in part to the adoption of energy efficiency
    measures, and also to an increase in the service orientation of
    the U.S. economy. Nevertheless, the reliable operation of the
    electric grid is as critical as ever to those customers--to our
    growth of our economy, and as such, continued investment is
    essential, but without rate increases for those customers whose
    use of the grid has not changed. After all, changes in customer
    use of the electric grid are by no means universal, at least at
    present. Customer adoption of rooftop solar, energy efficiency
    measures, and electric vehicles tend to be highly
    demographically correlated. As such, a minority of end
    customers, albeit a rapidly growing minority, is demanding
    something new of the grid, yet, the cost to accommodate them
    are socialized across the entire customer base under currently
    regulatory structure. Further compounding this is the fact that
    such customers may even pay less into the system, owing to
    their lower consumption of energy. Let us be clear; we want the
    grid to accommodate such customers. Their behind-the-meter
    investments are driven by basic economics that are only getting
    stronger. However, the revenue a utility realizes from these
    customers must reflect the actual cost of service to
    accommodate them. Fundamentally, not all customers are alike,
    and electricity rates structures must not only start to account
    for diversification of customer demand, but indeed, incentive--
    incentivize utilities to supply such demand.
        Conversations among State regulators, utilities, suppliers
    and other stakeholders are occurring throughout the Nation on
    how to evolve rate design to better align utility revenues with
    their underlying costs.
        Mr. Whitfield. Mr. Patel, I have let you go over almost 3
    minutes, so would you conclude?
        Mr. Patel. Yes, sure.
        Let us not forget that modernizing the electric grid is not
    only good for our national security and economic growth here at
    home, but also represents an opportunity for the U.S. to lead a
    global renaissance in energy services and grid infrastructure.
        Thank you for the opportunity to speak at this forum.
        [The prepared statement of Mr. Patel follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Whitfield. Thank you very much for your testimony. And
    thank all of you.
        And at this time we will open it up for questions, and I
    will recognize myself for 5 minutes.
        Mr. Siebel, you had mentioned that the smart grid analytics
    technology, the savings are so great over cost that you really
    don't need incentives or subsidies from the Government for some
    of this, but anytime we go through transformation of any
    sector, certainly in the electricity sector, there are always
    impediments, and you do refer to some State regulations and
    accounting rules. I was wondering if you would elaborate a
    little bit on that for us?
        Mr. Siebel. Thank you. Thank you, Mr. Chairman.
        We retained McKinsey and Company to do a study on the
    economic benefit of a smart grid analytics platform, and you
    think of this as the operating system for the smart grid, so it
    is the economic benefit to the U.S. consumer. And the study,
    which we will be happy to provide the committee if they are
    interested, concludes that the economic benefit is $300 per
    meter, per year. So it is pretty significant. So this is like
    $50 billion a year in economic and social benefit across the
    United States.
        Now, we have the adoption of these new technologies. If we
    look at all the new technologies that are being developed in
    Silicon Valley, Boston, Jerusalem, anywhere today, these are
    all Cloud-based Saas systems, you read about it every day,
    Google, Facebook, Twitter, whatever, so this is where
    innovation is happening.
        Now, the way that utilities make money is they spend money,
    and they spend money on capital and they get a guaranteed
    return on the capital by their regulator. Now, if they spend
    money on technology that was developed in the last decade, what
    we call enterprise information systems that you install behind
    a firewall, they will get a guaranteed return on that
    investment. It is capital expenditure and they get a return on
    that investment. If they invest money on this new generation of
    Cloud-based, what we call software as a service and platform as
    a service-type technologies, that is not deemed to be a capital
    investment, it is deemed to be an operating expense. So there
    is a disincentive to invest in innovation. If they invest in
    innovation, it results in reduced profitability and reduced
    cash flow for the utility. If they invest in obsolete
    technology, you get a 9 percent return on the investment.
        So I think the regulatory incentives at the State level
    need to change, and if they don't change, we are depriving the
    American consumer of innovation.
        Mr. Whitfield. Yes. I would ask any of you, in America, we
    have this pretty well balkanized system. We have some
    independent systems like California, Texas, we have RTOs, we
    have regulated States, deregulated States. Does that balkanized
    system impede the growth of technology in the electricity
    sector?
        Mr. Siebel. I would comment briefly. I think it does. I
    mean if we are dealing with a company like GDF Suez, or a
    company like Anel, Anel is--both of these companies are roughly
    the size of the U.S. market.
        Mr. Whitfield. Yes.
        Mr. Siebel. They operate in 40 countries, they might be
    100-billion-euro businesses, and they have in the order of 70
    to 80 million meters. So this is roughly the size of the U.S.
    This is one decision process addressing----
        Mr. Whitfield. Yes.
        Mr. Siebel [continuing]. 25 to 40 countries. In the U.S.,
    you have 3,250 utilities servicing 100 million meters.
        Mr. Whitfield. All right.
        Mr. Siebel. So it is highly, highly, as you would say,
    balkanized.
        Mr. Whitfield. You know, Mr. Kamen, in your testimony, we
    go through these transformations, there are always unintended
    consequences, and you do refer to the distributed energy
    resource death spiral of Germany. Would you elaborate on that a
    little bit?
        Mr. Kamen. Well, as I said, new technologies bring new
    opportunities. They also sometimes bring problems, especially
    to stranded infrastructure. And I am not a policy guy, but as I
    said, there are some perverse incentives out there. From a
    practical point of view, if the entire system that has ran for
    150 years premised on the generating company only making money
    by selling more power, there is not an encouragement to save.
    If they have to run it through a whole system that they already
    own, and somebody puts a solar panel at the other end, instead
    of supporting the overall system, it hurts the guys that are
    losing some of that. But from a technology point of view, there
    is a subtlety that I don't think maybe the regulators
    understand as well as the technology people which is, those big
    power plants are very good at producing a constant amount of
    power. It takes, in many cases, hours and hours and hours to
    bring those big boilers up. When you start putting transient
    capability online without enough battery, for instance, or
    other kinds of new technologies, what happens when that cloud
    goes by and suddenly a couple of hundred megawatts that was
    there goes away, or when that wind stops, you are asking that
    big tired grid that you were trying to avoid paying their bill
    an hour ago, suddenly you are desperate for more power. They
    have a tougher time reacting and keeping a stable grid with
    these other systems online than they had before, and they are
    making less money.
        In the case of Germany, the instability from a pure
    technology point of view, not an economic or financial point of
    view, but the instability induced in their large systems by all
    these new transient systems is making life difficult from a
    technology----
        Mr. Whitfield. Right.
        Mr. Kamen [continuing]. Point of view, therefore, making a
    reliability issue and a security issue. And I think we should
    avoid that in this country.
        Mr. Whitfield. Yes. Yes. My time is out, but I did want to
    just convey one thing. I was talking to a CEO of a big utility
    company in California, and they were building some additional
    transmission lines underground, and he said that the cost for
    them per mile was $100 million, which--that is a lot.
        At this time, recognize the gentleman from California, Mr.
    McNerney, 5 minutes.
        Mr. McNerney. Thank you, Mr. Chairman. I want to thank the
    witnesses for all your testimonies. Very good this morning.
        Mr. Kamen, I just want to ask you a question here. What do
    you think the microgenerators that you discussed, I forget what
    you called them, what do you think they would do to the grid
    system, to the transmission system, to the traditional utility
    company?
        Mr. Kamen. So one of the things I particularly think should
    be attractive about it, again, as I said before, almost all of
    the systems out there are presented, some--it is true, some it
    is by perception, as a somebody wins, somebody loses
    alternative, as we move forward.
        I think if you can make, for instance, these generators,
    which is what they are, that use the--a lot of the
    infrastructure, for instance, the largest buried infrastructure
    in the country that we don't need $100 million a mile for is
    natural gas, and many, many buildings have buried tanks with
    oil, propane. If our device could be moved so close to where it
    is needed, but still on the energy producer's side of that
    equation, still just outside the meter, then the energy
    producers could have millions of these small devices that they
    own and operate, because most buildings and, certainly, grandma
    doesn't want to become her own utility company because she has
    a solar panel, but if the utility companies and energy
    providers could compete with each other to have small units
    that are so close to the loads, they still get the full
    advantage of being a supplier of energy with just millions of
    little plants, but they get to avoid needing those transmission
    lines, distribution lines, substations, et cetera, that
    everybody is talking about being expensive, unreliable, and
    subject to issues.
        Mr. McNerney. Right. Thank you. Nice answer.
        Mr. Atkinson, you said that the future will spur innovation
    and investment. How do you see it spurring investment in
    transmission systems, the future technology?
        Mr. Atkinson. Today, it is spurring investment. As we get a
    framework, you are aligning our market, our policy, our
    technology, everything, you know, lines up for companies to
    come in, you know, drive solutions forward and invest. Again,
    as I point to the gentlemen on my right, came from different
    places, have come into the grid, and now are investing based on
    what exists today, based on the, you know, again, the policy
    and the technology that is available today and looking forward
    into the future.
        Mr. McNerney. OK. Mr. Christiansen, just sort of an
    estimate, if someone puts a solar system on their house, how
    much will the storage devices that you are talking about add to
    the capital cost? Will it add 20 percent to the capital cost in
    order to serve the--a good purpose for the homeowner?
        Mr. Christiansen. To direct cost, I mean on our unit we
    really do not approach the distributed solar household market,
    we see greater benefit of the grid connected bigger units.
        Mr. McNerney. So you are not talking about a residential--
    --
        Mr. Christiansen. We are talking megawatts scale, that is
    what we produce.
        Mr. McNerney. OK.
