    [Senate Hearing 114-31]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 114-31

     ``THE STATE OF TECHNOLOGICAL INNOVATION RELATED TO THE ELECTRIC GRID''

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

                                    HEARING

                                   BEFORE THE

                                  COMMITTEE ON
                          ENERGY AND NATURAL RESOURCES
                              UNITED STATES SENATE

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 FIRST SESSION

                                       ON

                    ``THE STATE OF TECHNOLOGICAL INNOVATION
                         RELATED TO THE ELECTRIC GRID''

                                   ----------

                                 MARCH 17, 2015

                           Printed for the use of the
                   Committee on Energy and Natural Resources

                                                             S. Hrg. 114-31

     ``THE STATE OF TECHNOLOGICAL INNOVATION RELATED TO THE ELECTRIC GRID''

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

                                    HEARING

                                   BEFORE THE

                                  COMMITTEE ON
                          ENERGY AND NATURAL RESOURCES
                              UNITED STATES SENATE

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 FIRST SESSION

                                       ON

                    ``THE STATE OF TECHNOLOGICAL INNOVATION
                         RELATED TO THE ELECTRIC GRID''

                                   __________

                                 MARCH 17, 2015

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                           Printed for the use of the
                   Committee on Energy and Natural Resources
                                    ______

                             U.S. GOVERNMENT PUBLISHING OFFICE

    94-050                         WASHINGTON : 2015
    -----------------------------------------------------------------------
      For sale by the Superintendent of Documents, U.S. Government Publishing
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                              Washington, DC 20402-0001

                   COMMITTEE ON ENERGY AND NATURAL RESOURCES

                        LISA MURKOWSKI, Alaska, Chairman
    JOHN BARRASSO, Wyoming               MARIA CANTWELL, Washington
    JAMES E. RISCH, Idaho                RON WYDEN, Oregon
    MIKE LEE, Utah                       BERNARD SANDERS, Vermont
    JEFF FLAKE, Arizona                  DEBBIE STABENOW, Michigan
    STEVE DAINES, Montana                AL FRANKEN, Minnesota
    BILL CASSIDY, Louisiana              JOE MANCHIN III, West Virginia
    CORY GARDNER, Colorado               MARTIN HEINRICH, New Mexico
    ROB PORTMAN, Ohio                    MAZIE K. HIRONO, Hawaii
    JOHN HOEVEN, North Dakota            ANGUS S. KING, Jr., Maine
    LAMAR ALEXANDER, Tennessee           ELIZABETH WARREN, Massachusetts
    SHELLEY MOORE CAPITO, West Virginia
                                     ------
                        KAREN K. BILLUPS, Staff Director
                    PATRICK J. McCORMICK III, Chief Counsel
                     KELLIE DONNELLY, Deputy Chief Counsel
               ANGELA BECKER-DIPPMANN, Democratic Staff Director
                    SAM E. FOWLER, Democratic Chief Counsel
               SPENCER GRAY, Democratic Professional Staff Member

                                C O N T E N T S

                                  ----------

                               OPENING STATEMENTS

                                                                       Page
    Murkowski, Hon. Lisa, Chairman, and a U.S. Senator from Alaska...     1
    Cantwell, Hon. Maria. Ranking Member, and a U.S. Senator from
      Washington.....................................................     3

                                   WITNESSES

    Howard, Dr. Michael, President and CEO, Electric Power Research
      Institute                                                           4
    Littlewood, Dr. Peter, Director, Argonne National Laboratory.....    58
    Taft, Dr. Jeffrey, Chief Architect for Electric Grid
      Transformation, Pacific Northwest National Laboratory..........    69
    Barton, Lisa, Executive Vice President, Transmission, American
      Electric Power.................................................    82
    Edgar, Hon. Lisa, President, National Association of Regulatory
      Utility Commissioners and Commissioner, Florida Public Service
      Commission.....................................................    92

              ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED

    Barton, Lisa
        Opening Statement............................................    82
        Written Testimony............................................    84
        Responses to Questions for the Record........................   334
    Cantwell, Hon. Maria
        Opening Statement............................................     3
    Edgar, Hon. Lisa
        Opening Statement............................................    92
        Written Testimony............................................    94
        Responses to Questions for the Record........................   352
    Howard, Dr. Michael
        Opening Statement............................................     4
        Written Testimony............................................     7
        2011 Technical Report by EPRI entitled ``Estimating the Costs
          and Benefits of the Smart Grid''...........................   114
        Responses to Questions for the Record........................   371
    Littlewood, Dr. Peter
        Opening Statement............................................    58
        Written Testimony............................................    60
        Responses to Questions for the Record........................   390
    Murkowski, Hon. Lisa
        Opening Statement............................................     1
    Taft, Dr. Jeffrey
        Opening Statement............................................    69
        Written Testimony............................................    71
        For the Record: Pacific Northwest Smart Grid Demonstration
          Project entitled ``A Compilation of Success Stories''......   271
        Responses to Questions for the Record........................   412

     ``THE STATE OF TECHNOLOGICAL INNOVATION RELATED TO THE ELECTRIC GRID''

                                  ----------

                            TUESDAY, MARCH 17, 2015

                                   U.S. Senate,
             Committee on Energy and Natural Resources,
                                                        Washington, DC.
        The Committee met, pursuant to notice, at 10:07 a.m. in
    room SD-366, Dirksen Senate Office Building, Hon. Lisa
    Murkowski, Chairman of the Committee, presiding.