        Mr. Christiansen. We produce--yes, and then multi-mega--our
    standard building block is 1 megawatt hour, 2 megawatt units.
        Mr. McNerney. OK. So you don't want to answer that question
    for the residential----
        Mr. Christiansen. I mean I could estimate based on
    competing--competitors' price estimates, but----
        Mr. McNerney. OK, I will give you a chance to answer that
    off-line later.
        Mr. Atkinson, do you think there is a role for the Federal
    Government, then, with respect to grid modernization?
        Mr. Atkinson. Absolutely. I--again, I think you are helping
    drive that shared vision forward, aligning, you know, the
    public and creating new public-private partnerships. You know,
    today, companies like myself, you know, we are working with the
    national labs, we are working with our customers, and creating,
    you know, a more defined framework for that I think is a great
    job for the Federal Government to do, and that then allows the
    public and the private sectors to get together, you know, and
    fill out the space. Again, there is significant investment
    going on in the grid today, and it needs to continue. It is--it
    will exist in the future. It is the backbone of, you know, what
    we do, and it needs to be utilized in different ways.
        Mr. McNerney. So you see a significant role for the
    national labs then in creating this future?
        Mr. Atkinson. Absolutely. I think the national labs, you
    know, we are out--our technology center, Global Center of
    Excellence for Grid Technologies in Redmond, Washington, we
    have a very close relationship with VNNL. We work with several
    of the others as well. They have a different timescale that
    they look at, and it is great getting together with them and a
    customer. A customer who is doing things today, national lab is
    looking out 3, 5, 10 years, us looking out 1 to 3 years, and
    merging that together and figuring out what is going to work,
    and then figuring out how to commercialize that.
        Mr. McNerney. Thank you.
        Mr. Chairman, I yield back.
        Mr. Whitfield. At this time, recognize the gentleman from
    Illinois, Mr. Shimkus, for 5 minutes.
        Mr. Shimkus. Thank you. Sorry for bouncing back and forth.
    I have another hearing upstairs, and met with the funeral home
    directors, and so we are trying to do multiple things at once.
        Mr. Kamen, it is great to see you. Charlie Bass, it is good
    to see you. Secretary, good to see you back in the crowd.
        FIRST Robotics. I will do the plug, right? We talked
    earlier, so the actual--the championship is in St. Louis,
    Missouri, which is right across the river from where I live. We
    follow it very, very closely. Thank you for that because now,
    it has gone not just into high school, but in the middle
    schools and in the grade schools with the Lego thing. And our
    Christian Dade School that I graduated from, my wife teaches
    at, they are all in it, and it is a great thing that you have
    started and I want to give that plug here.
        Also, I would like to go on just the issue, I know you have
    a great diverse background as an inventor in the medical field,
    insulin pumps, dialysis, why are you interested in this energy
    debate?
        Mr. Kamen. First of all, thanks for the plug for FIRST. You
    are all invited to our----
        Mr. Shimkus. It is the--and you have to use it when you get
    it, right?
        Mr. Kamen. Well, we have events in every congressional
    district. Schools from every district. I hope all of you will
    get involved, but thank you for that. And also thank you for
    asking because, honestly, we did not start building a small
    power generation systems for the U.S. After all is said and
    done, we still have a world class energy system. We have heard
    about that. I am a member of the National Academies. We did
    determine a few years ago it was one of the great achievements
    of the last century.
        I started building these small boxes because there are 2
    billion people around the world that have never used
    electricity. And I made a box of a similar size that would make
    clean water without a lot of other stuff. It didn't need
    filters or membranes or chemicals, but it needs a little
    electricity to run. And I thought the two most basic human
    needs around the world, water and power, ought to be available
    to everybody, and the rest of the world they are going to skip
    over ever building a power grid, just the way they skipped over
    landlines for cell phones--for phones, and now most of the
    developing world has this productivity called a cell phone, but
    they don't have a grid. Our little boxes can operate remotely
    to make true microgrids, and in fact, we ran two villages in
    Bangladesh for 6 months off two of these boxes, and the only
    fuel that went into them was the methane coming off a pit full
    of cow dung. If we bring these things into production here, the
    U.S. could start supplying electricity to a couple of billion
    friends around the world.
        Mr. Shimkus. And I think the last time you really testified
    was on that technology also, as I remember.
        Mr. Christiansen, I was interested in your testimony, and
    of course, I am from a cold part of the country, that is a big
    debate here, but you--this--as I understand it, the provisions
    of getting--we want to create efficiencies by our major
    generators, the base load folks, and sometimes that goes up and
    down, and then--and peekers come in, so just briefly, how do we
    segue your technology, and what is it again, and then how do
    you think it is being reviewed and accepted by our friends down
    the street at the Environmental Protection Agency?
        Mr. Christiansen. Well, we actually have sent this idea to
    the EPA as well. We did that last April. And the concept is
    essentially coupled with base load. You can optimize heat
    grades, basically have a unit that operates at constant output,
    almost like your car going down the highway at highway speeds
    where your battery system handles the flexible components, and
    that is what batteries are good at. They excel at responding
    quickly, fast and accurately, and that is what batteries should
    do. And then you have a unit that generates--that gets to be a
    generator and generates constant. And we have done a study
    that--on the whole west end connector, we sent it to the EPA on
    that, and you can essentially incorporate storage and have the
    efficiency pay for the storage units.
        Mr. Shimkus. Great, thank you.
        And I want to end up with Mr. Siebel. What do you see the
    primary regulatory burdens preventing utilities from grading
    adoption of new information technologies?
        Mr. Siebel. Great question. The barrier is very simple. OK.
    Utilities get a return on things that are deemed to be capital
    expense. Information technologies developed in the 20th century
    are deemed to be capital expense. You buy a piece of iron, a
    computer, disks, you put it behind your firewall, you get a
    disk from Oracle and you install it, that is a capital expense.
    The new--and you get a guaranteed return on those investments
    through your rate case, so you can pass it on to the rate case.
        Investments in the new generations of technologies that
    they never see and touch, these softwares of service
    technologies like using Google or Facebook or Twitter, where
    nothing is ever installed, they get--that is not a capital
    expense for accounting treatment, so they--not deemed to be
    capital, so they cannot pass the cost on to the ratepayer. So
    it is deemed an operating expense, lowers profitability, lowers
    cash flow, major disincentive to invest in innovation.
    Consumers--U.S. consumers deprived of all the innovation going
    on today.
        Mr. Shimkus. And I thank you.
        Thank you, Mr. Chairman. Sorry for going past.
        Mr. Whitfield. At this time, recognize the gentleman from
    New Jersey, Mr. Pallone, for 5 minutes.
        Mr. Pallone. Thank you, Mr. Chairman.
        I wanted to ask two things of Mr. Atkinson. First, you
    talked a lot about--and I wasn't here so I have to apologize, I
    had to go to the other hearing, but you talked a lot about
    increasing reliability. What has industry been doing since the
    blackout in August 2003 that, you know, went from Ohio to New
    York, to improve the reliability of the grid, and where are
    there technology gaps at this point?
        Mr. Atkinson. There has been a lot of activity since 2003.
    It was a bit of a wakeup call. You know, one of the things it
    spurred, honestly, was the creation of the GridWise Alliance.
    That is what--the reason it was formed was to, you know, move
    forward and address these things.
        Another thing this, you know, people started paying a lot
    of attention to--as you looked at the root cause of why it
    happened, was situational awareness. We as a company came out
    with a product around situational awareness, letting people
    understand what is happening with the bigger picture and not
    just in the specific numbers and charts and graphs they are
    used to looking at.
        Since that point, us and, you know, frankly, our
    competition as well, has driven that, you know, situational
    awareness through all of the technologies that they have,
    making sure, again, that there is a bigger picture look at what
    is happening in the grid, not just right in front of me, but
    the potential ripple effects as it extends out from just my
    system.
        Mr. Pallone. And then I wanted to ask you with regard to
    Super Storm Sandy, my constituents and I personally endured
    Super Storm Sandy, and could you explain--could you please
    explain whether and how we might avoid such severe and long-
    lasting power outages in future extreme events? It think it was
    about 2 weeks or so that we were out of power. What is being
    done now to prepare for future extreme events like that?
        Mr. Atkinson. An awful lot is being done. You know, the--as
    the grid is being, you know, rebuilt and revamped, it is being
    hardened. New technologies are coming into play. There was a
    microgrid that was--you discussed yourself with the trains,
    making sure that they can continue to flow. Also I believe
    around Princeton there is a microgrid that has been put in
    place as well to maintain power.
        The--at the same time, there is a lot we could learn from
    each other. The GridWise Alliance, you know, joined together a
    bunch of people to discuss best practices. And just, you know,
    some people came back differently, better or worse than others.
    What are the best practices and how can utilities leverage that
    for the next event. We know these events are going to continue
    to happen, and it is minimizing their impact that we need to,
    you know, focus on.
        And then additionally, just the grid technologies continue
    to advance. You know, distribution systems that are being put
    in place today, the advanced systems, you know, they
    automatically identify a fault. You no longer have people out
    in a dicey situation, you know, looking for where the fault may
    be along miles of lines. You can identify very closely where a
    fault is. You can also do some automatic reconfiguration of the
    system to bring some people back automatically, thus minimizing
    the number of people that are, you know, experiencing the
    outage. And all this is helping things come back faster from
    the inevitable events.
        Mr. Pallone. All right, thanks.
        I wanted to move to Mr. Nahi, if I am pronouncing it right.
    There was an earlier question, again, I wasn't here, raised by
    one of my colleagues about issues relating to integration of
    solar and wind to the grid, but to the extent there are truly
    issues there, aren't they easily dealt with? Could you just
    respond to that?
        Mr. Nahi. Sure. So I think we have to acknowledge that the
    dynamics that are making solar as powerful as it is today are
    doing nothing but getting better. The cost of solar energy
    continues to decrease exponentially year on year, while at the
    same time grid electricity, utility electricity, is continuing
    to increase in price. So the--it is less a question of how we
    do it, if we do it, it is a question of how we do it, and the
    reality is that the integration, the technologies that are
    available today at the--at--for distributed generation are so
    sophisticated that not only does it make the integration
    relatively straightforward, it actually acts to strengthen the
    grid. The fact is that the old hub and spoke model that we
    currently have is inherently flawed. What we want is more
    generation of all kinds, more distributed generation, and
    associated with that brings about greater visibility, greater
    control, there is more and more we can do to leverage solar as
    an asset on the grid and increase stability if we have the
    will. The technology is here. We don't need any more. And I
    would say that it has become so sophisticated that it is
    relatively straightforward to integrate right now. With the
    appropriate policy and regulatory issues, with the right--the
    will to support it, we can easily integrate more and more
    distributed generation.
        Mr. Pallone. All right, thanks a lot.
        Thank you, Chairman.
        Mr. Whitfield. At this time, recognize the gentleman from
    Pennsylvania, Mr. Pitts, for 5 minutes.
        Mr. Pitts. Thank you, Mr. Chairman. Thank you for your
    testimony. Good to see you. Charlie Bass, the Secretary,
    welcome.
        Mr. Atkinson, please tell us a bit about your R and D
    process, how does Alstom Grid go about bringing R and D to the
    market?
        Mr. Atkinson. First and foremost, we listen to our
    customers. The--and we work on solutions that are solving, you
    know, business problems. We are constantly, and I believe all
    technology providers are constantly working towards a more
    cost-effective delivery of electricity. You know, as we look
    longer out again, I thought that we have, you know, we discuss
    a lot with the national labs and we, you know, taking a step
    back, looking even further out as to what may be happening and,
    you know, begin planning ahead, but a lot of our efforts are
    focused in the now-to-3 years, you know, things that can, you
    know, be commercial pretty quickly.
        Our R and D center is located, you know, for the globe, is
    located here in the U.S. We have, you know, we hired, you know,
    in the last 8 years we have more than doubled the number of
    advanced engineers, power system engineers, and computer
    scientists. We work mostly with Masters in PhD, you know,
    people. It is a high-end workforce, and they are sitting around
    working with customers, working to solve their problems, and
    then working to adapt what was a specific customer problem to a
    larger set of, you know, use cases across the industry, and
    that is when you come up with a full commercial product.
        We are focused on single code base and, you know, we
    created here and again for use cases in the U.S. and globally
    but, you know, making sure we have a single product pack that
    we can leverage globally.
        Mr. Pitts. Thank you.
        Mr. Christiansen, you stated that your technology is source
    agnostic architecture that helps balance the grid. What is the
    importance of being source agnostic?
        Mr. Christiansen. I think the key point is that we are a
    flexible resource that is not purely a renewable integration,
    it is an optimizer for all assets. You look at the grid itself,
    the grid needs flexibility, it needs a dynamic resource that
    can adjust to changing load, change in generation, and can do
    it quickly, and that is unrelated to the source reflected. We
    have done studies where collocated with coal, we are collocated
    with natural gas, we have been working with cases where we
    collocated with nuclear. And the value proposition for storage
    is unique that it fits into all generation resources.
        Mr. Pitts. Mr. Ivy, how do the advanced grid technologies
    being deployed by Lakeland Electric better empower consumers to
    save energy and reduce their electricity bills?
        Mr. Ivy. So we have enabled the customer information to be
    available on a customer account basis by anybody that is
    willing to get in there and look at what their consumption
    patterns are. We have also deployed shift-to-save rates. Our
    shift-to-save rate is a three-tiered rate. It is intended to
    incentivize people to go to a lower cost rate that is in an
    off-peak period of the day. We have a winter peak, oddly
    enough, in Florida, but we have a lot of northern visitors. So
    the tendency of wanting to get people to shift their
    consumption patterns from like 7 o'clock in the morning,
    everybody takes a shower, everybody turns on their heater, a
    cold morning, or two or three cold mornings in a row, and all
    of a sudden we have a winter peak that looks like this. That is
    what we have to build our system to.
        So we are actively engaged with the consumers in outreach
    groups and civic organizations, and whatnot, trying to get them
    to get a good feel for how they can use that data to their
    advantage.
        Mr. Pitts. OK. Mr. Kamen, in your testimony you noted the
    need to promote renewable energy technology while ensuring
    continued viability of the utility-based model, siting Germany
    as a cautionary tale. How do you think these 2 seemingly
    opposing objectives can be achieved?
        Mr. Kamen. Well, I think if you include all the energy
    producers and the people that handle transmission, distribution
    and retail, and included them in making these transitions to
    modern, clean, efficient technologies, first of all, a lot of
    people in the public don't want to own and operate their own
    photovoltaic farms, et cetera. They are used to having somebody
    from whom they get a bill once a month and they have reliable
    power. So if you could make small distributed generators, but
    make them compatible, for instance, with solar panels, and as
    you have heard, the technology to make instant power
    electronically is pretty good, but the big old plants can't
    respond as quickly when suddenly there is a cloud or the wind
    dies, but if those utility companies had access to distributed,
    very quick response ways to make energy so if the wind went
    away, if the cloud came by, if those batteries, even those
    great batteries go down a little, if those utilities and those
    energy suppliers are part of an integrated--that could say I am
    going to put clean, efficient, small, new stuff out there, it
    still helps them as the old guard get rid of some of their
    problems with these aging systems, right back to those big
    plants, those old transmission lines, those unreliable
    distribution, the switch gears, the transmission that the
    substations that we are hearing about being a problem during
    Sandy. So I think creating a piece of technology that could be
    put behind the meter, could be put in front of the meter, but
    giving all of the stakeholders the capability to find
    competitive ways to optimize producing energy, doing it
    cleanly, doing it effectively, everybody wins.
        Mr. Pitts. My time has expired. Thank you.
        Mr. Whitfield. At this time, recognize the gentleman from
    New York, Mr. Tonko, for 5 minutes.
        Mr. Tonko. Thank you, Mr. Chair. And welcome to our
    panelists.
        A number of you have mentioned in your testimony the
    increased role of customer involvement in the current operation
    of the grid, and the prospects for much more involvement in the
    future. Of course, this represents a significant departure from
    the mostly passive role that the average consumer plays now.
    They receive a bill and they pay it. If the power goes out,
    they call their local utility and report it. Now, consumers are
    also producing energy, and their ability to refine and manage
    their appliances and sources of energy are expanding. This is
    certainly part of what the smart grid is all about.
        You all mentioned the need for better information to go to
    consumers about their choices, and to educate them about how
    all this is going to work. How are utilities approaching this
    given phenomenon? Anyone? Yes, Mr. Siebel?
        Mr. Siebel. If we look at the utility engagement model,
    customer engagement model, it is firmly entrenched in, say,
    1950. OK, so where the primary communication is through direct
    mail and the call center. So if any of you remember Publisher's
    Clearinghouse when we grew up, that is kind of what it is like.
        Now, it is clear that consumer expectations are
    dramatically changing. You know, with Uber and Amazon and
    Google, we can do anything in 30 seconds and two clicks. And
    fundamentally, there are very few transactions that we want to
    engage in with a--with our utility. Pay a bill, question a
    bill, establish service, change service, hook up our PV array,
    whatever it may--that is about it. All of those things are very
    time-consuming and painful transactions for a consumer to
    engage with. So we are working today with Northeast Utilities,
    Exelon, Commonwealth Edison, Pacific Gas and Electric, Socal
    Edison, Anel in Italy, GDF Suez and Europe, and basically what
    is going on is applying the learnings that we have learned from
    Uber and Google and Amazon, and applying that level of
    interaction to the customer engagement problem, so a consumer
    can get--basically do anything they want to do, you know,
    within a minute and say 5 clicks.
        Mr. Tonko. Um-hum.
        Mr. Siebel. And so there is major investment going on in
    this. Much of it was driven initially by the State-mandated
    energy efficiency mandates that are coming out, I think 39
    States where they have almost $10 billion a year allocated for
    energy efficiency programs, but with, you know, fuel prices
    diminishing, those efforts are now being put to, you know,
    reinvent the customer engagement model, and we are working with
    utilities all over the world to do that.
        Mr. Tonko. Well, I agree we need to provide sufficient
    engagement of consumers early enough in the process to get good
    input from them on the frontend of program design.
        I would point out an issue we had in New York with rolling
    out smart meters. There were a significant number of consumers
    that strongly opposed having them installed because of a
    variety of concerns, including privacy. I would also point out
    that opening up the utility and the grid to a broader two-way
    conversation with customers presents both opportunities and
    problems in terms of computer security. I think with a much
    more dynamic and two-way role for the consumer and grid
    operations, we are going to need a more inclusive process to
    engage our consumers. Have any of you thoughts about what that
    might be in terms of engagement? Yes, Mr. Ivy?
        Mr. Ivy. We are actually going through the throws of that
    in Florida. The Sunshine State has sunshine laws that allows
    everything be done in the sunshine. So if you are a public
    agency like we are, for example, we are kind of beholding to
    public records requests and we are to be providing what the
    requestor is asking for. At the heart of kind of what you are
    saying with us is, there is also information that we are
    keeping hourly information on metering data, things that can
    indicate whether or not people are home or not, closer to a
    real-time basis than just the monthly consumption information
    perhaps that they could get before. So we are wanting to push
    the notion in Tallahassee that perhaps we want to close that
    down just a little bit without getting rid of peoples' ability
    to still get access to historical-type information.
        Those conversations are important. They need to be had
    because we need to make sure that we are protecting the
    consumers' information.
        Mr. Tonko. Thank you very much.
        And, Mr. Christiansen, as an advocate for renewable energy,
    I am very interested in the work your firm is doing with energy
    storage. You seem very encouraging. I feel encouraged about the
    possibilities. But the other day I heard a bit more skepticism
    about how fast this technology could evolve to make a
    significant contribution to the grid. What are the biggest
    challenges, and how quickly down the road will we see a
    meaningful energy storage outcome?
        Mr. Christiansen. So we are in the process now of deploying
    over 200 megawatts, which we will do in 2015, and that is in
    markets that have been opened by, you know, FERC Order 755,
    opened the way to some of these markets. We also have
    tremendous interest now from utilities and also international.
    I think we can do some work on the policy part and ensuring
    that storage gets cheated for the value of the--and the
    flexibility, and the speed and accuracy it provides, and that
    will help more installations come up.
        Mr. Tonko. Thank you very much.
        With that, Mr. Chair, I yield back.
        Mr. Whitfield. Gentleman yields back.
        At this time, recognize the gentleman from West Virginia,
    Mr. McKinley, for 5 minutes.
        Mr. McKinley. Thank you, Mr. Chairman.
        I thought that when we came here, the hearing was the
    ensuring a secure, reliable and modern electric system, and I
    thought by extension, we were going to be talking a lot more
    about the grid, and I have got more confused as I have heard
    all this discussion. It is much like, you know, I am an
    engineer by training and, by virtue of that, I suppose I can
    take on the lawyers in the room, because you ask 100 lawyers an
    opinion on something, you are going to get 100 different
    opinions. So I am curious, I have heard very professorial
    comments, very in-depth, your white papers that you have all
    developed about this topic, but I wonder whether or not we have
    been able to reach America with the story, because we have been
    talking about source agnostic architecture. We have even heard
    about balkanizing. We have heard about platforms, we have
    talked about polar vortexes. Mr. Kamen, you were about as close
    to talking to the American public as I have seen in this panel.
    One thing I have learned in Congress in my 4 years here, that
    we have trouble when we are confronted with more than one
    option, and I haven't heard the option. I have heard seven or
    eight different themes of where we should go, and I am really
    trying to get to a point with the grid of what is--and the
    folks on the other side, they all keep talking about consensus,
    so I will take their word. Is there a consensus of where we
    should go to develop grid reliability, because what we have not
    talked about is the public's resistance, the public doesn't
    want--``don't put that high-tension line over my property, not
    in my back yard''. We haven't talked about electromagnetic
    pulse, the threat to our grid reliability with that, because we
    know that is a serious challenge. We have talked about the fact
    that we have had briefings, I don't think I am breaching
    protocol here, but we can shut off someone else's grid in
    another country, and they can shut off our grid, because we
    have that capability. There was just some mention slightly
    about the EPA regulations and shutting down some of our
    powerhouses that when we had this polar vortex, that we are now
    leading to a point that we came within, what I was told, 700
    megawatts of having a brown-out last winter. That is really
    threatening. I don't know whether people across American
    understand, that is really just one powerhouse, 700 megawatts.
        And then the option of the age issue, I would like for you
    to just explain in terms that we don't use here in the beltway
    for Mildred Schmidt to understand, what does that have to do
    with what--tell me a little bit more about the age because we
    have waterlines and sewer lines, and buildings and roads and
    bridges that are far older than 25 years. Why should I be
    worried about electric grid--why should I be worried about the
    electric power lines being 25 years old? So with that, I would
    like to hear, is there a consensus of where we should go, where
    Congress should be putting its first priority in getting
    greater reliance or dependability, or are we just kind of
    talking abstract again? Is there a consensus? Mr. Kamen.
        Mr. Kamen. First of all, thanks for being an engineer in
    Congress.
        Mr. McKinley. It is lonely.
        Mr. Kamen. Secondly, I would continue, you know, in our
    FIRST competitions we call it coopertition. We believe that if
    you apply technologies properly, everybody can win as they
    compete because the public gets the best that way. And I think
    what you have heard from everybody is the grid is getting
    older, it is getting, for various reasons, the environment,
    terrorism, cyber attacks, and it is more fragile, and you are
    hearing a lot of people adding a lot of new technologies, but I
    would think where there is a consensus should be that you have
    to get all the people that provide the net result to the
    public, as you point out, working together so that you don't
    create an if-I-win-you-lose situation. And the energy
    providers, the transmission or the generation--for instance,
    our partner for our little box is a major generator, NRG, yet
    they are now becoming one of the biggest suppliers of solar
    panels, and working with us on these small distributed boxes.
    In one perverse way, you could say they are undermining their
    core business, but, you know, like they always say, the
    railroads went away because they thought they were in the train
    business, not the transportation business.
        And to your point, the public doesn't care about CDMA and
    TDMA and Time Division--they care about a cell phone being more
    convenience than a landline. So the public--if the public could
    have a simple appliance put into their home that already used
    infrastructure that we have great confidence in, because it is
    buried under the ground, like gas lines, like their oil, like
    their propane, and it could be made to work in parallel with
    solar and wind and the grid, because it sits at the
    intersection of all those things, somebody with an appliance
    like that would say, my costs went down because the waste heat
    from this thing is now my water system and my furnace, and I
    have more security and reliability because it is distributed,
    it is sort of like getting a back-up generator free, the people
    that run the grid and all the other systems win with it because
    it deals with transient problems, it is compatible with solar
    panels, it is compatible with batteries, it is compatible with
    the big producers.
        Mr. McKinley. My time has expired, but I just--so thank you
    for your comments. I am going to ask if you could please--I
    don't have time, we are limited to 5 minutes here, so if you
    could please each of you could--would you mind, I would like to
    hear from you what is the number one thing we should do. If you
    could write that to me, I would like----
        Mr. Kamen. Yes.
        Mr. McKinley. So that it is more direct. Instead of this
    abstract idea, let us get down to concrete where we can----
        Mr. Whitfield. And did anyone else want to briefly respond
    to that? You looked like you wanted to say something, Mr.
    Siebel.
        Mr. Siebel. Yes, sir. You have an 800-pound gorilla in the
    room here, is the cybersecurity problem. OK, now, every now and
    then, I mean and this is an opportunity where the Federal
    Government can play a role. All right, so every year or so, we
    get the word out of Washington that this is a priority. The
    fact of the matter is any hostile government, OK, any 10 smart
    engineers from UC Berkeley, OK, could bring down the grid from
    Boston to New York, you know, in 4 days. And this system is
    entirely exposed. And if you bring in the leadership from
    Homeland Security, DHS, in here to talk what they--I think what
    they will say, and what I believe, before we really do
    something about this, we are going to have the equivalent of 9/
    11. There is going to be some disaster, and it is not going to
    be good, and it will come from just some bad actor or some
    kids. And then we will get serious and spend, you know, $100
    billion a year on it for, you know, 10 years and declare a war
    on whatever it is. OK, but this system is so vulnerable and so
    fragile, and there is going to be a problem and we are not
    going to be happy. And it is fixable.
        Mr. McKinley. So if you--again, when you----
        Mr. Siebel. I will personally send you a letter, sir.
        Mr. McKinley [continuing]. See it, you have that--tell me
    what is----
        Mr. Whitfield. And Mr. Patel wanted to make a comment.
        Mr. Patel. Yes. On a basic level, customers care about the
    cost of electricity and it being on when they want it. And for
    the variety of reasons we have discussed, we are at a point in
    the evolution of the grid where there are fundamentally two
    paths that utilities can go. One is to do what they have done
    in the past, which his to invest in wires and transformers, and
    poles and grid hardening, another option is to actually take a
    different path where the cost of upgrading the infrastructure
    can be lower. See, the challenge with the first path is costs
    are going to go up. That means your rates are going to go up.
    Investing in wires and poles is expensive.
        Now, with the technologies that we have all been discussing
    today, there is an opportunity for a much lower-cost path. Now,
    the question is why isn't that happening? Why are utilities not
    pursuing the lower-cost path? And from my perspective, it comes
    down to incentives. You know, the regulatory compact that has
    driven decision making at distribution utilities is not
    directly incentivizing them to take the lower-cost path. Why?
    Because it is a little bit more risky, because of, you know,
    adoption of new technology is always somewhat risky, but also
    because there isn't the direct financial incentive for them to
    adopt something lower cost. And so in my view, there needs to
    be a change on a State-by-State basis to the regulatory compact
    insomuch as it relates to how utilities invest in a capitally
    efficient way, rather than just investing in capital----
        Mr. Whitfield. Yes.
        Mr. Patel [continuing]. As has been referred to multiple
    times. And I think those incentives, once in place, the market
    and efficiency will naturally drive to an outcome that
    addresses reliability in a cost-effective way.
        Mr. Whitfield. Thank you, Mr. Patel.
        At this time, I would like to recognize the gentleman from
    Iowa, Mr. Loebsack, for 5 minutes.
        Mr. Loebsack. Thank you, Mr. Chair. Thank you for having
    this very, very critical hearing today, and thanks to all of
    you for being here. I really appreciate this very much.
        I am new on this committee, on the larger committee. I am
    new on the subcommittee, but I have been dealing with these
    issues, especially in rural Iowa, since I have been in office
    since 2007. Trying to get my head around all of this. It isn't
    all that easy, as you might imagine as well, because all of you
    are kind of coming at this from different angles and what have
    you. But, you know, clearly, the idea of the smart grid makes a
    lot of sense. The whole idea of the--of an individual sort of
    having more control over how they use energy, the amount of
    energy they use and all, I mean I get my, you know, monthly
    utility bill, it tells you sort of in a macro-sense how much I
    have used, but that is not nearly the same as being able to
    control, you know, time of day and all kinds of things much
    better than I am able to do now, so I really appreciate that.
    And I do believe in individuals taking their own responsibility
    for their decisions.
        And we see in Iowa, for example, we do see a lot of wind
    turbines, you know, at farms, and solar panels powering, you
    know, hog farms, for example. I mean there is all kinds of
    stuff like that going on around this country, and around the 24
    counties in my congressional district. It is really quite
    fascinating to see how this is all going. And the local RECs
    are kind of coming onboard more on solar, and some of these
    alternative energies as well. So it is really pretty exciting,
    and I am glad that Mr. McNerney was excited because--I am not
    quite as excited, but I am excited about all this, and sort of
    where we can go from here.
        You know, Iowa, traditionally, we were a coal State, not
    unlike parts of Illinois where Congressman Shimkus is from.
    John L. Lewis, actually, is from Iowa, long ago. But we have
    made this transition in many ways. I like to remind people that
    27.3 percent of our energy in Iowa is wind-generated. We have a
    heck of a lot of wind energy in Iowa. Now there is big
    controversy about building a transmission line across the State
    carrying, you know, energy that is not necessarily generated in
    Iowa, but in other places, over to other markets to the east of
    us. But we are really making tremendous progress when it comes
    to renewables, there is no doubt about that.
        But I do want to ask kind of a general question. Anybody
    wants to answer this. And keeping in mind that if I get--if
    that takes my time--I want to come back to you, Mr. Kamen,
    especially the German issue and some things you were talking
    about, and if I don't get to that then we will do it for the
    record, if that is OK. Thank you.
        So, you know, I am from a rural area. We have a lot of
    challenges. We have natural disasters. Aligned Energy said they
    lost 6,000 poles in February of 2007 when we had this massive
    ice storm. And I guess if you could be as specific as possible,
    how do we look at making sure that we get sufficient energy--
    continue to get sufficient energy to the more rural areas in
    places like Iowa and other places? I know it is a general
    question, and it is a big challenge to answer that question,
    but I want to open that up to anyone. You are nodding, Mr.
    Kamen. I don't want to be preferential here, but you are
    nodding like you do want to answer that question.
        Mr. Kamen. Well, as I said before, the actual stimulus to
    make our little box was for the parts of the world that have no
    grid at all----
        Mr. Loebsack. Right.
        Mr. Kamen [continuing]. Because it is very compatible with
    microgrids and can be networked, especially when you put smart
    technology around to connect them, and you make them compatible
    with solar, so you reduce your fuel needs, which could be hog
    waste or other things, but I think the more you have an
    unstructured area that doesn't have a big grid already in
    place, transmission, distribution, substations, the more the
    21st century is going to start from the other end of this
    equation and start integrating local solar, local wind----
        Mr. Loebsack. Right.
        Mr. Kamen [continuing]. But you need a system to make sure
    it is there all the time. And so since most places have some
    sources of fuel, natural gas or propane or----
        Mr. Loebsack. Um-hum.
        Mr. Kamen [continuing]. Number two, and, you know, we build
    a technology that is agnostic to that, if you have a hot water
    heater or a furnace, well you have--you can make electricity.
    So I think, again, it is also a piece of hardware that the
    competitive environment will say any forward-thinking utility
    or energy generator, or transmission company or any other
    provider would say it is compatible with what they are doing,
    and it should be made part of the equation for the future.
        Mr. Loebsack. If I could just skip--I know I kind of opened
    that up to everybody, but now I am thinking in terms of
    regulatory framework, making sure that we integrate some of
    these things into, you know, the generation and provision of
    power to folks, because it was mentioned, you know, we have to
    have the right regulatory framework, right policy, right
    regulatory approach. What is that approach? I think you were
    saying--talking about that, Mr. Nahi.
        Mr. Nahi. Exactly. So I completely agree with Mr. Kamen
    that the right answer is distributor generation.
        Mr. Loebsack. Um-hum.
        Mr. Nahi. It can't be done at the expense of the grid, this
    is done in concert with the grid, but really what we need is
    more and more of all kinds of distributor generation.
        Mr. Loebsack. OK.
        Mr. Nahi. In terms of the regulatory and policy changes
    that need to be adopted for that, we have to recognize that the
    potential for an adverse relationship between the renewable
    energy companies and the utilities exist. It doesn't have to
    be.
        Mr. Loebsack. Right.
        Mr. Nahi. There are ways these companies can work together,
    there are ways that we can help the utilities adopt to a
    business model that would provide for more distributed
    generation. Right now, most of the distributed generation, not
    all but most, is done by third-party companies.
        Mr. Loebsack. Right.
        Mr. Nahi. There is no reason why the utilities themselves
    can't take a greater ownership and greater responsibility for
    putting on more of that distributed generation.
        Mr. Whitfield. Thank you.
        Mr. Loebsack. Thank you. And, Mr. Chair, thank you. And I
    am going to pursue this with you, Mr. Nahi, more after this,
    and also Mr. Kamen on the German issue, if I may. Thank you.
    Thank you.
        Mr. Latta [presiding]. Well, thank you very much. The
    gentleman yields back. And the Chair recognizes himself for 5
    minutes. And I apologize, there is another subcommittee of the
    full committee running at the same time as this, but I tell
    you, this is a very, very important issue and I really
    appreciate the testimony that you all submitted today, and also
    being here today.
        And, Mr. Siebel, if I could start with you, how do the
    kinds of energy analytics you have described help us with
    energy security and reliability?
        Mr. Siebel. Great question. So what we do when we look at
    this as a big data problem is we aggregate all the data from
    all of the operating systems in the utility, generation
    information, meter data management, customer care and billing,
    outage management, Volt/VAR, all of it into a unified data
    image in the Cloud. These can be like petabyte-sized data
    images, which are, in engineering speak, bigger than a
    breadbox. OK, and then we can correlate so that we get these,
    say, for predictive maintenance or grid reliability, or energy
    efficiency or whatever it may be, we can see in real time
    across the entire value chain from when somebody is moving a
    thermostat, to making a decision on whether we are going to
    bring on a peaker plant or change capacitates to balance Volt/
    VAR. Now, over in another building, OK, in a subbasement, there
    are 13 people looking at computer screens, and they are looking
    at utilities that are provided by companies like Symantec and
    like Hewlett Packard, and whatnot, looking for virus detection
    and malware detection that are penetrating the network. And
    basically, this is a pattern recognition problem, where they
    are looking for strings that look similar to malware that they
    have seen come out of China or Syria or Korea, or whatever it
    may be. And then this person, almost like an accountant with
    green iron shade, is kind of looking at this gibberish coming
    across the screen that says this is the type of malware that is
    trying to come in from this point. The question is what do you
    do with it.
        By being on a core like that as just another data source
    with the entire grid infrastructure, you can say, what does
    this mean, what portion of the grid is impacted, what critical
    infrastructure is impacted, what is the single point of
    failure, so you can then prioritize, and so you can both
    prevent them at the perimeter and you can do something about it
    right away. And so this is where cybersecurity comes together
    with kind of big data analytics. And we have done a lot of work
    with this at the University of Illinois with--and UC Berkeley,
    The Trust Group, and it is a well-understood problem. The fact
    is there are no budgets at the utility level to deal with it,
    and this is where I think the Federal Government can do
    something to encourage investment in hardening the system.
        Mr. Latta. Well, thank you very much.
        Mr. Atkinson, and how do advanced grid technologies help
    prevent the outages and enable the grid to better withstand
    outages when they do occur, and how can the technologies
    facilitate faster outage restorations and provide utility crews
    with greater situational awareness?
        Mr. Atkinson. It comes down to situational awareness.
    Allowing people to understand what is going on with the grid at
    all levels, pushing that information out from a centralized
    room into the hands of the people in the field that are there,
    and giving them more accurate information. And the technologies
    that exist today, you can identify the location of faults to,
    you know, a very close geographic proximity, rather than it is
    somewhere in, you know, in this, you know, series of seven
    blocks. You can send people directly out to a--the fault. They
    have a knowledge of what is happening because, you know, one of
    the things we discussed is things are, you know, more
    distributed energy resources are in play, you have to be
    careful, and you have multidirectional flow of electricity that
    changes the safety environment for the line worker pretty
    dramatically, and he needs to understand what is going on, and
    there needs to be, you know, that communication about what is
    going on. The technology that exists today is allowing that,
    and it continues to get better and better.
        As far as preventing outages, you know, as you see things
    happening, you know, from the transmission system down into the
    distribution systems, you see harmonics building, you get a
    chance to adapt quickly where, you know, the faster, you know,
    talking system today. The phasor measurement units are
    providing data 100 times a second, versus once every 6 seconds.
    You are able to get an accurate dynamic picture of what is
    happening, and it gives you a chance actually to, in some
    cases, you know, and there is proof this, eliminate when an
    outage was about to happen. If an outage does happen, you are
    now working on coming back faster, and eliminating as many
    people from that outage as you can. And again, that is where
    the fault identification, automatic restoration through
    switching on the rest of the grid, brings back a portion of the
    people, leaving a subset that is still out, and again, you have
    identified it very closely where it is, giving you a better
    chance to come back quickly.
        Mr. Latta. Well, thank you very much.
        My time has expired, and the Chair recognizes the gentleman
    from Ohio, Mr. Johnson, for 5 minutes.
        Mr. Johnson. Thank you, Mr. Chairman.
        Mr. Kamen, you testified that advanced grid technologies
    offer a promising future for U.S. electric systems, but the
    immediate challenge is to develop the appropriate business
    models and regulatory structures to effectively manage the
    integration of modern technologies. Do you have any
    recommendations as to what these business models and regulatory
    structures might look like?
        Mr. Kamen. So with the caveat that I think thermodynamics
    is way easier than Government, way easier, I----
        Mr. Johnson. I would agree with that.
        Mr. Kamen [continuing]. I would give you an example from my
    practical life experience. I spent 30 years building medical
    equipment. We built some very advanced medical equipment, life
    support equipment, and as tough as the standard is to get an
    FDA approval, once you get it, you have it, and every hospital,
    whether it is Harvard or UCLA or--you know what the standard
    is, you build stuff, it gets approved and you are done.
        We just built 20 of these model systems that our partner,
    NRG, has put around the country, but pretty much not only every
    State but almost every city and every town has a different set
    of rules about how you put these in, what you are required to
    do, and how do you make them become legally part of the grid. I
    think if there was some standard that the feds could put out so
    what the FDA does for medical products, if you guys could do
    for energy products, you could encourage innovators to start
    making stuff because they know what they have to do----
        Mr. Johnson. OK.
        Mr. Kamen [continuing]. They know if they did it, it could
    be used everywhere.
        Mr. Johnson. OK. Good.
        Mr. Atkinson, your testimony suggests that the grid of the
    future will enable electrons to flow into or even multiple
    directions. Why is having flexibility in power flows
    significant, and how can advanced grid technologies facilitate
    this?
        Mr. Atkinson. In the traditional hub and spoke that was
    mentioned before, you have an outage upstream, everybody
    downstream is out. When you have multiple directional flow, you
    get a chance to re-switch your system, reconfigure your grid on
    the fly, thus allowing, you know, all or some of the people to
    be brought back up immediately and not suffer that outage.
        The technologies today, you know, they exist to do this and
    they continue to get better, and the algorithms that are
    written, you know, continue to improve and, you know, it
    continues to move forward. Again, it exists today, getting
    better into the future.
        Mr. Johnson. OK. Mr. Christiansen, how can energy storage
    help utilities and consumers ride through outages and other
    power interruptions seamlessly? I understand it, but for the
    American people I would like----
        Mr. Christiansen. I think, first of all----
        Mr. Johnson [continuing]. For them to hear from you.
        Mr. Christiansen. Yes. First of all, to piggyback on
    everybody's comments here on having a distributed network and
    really, in my creative environment but almost local balancing
    authorities, adds a lot of reliability to the system. You have
    this capacitance in the grid that is able to soak up capacity
    and quickly deliver it back when it is needed really helps you
    ride through any peak, you know, that nature. Also as a good
    blank start----
        Mr. Johnson. Sure.
        Mr. Christiansen [continuing]. Get--helps us just to get
    back up to speed again after an outage, and this is a huge
    benefit by energy storage.
        Mr. Johnson. Yes. I--as a chief information officer for a
    global publicly traded manufacturing company, I had to be
    concerned about the data center and UPSs and those kinds of
    things, to make sure that we had that steady power.
        A lot of folks don't realize in today's high-tech arena
    what a power outage, a power surge, and what those constantly
    changing power parameters do to solid state circuitry and those
    kinds of things. It wreaks havoc.
        Mr. Ivy, you state in your testimony that greater adoption
    of advance grid technologies may help create self-healing
    grids. Can you expand on this concept of a self-healing grid a
    little bit?
        Mr. Ivy. We have actually touched on this quite a bit, and
    Mr. Atkinson did a fair job of describing that I think. So if
    there is an outage somewhere in the field, like he said, in the
    original hub and spoke method, you are just out if you are
    downstream of that, or even in some area around it you are
    still out.
        We are installing in our company, and other municipalities
    and investment utilities around the country are pretty advanced
    already in the tactics of installing these high-speed switches
    that are sensing where these short-circuits are in the system,
    and they are talking to each other to try to figure out how to
    isolate it----
        Mr. Johnson. Um-hum.
        Mr. Ivy [continuing]. And then the goal is to have it just
    isolated to the smallest area that you can possibly have it in.
    So then that allows us then also to dispatch somebody straight
    to what the problem is, because normally it is lightning, it is
    trees, it is an animal, something that can be cleared up very
    quickly, we can get the lights back on very, very quickly.
        Mr. Johnson. OK, very good.
        Well, thank you, Mr. Chairman, and I yield back. Thank you,
    gentlemen.
        Mr. Whitfield. Gentleman yields back.
        At this time, recognize Mr. Mullin, the gentleman from
    Oklahoma, for 5 minutes.
        Mr. Mullin. Thank you, Mr. Chairman.
        I want to start with Mr. Ivy, and I know these two may not
    actually go together, but in practical and legal terms, which
    those are the two I am talking about, is it better for the
    development of advanced grid technology to be managed at the
    local or State levels?
        Mr. Ivy. Our preference is certainly at the local level
    because all of our systems have these unique nuances to them. I
    think somebody had brought up in Iowa, for example, their
    system is pretty sparse. They don't serve a lot of customers.
    Their needs are going to be decidedly different from mine. I am
    like a 258 square mile service area, very dense, pretty good
    population base. So the kinds of things that we need to do in
    my area are going to be decidedly different from what other
    people would want to do. And then you have the State rules that
    go along with the implementation, or not, incentives or not,
    that exist, so it can get pretty much--well, I am just going to
    say, there is no one-size-fits-all for us, and so our
    preference is to keep it as local as possible.
        Mr. Mullin. Thank you.
        Mr. Kamen, you made a point in your written testimony that
    more than 50 percent of the generating capacity in the U.S. is
    30 years old, and at 70 percent of the 280,000 miles of
    transmission line is more than 25 years old. What do you feel
    your company, as well as other companies like yours bring to
    the table in addressing this issue?
        Mr. Kamen. I think that, you know, like with a used car,
    you reach a point where it is cheaper to buy a new one than to
    keep fixing the old one. I think if you could----
        Mr. Mullin. Unless it is antique. You have to hold onto
    those.
        Mr. Kamen. OK. Agreed. I have a 1913 Model T and it is not
    for sale.
        Mr. Mullin. Wow.
        Mr. Kamen. I would tell you if the proper incentives were
    put before the people that produce the energy, transmit the
    energy, distribute the energy, supply it to the end user, if
    they had a clean piece of paper and could invest their money in
    alternatives to just fixing these things that are, as you have
    heard, more--when it is a big central power plant,
    cybersecurity is a real issue. There are only a few of them to
    take down, you heard that there are only a few plants that are
    hub and spoke, it is very hard to make them self-healing. If
    you could have thousands and thousands of small, locally
    operated and controlled units that, by the way, when there are
    thousands or for--hundreds of thousands of them, you can put
    them so close to where you need the electricity that you can
    also take their waste heat, because all of these systems make
    mostly waste heat of whatever energy they burn, but you can't
    transmit heat very far, but if you made lots of small
    distributed plants, you would sort of get as a bonus, you could
    use the waste heat in most places so it is no longer waste, it
    is what people need for their furnace, not water, you would be
    much safer against anybody taking one system down. It might
    require more sophisticated controls and interaction, but as we
    have heard, that is becoming easier and easier. So if you could
    create a system instead of taking these very, very old systems,
    which they sort of have no other choice but to keep them up and
    operating, and allow them to transition to a new alternative
    technology, they would do better.
        Mr. Mullin. What is keeping it down? What is keeping the
    companies from being able to do this? Are we the hindrance?
        Mr. Kamen. From my understanding, when I have talked to
    people that do generation, that do transmission, it is a--it
    boggles my mind, as I--I wasn't kidding when I said
    thermodynamics and engineering is easier than regulation, I
    have heard CEOs of major energy-related companies say I am not
    allowed to do transmission, I generate, or I am not allowed to
    generate, I do transmission. I can't put your box somewhere
    there. And I get a headache thinking, I think I just spoke to
    my power company who said I can do this but not do that. Well,
    my lights only come on when all of that stuff is done.
        Mr. Mullin. Does anybody else on the panel want to address
    that? What is holding the industry back?
        Voice. I sense they do, but----
        Mr. Mullin. Yes. I am the good guy, I am not going to hurt
    you, but I need. Look, I come from a business, and the only
    reason why I am here is because the biggest problem I had with
    running our company was rules that were being made up here.
        Mr. Ivy. Um-hum.
        Mr. Mullin. And so I understand it, but I need to know what
    it is that is holding you back so we can help.
        Mr. Ivy. Let us look a little bit at the macroeconomic
    piece of it. And, you know, the answer or the solution for the
    future is, and I will tell you is a combination of all the
    stuff that we have been talking about. So you have a great
    panel here.
        We--when we build a $300 million natural gas combined cycle
    generating unit, we spread the cost of that out over 25 to 40
    years maybe, and whoever is on the system at the time gets to
    help--not only do they get the benefit of it, but they get to
    help pay their share of the cost for that facility.
        I have been challenged with being a little stodgy, little
    narrow-minded in my thinking, but we are that way be design and
    I accept that almost as a pat on the back because we are that
    way by design. We don't change quickly. I am leveraged right
    now about 60 percent debt to my assets, and that is fairly
    typical for the utility business. So we still have to look at
    the long-term payout before we start looking at a rapid and
    widespread integration of these different types of technologies
    that we are hearing. That is one of my main concerns. And I
    will tell you, that is a local issue, and we are talking about
    it. We are talking about it with our city commission, about the
    need to start changing our minds about how long we should be
    amortizing that debt out like that. So it is going on but
    unfortunately, it is not going to happen really quick.
        Mr. Mullin. Thank you.
        My time is out.
        Mr. Whitfield. At this time recognize the gentleman from
    Virginia, Mr. Griffith, for 5 minutes.
        Mr. Griffith. Thank you very much. Wow, what a great panel
    you have put together, Mr. Chairman. It has really been a very
    educational morning. I have been here since the beginning, so I
    can say that you all have been very helpful in educating me. I
    happen to be one of the few members of this committee that is
    one of those evil lawyers everybody talks about, so I need lots
    of help in understanding these things. But I am concerned about
    privacy issues, and, Mr. Ivy, your company has some smart
    meters, as I understand it, and you all have an opt-out
    provision. Can you tell me what that is important to your
    customers?
        Mr. Ivy. The opt-out provision is as much not wanting to
    have a smart meter on the side of their house as it is anything
    else, frankly. So they have a standard digital meter that we
    read manually once a month. That is not very many that are
    left, and less than \1/2\ a percent of our consumers went that
    direction. I am more concerned about the hourly information
    that we can collect and maintain in our large database that we
    have. That is the part that I am looking to try to conceal, and
    if people can still get access to more historical-type
    information that they can get already before smart meters were
    available, fine. I don't have an issue with that.
        Mr. Griffith. OK. I do appreciate that. I am concerned
    about all the collection of this data and being able to predict
    with the new smart grids and so forth what the usage is going
    to be is very important, but when it comes to an individual
    house, sometimes, you know, just because we can doesn't mean we
    should. So I appreciate that perspective. I am excited--
    although I am having some kind of a technical glitch here, I
    don't know whether my phone is too close or whether I am just
    electric today or something--but, Mr. Kamen, I am excited about
    the technology you are talking about with these small
    generators. So how small a facility can they be used at, and
    how big can you go?
        Mr. Kamen. Sadly, I think again, the thermodynamics limits
    this kind of technology from getting very, very big, but it can
    get pretty small. We built a few small ones for DARPA a number
    of years ago that a man could carry around base, and run it on
    any liquid fuel. The ones that we build now at NRG produce 10
    kilowatts, that is enough for a small neighborhood of houses or
    a small business----
        Mr. Griffith. All right, let us----
        Mr. Kamen [continuing]. The size of a typical home
    appliance. I----
        Mr. Griffith. Let us define that small neighborhood. I live
    on a cul-de-sac with 13 houses, do I need to be bigger?
        Mr. Kamen. OK. The average American home consumes less than
    2 kilowatts. So a 10 kilowatt unit, and I would probably put a
    cluster of three or four of them on a pad, and then they, at
    that last pad at the bottom of what used to come from all those
    things we have been talking about, distribution, switch--half--
    let us say four of these on a pad would handle your
    neighborhood and would have the advantage that if one of them
    went down, with the redundancy, you have the other three would
    keep everybody happy, and at their convenience, somebody would
    fix the one that went down.
        Mr. Griffith. And as a part of that, because I was thinking
    about it when the testimony was going on earlier about the
    storms and the neighborhoods being wiped out----
        Mr. Kamen. The big advantage we have is, of course, we run
    on any fuel, and typically your neighborhood has buried lines
    in it that are bringing natural gas. You probably have buried
    tanks with heating oil or propane. Those things are way less
    susceptible to problems than wires running through all the
    trees that get taken down by ice or wind or hurricanes, and
    these boxes then are so close to where you need them that the
    rest of the system going down hundreds of miles away isn't
    going to affect you, and again, they are so close to your loads
    that you can also take their ``waste heat'' and turn it into
    your heat and hot water. It is no longer waste.
        Mr. Griffith. Well, I am hoping I have time to get back to
    waste heat, but you said it could use any fuel at--on a couple
    of occasions, but then once you said liquid fuel----
        Mr. Kamen. Or gaseous. We right now run on natural gas,
    propane, diesel fuel, gasoline. The device is actually running
    on something that looks like a burner in your hot water heater,
    which is why it doesn't make lots of noise. An engine, diesel
    cycle, Rankine cycle, auto cycle, typical--an engine has a very
    specific kind of fuel because it touches every part of the
    inside of your engine. It gets atomized, a spark comes in,
    compression come--an engine typically has a very, very
    selective appetite for fuel, but your hot water heater will
    keep water hot if there is a flame under it, and it doesn't
    really care what the fuel is. We are running a system that
    looks much more similar to your hot water heater, but we turn
    some of that energy into electricity instead of heat.
        Mr. Griffith. So if I had a big storm, and for some reason
    I lost--let us say I have natural gas, which my neighborhood
    doesn't, but let us say that we had natural gas, and some--for
    some reason we lost our natural gas, would I be able to drive
    down to the local gas station and----
        Mr. Kamen. Absolutely.
        Mr. Griffith [continuing]. Get my tank filled up?
        Mr. Kamen. Absolutely. When we were asked to fire these
    little ones up for the Department of Defense, the original deal
    they said was you have to be able to switch from one fuel to
    another with only a 2-hour cool down, shutdown and refit it. We
    said to them we don't need 2 hours, we will add a little
    gasoline to the diesel fuel, throw in a little beer and let it
    keep running, and we never even shut the engines off as we
    changed fuel.
        Mr. Griffith. I think this is exciting, and I would love to
    get to waste heat but my time is up, but I find it exciting
    from another perspective because one of the fears that some
    folks have, and I am--probably share some of that, is that if
    you get a smart grid that covers everything, and you have just
    a few big providers, that gives a lot of power to a few folks
    in the switch room. This gives power back to smaller
    communities and so forth, and I think it is very exciting
    technology.
        Thank you all so much for being here, all of you. I had
    other questions for others but I don't have time, but what a
    great panel. Thank you.
        Mr. Whitfield. Gentleman yields back.
        At this time, recognize the gentleman from Texas, Mr.
    Green, 5 minutes.
        Mr. Green. Thank you, Mr. Chairman. And I want to thank our
    panel.
        You know, we draft legislation and if it becomes law, it
    may be 30 years before we go back and visit it. And back
    yesterday, we had a hearing on oil exports, it is from the
    1970s. I know you all have a lot of good suggestions in your
    remarks about what is going to happen in the electricity market
    over the next few years in alternative fuels. I just am glad to
    hear that, you know, my generator I bought when Hurricane Ike
    was hitting Houston, Texas, in September 2008, that I may have
    another fuel source from going down and, you know, buying
    gasoline. And the problem is we haven't needed that generator
    for 7 years, but--so I have to start it up every 30 days to
    make sure it doesn't foul up when we need it.
        I know that sometimes you are all over the board though on
    envisioning what may happen with industrial and consumer
    demand. I know the testimony, and we have seen it,
    efficiencies, that is part of--should be part of what we do,
    but at least in my area, and I have east Harris County, we have
    refineries and chemical plants, they are always looking for
    ways that they can efficiently run those plants and, you know,
    as cheap as they can. And some of them probably have cut their
    fuel requirements over the years because the cogeneration and
    lots of things, in fact, I don't think we have a chemical plant
    that doesn't have a cogen facility, but do you expect
    industrial and consumer demand to increase over the new few
    years? We can't save our way out of the power.
        Mr. Ivy. If I can jump in. I assume you are talking about
    retail customer consumption, industrial consumer demand. What
    we are seeing all across our industry is kind of a suppression
    of demand increase on us. So on a per unit basis, let us say,
    households, for example, they are not consuming even though
    they have as many appliances as they have ever had. They have
    much more energy-efficient appliances. And we are seeing a
    little bit of that on the industrial sector as well. We are
    going to see a--I will caveat this, based on the cost of
    energy, we could see an increase in industrial demand based on
    industrial growth, able to add new processes to their
    facilities and whatnot, and I think that is very important
    while we continue to keep our eye on what the price that we are
    giving them is, because that signals what they are going to be
    doing. That is going to be probably where the main amount of
    growth in electricity consumption comes from, in my opinion.
        Mr. Green. Anyone else?
        Mr. Patel. Well, I think there are certain parts of the
    country that are seeing load growth because of electric
    vehicles. That is obviously very small as a percentage of load
    growth right now, but that is occurring, and I think that
    depending on the price evolution of electric vehicles, we could
    see a rapid adoption of that. But I would also say there is
    something that is actually keeping or containing the growth on
    the electrical demand side, and that is the fact that, it goes
    back again to our regulatory compact since 1935 which, in
    effect, utilities are constrained to operate at one point in
    the customer's demand curve. And it is actually multiple points
    depending on whether you are a, you know, industrial or
    commercial customer, but there are relatively few points on the
    customer's demand curve that utilities are constrained to
    operate on. If we were imagined to say allow the utility to
    address different customer demands, but also at different price
    points, now the total opportunity to the electrical--to the
    electric delivery ecosystem as a whole actually can increase.
    And there are some prime examples of where there is a need to
    do this. In storm--particularly storm-prone areas, there are
    cases where there is a demographic living in those areas that
    are actually willing to pay more for electrical service should
    it be recovered more quickly. Now, the utilities are currently
    constrained to offer a price of electricity in that area and
    other areas in their service territory that is the same, yet
    there is demand that goes unfulfilled because of this fact. And
    so if you were to enable utilities to operate at multiple
    points and address--diversify demand from the customer, you can
    actually now increase the total size----
        Mr. Green. I only have 5 minutes, so appreciate it.
        One of the issues though, and I understand where you are
    coming from on that, but--is infrastructure. For example, we
    have--Texas has grown--wind power--predominantly in west Texas,
    but also on the Gulf Coast. Gulf Coast it is much easier to do
    transmission to the urban areas, San Antonio, Austin, Dallas,
    Fort Worth, whereas west Texas, the ratepayers in Texas to get
    that spending $5 billion for the transmission. And we are--of
    course, we have a competitive market in ERCOT that--and we are
    very proud of that. In fact, whether you are democrat or
    republican for Texas, we barred our ability--although ERCOT has
    gone through some tough times, but I think they are back on
    their feet now, they are much better.
        Mr. Ivy, in the sector--the new transmission lines, we--
    should we be concerned with building more of these intrastate
    in eastern Texas or interstate?
        Mr. Ivy. As renewable energy gets to be much more prolific
    in our industry, our ability to offload the variability is a
    way to help manage the system reliability. If any one of us
    believes that we are going to get up to 30, 40, 50 percent
    penetration and manage it all on our own, we are not drinking
    the right Kool-Aid. So I think it is very important that we
    start looking at--in Texas' case, that is almost blasphemy to
    say that you are going to build transmission outside the State
    like that, but you may well get to the point where that needs
    to be the thing that you do just to be able to help manage the
    variability, but still facilitate----
        Mr. Green. Mr. Chairman, I appreciate it, and I know I am
    out of time, but in Texas we don't mind selling it to you, we
    just don't want you to take it from us.
        Mr. Whitfield. Thank you.
        And at this time, I recognize the gentlelady from North
    Carolina, Mrs. Ellmers, for 5 minutes.
        Mrs. Ellmers. Thank you so much to my colleague, and thank
    you for this panel. This is awesome. And, Ranking Member
    McNerney, I don't know if he had mentioned, because I had to
    step out, that we co-chair the Grid Innovation Caucus together,
    and we are very, very excited and energized, no pun intended,
    on this issue and all of the significance of it.
        And, Mr. Kamen, I can't agree with you more, when it comes
    to thermodynamics and then when you are talking about what we
    do here, it makes absolutely no sense. You are talking about
    logic and facts, and unfortunately, many times those things do
    not fit into what we do here, unfortunately. So, you know, it
    is so funny, I have my list of questions and I have changed up,
    you know, as I am listening to the conversation because I want
    to ask everything and, obviously, I can't.
        I do want to get to the question of the hurdles that are in
    place, that are standing in the way of us moving forward with
    more of the grid innovation, and how do we pay for this, what
    do we do, how can we do a better job as legislators just being
    able to tell your story and the advancements that can happen.
    You know, I just believe that when we are talking about energy,
    and long-term energy policy for our future of this country, we
    have the grid technology as a part of that conversation. It is
    just so vital to our future.
        You know, Mr. Atkinson, I just want to go back to the
    conversation we have been having about the, you know, how we
    incorporate analytics into everything that we are doing, and
    obviously, that is a big part. As far as your ability to
    improve the way you forecast how energy will be used into the
    future, and the supply that is needed, are your companies
    incorporating these things, do you have that capability, and
    are there metrics in place now where we can start measuring the
    efficiencies and the improvements?
        Mr. Atkinson. Yes, we do those things. The--we do, you
    know, multiple levels of load forecasting----
        Mrs. Ellmers. Um-hum.
        Mr. Atkinson [continuing]. Or help utilities do multiple
    levels of load forecasting. We have the technology that allows
    them, you know, short-term, medium-term, long-term, based on
    lots of factors, lots of variability, historical patterns,
    weather patterns, existing weather, you know, in the near-term,
    you know, projected weather in the far-term. That is, of
    course, only a small piece of data analytics.
        Mrs. Ellmers. Um-hum.
        Mr. Atkinson [continuing]. But it, you know, it is a pretty
    major piece for the utilities because, you know, as we have
    talked about here today, you know, there is a lot of assets on
    the grid and they are incredible assets. A lot of them are very
    big and move slowly.
        Mrs. Ellmers. Um-hum.
        Mr. Atkinson. You know, what Mr. Kamen is talking about----
        Mrs. Ellmers. Um-hum.
        Mr. Atkinson [continuing]. Are some smaller and more nimble
    assets.
        Mrs. Ellmers. Um-hum.
        Mr. Atkinson. And, you know, again, you need kind of an
    all-the-above though. Everything needs to be considered,
    everything needs to be integrated, and the more accurate you
    are in what you do, you can balance those different assets and,
    you know, the intermittency with the other renewable assets as
    well, you know, be it wind, solar, storage.
        Mrs. Ellmers. Um-hum.
        Mr. Atkinson. Storage----
        Mrs. Ellmers. Um-hum.
        Mr. Atkinson [continuing]. Is a big piece of what we are
    also talking about as well. So again, it is a little bit of an
    all-the-above. We have the analytics today to do this kind of
    forecasting. We have the technology that also integrates, you
    know, the control systems, as it were, of all the different
    types of technologies, understands what they are doing, and is
    able to present a simple view of that to the operators in the
    control room, to the utilities who are on the frontlines----
        Mrs. Ellmers. Um-hum.
        Mr. Atkinson [continuing]. Of, you know, making sure that
    we all have electricity at the flip of a switch. That is what
    we want.
        Mrs. Ellmers. Yes. And, Mr. Christiansen, you--I can see
    that you want to comment on that as well.
        Mr. Christiansen. Yes, and I guess the--my comment goes out
    to the type of data that we use----
        Mrs. Ellmers. Um-hum.
        Mr. Christiansen [continuing]. When we typically use these
    analyses, something that Alevo does as well. We try to--we do
    base systems to evaluate the proposition of what storage
    brings. And it goes back to Mr. Siebel's comment that, you
    know, the amount of data that we need to really optimize the
    grid is tremendous, and when we look at average data of just
    typically what is available today as an average heat grid for
    the year----
        Mrs. Ellmers. Um-hum.
        Mr. Christiansen [continuing]. It really--when we look at
    the variability and the granulidity we need for the grid today,
    it is just not enough data to make the----
        Mrs. Ellmers. Um-hum.
        Mr. Christiansen [continuing]. Choices or to look at the
    value proposition.
        Mrs. Ellmers. Um-hum.
        Mr. Christiansen. So really, it goes down to collecting,
    you know, down to sub-hourly data----
        Mrs. Ellmers. Um-hum.
        Mr. Christiansen [continuing]. Regarding automation--
        Mrs. Ellmers. Um-hum.
        Mr. Christiansen [continuing]. That type of data.
        Mrs. Ellmers. One of the things that I have learned over
    time is for my rural electric co-ops, the importance of the
    smart meters for consumers and how they have been able to
    really have that dynamic relationship with their providers, so
    that they can actually control cost. So I would just like to
    add to that in my 5 seconds left. Thank you on behalf of the
    customers of our rural electric co-ops because you are
    providing for them the--this vital piece so that they can
    actually be doing a better job in their costs every day. So
    thank you. And thank you to the panel. You guys are awesome.
        Mr. Whitfield. Well, thank you.
        That concludes today's hearing, and I want to thank each
    and every one of you for joining us today, for your testimony,
    for responding to our questions. And we look forward to working
    with you as we move forward, and it is going to take the
    efforts of all of us, of course, to be successful.
        And I will keep the record open for 10 days for any
    additional materials.
        And with that, the hearing is concluded.
        [Whereupon, at 12:38 p.m., the subcommittee was adjourned.]
        [Material submitted for inclusion in the record follows:]

                     Prepared statement of Hon. Fred Upton

        America is currently enjoying an energy renaissance, and we
    are all better for it. But this resurgence is not limited to
    just oil and natural gas. In fact, the nation that created the
    modern electricity system is poised to reinvent it, bringing
    with it the potential benefits to both electricity producers
    and consumers all the while helping to keep the American
    economy competitive in the decades ahead.
        Utilities are spending billions of dollars each year
    modernizing the grid and making it smarter. These jobcreating
    technology and infrastructure projects are an integral part of
    our architecture of abundance, and will give us an electricity
    system that can better serve the current and future needs of
    users--from homeowners to small businesses to major
    manufacturers.
        Our potential is exciting. The same information technology
    revolution we have seen in our smart phones and in many new
    business models can be applied to create an electricity system
    that is more secure, reliable, efficient, integrated, and
    responsive to user needs.
        Old problems like power outages will be addressed as a
    smarter grid can substantially reduce the number and duration
    of blackouts. At the same time, new opportunities are emerging,
    such as electricity storage breakthroughs that can improve
    efficiency and allow for greater diversity of supply, and
    better communications between each link in the electricity
    chain to further drive efficiencies.
        And greater transparency and new technologies increasingly
    allow consumers and businesses to have more control over their
    electricity use. For homeowners in Michigan and across the
    country, that means help where it matters most--the bottom line
    with lower electric bills. And for businesses, that means less
    spending on energy and more available for hiring. Lower bills
    and more jobs--the future is certainly bright.
        But with new technologies come new challenges. Just as data
    theft is a crime that previous generations didn't have to worry
    about, a digitally connected grid is subject to new forms of
    manipulation by bad actors. We need to protect both the grid
    and consumers from cyber threats and other risks. The good news
    is that the same advances that make these threats possible are
    also capable of addressing them.
        Of course, Congress must decide the proper role of
    Government in these changes to the electricity system. New
    mandates and subsidies are not the answer. But we do need to
    identify and address regulatory barriers to entry, market-
    distorting incentives, and artificial constraints on
    competition that will be critical to further innovation.
        Although the age of electricity is well into its second
    century, the pace of innovation is as rapid as ever. Federal
    energy policy needs to adapt in order to ensure that these
    advances can continue.

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