      OPENING STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR FROM
                                 ALASKA

        The Chairman. Good morning.
        We're calling to order the Energy Committee. We are here
    for a Grid 2.0 hearing, and it should excite us all.
        This is a good subject. It is an opportunity for us this
    morning to hear testimony from a panel of experts to evaluate
    what's actually happening with technological innovation for the
    electric grid. No other electricity network on Earth provides
    as much power to as many people as reliably and affordably as
    our American grid. It really is a modern marvel, and I think we
    should be proud of what we have accomplished.
        Keeping the lights on, as all segments of the industry have
    for the past 100 years, is not just about flicking the switch
    or changing a bulb. It is a highly complex and technical
    undertaking that requires scores of talented individuals.
        We have also reached a very good point in time to be
    looking at this subject this morning. The grid was built
    incrementally, but the rate at which it changes, or is
    compelled to change, appears to be accelerating. A combination
    of market forces, technological innovation, and policy
    directives at both the federal and the state levels could well
    result in an unprecedented transformation of the electricity
    sector.
        Today's developments have tremendous potential, but they
    also present a number of challenges, like smoothing out the
    intermittency of variable, weather dependent generation. With
    the rise of distributed generation and smart grid technologies,
    Americans are gaining more control over how they use and
    consume electricity, but the grid must be even more closely
    integrated as a result.
        Innovation and new technologies, such as commercially
    viable storage, are clearly necessary to assist in this
    transformation. We are talking a lot in my state about
    microgrids. Many people don't think of Alaska as being a
    pioneer in some of these areas, but what we are doing with
    microgrids--which used to be called ``isolated islanded
    grids''--is really making a difference in a state where
    sometimes it is tough to keep warm or keep the lights on.
        It is always best when public policy responds to proven
    technology advancements. Today, however, we must hope
    technology can deliver solutions to meet political mandates
    while satisfying our expectations for reliability and
    affordability. Two major questions that I have, and I will be
    proposing these to the panelists this morning, are over what
    time period can solutions be developed, and at what cost?
    Credible estimates hold that new grid technologies alone will
    require a cumulative investment of between $300 and $500
    billion over the next 20 years.
        This Administration has rightly classified the electric
    grid as uniquely critical infrastructure because so many
    things--communications, roadways, hospitals--depend upon a
    functioning grid. The reliability of our nation's grid is
    therefore paramount, and the impact of policy directives must
    be seriously considered--not dismissed as somehow anti-
    environment or anti-future.
        I focused our Committee on drafting broad energy
    legislation and expect that electric issues will be a key part
    of it. We have an impressive group of panelists with us this
    morning whose testimony will assist us in this effort.
        We have Dr. Michael Howard, who is President and CEO of the
    Electric Power Research Institute. He is going to start us off
    with an overview of the changing integrated grid. He had hoped
    to use a computer for his presentation, but we are still using
    19th century technology here in the Senate, so we are stuck
    with posters, but thank you for that.
        We have also Dr. Peter Littlewood, who is the Director of
    Argonne National Laboratory. He is joining us because research
    is really the foundation of the federal role, and his lab is a
    key part of our efforts on grid modernization and energy
    storage.
        We also have Dr. Jeff Taft, who is the Chief Architect for
    Electric Grid Transformations at the Pacific Northwest National
    Lab. He's here to tell us more about PNNL's work with smart
    grid technologies and grid modernization.
        We have Lisa Barton, who is the Executive Vice President
    for Transmission for American Electric Power. She is here to
    share the perspective of a major utility that operates the
    nation's largest electricity transmission system with 40,000
    miles of transmission lines to deliver electricity in 11
    states.
        To round out the panel this morning we have The Honorable
    Lisa Edgar, a Commissioner at the Florida Public Service
    Commission and President of NARUC, the National Association of
    Regulatory Utility Commissioners. She will present the state's
    perspective which, of course, is invaluable because so much of
    this transition is happening at the retail level.
        So I welcome all of our panelists, and I look forward to
    your presentations.
        We do have a couple of votes coming up a little after 11
    o'clock this morning, so we may be a little bit disjointed
    here, but we certainly intend to spend the full time this
    morning getting the most that we can from our panelists.
        With that, I would like to turn to my Ranking Member,
    Senator Cantwell.

     STATEMENT OF HON. MARIA CANTWELL, U.S. SENATOR FROM WASHINGTON

        Senator Cantwell. Thank you, Madam Chairman and thank you
    for holding this important hearing today. I also join you in
    thanking the witnesses for being here to discuss these issues.
        As our economy has evolved and information technology has
    evolved, we have seen it has disrupted many industries and
    business models, everything from the telecom industry to the
    music industry. So I think today we'll have a little bit of
    discussion about what that disruption is also going to mean for
    the electricity industry and how the advanced electrical grid
    is part of efficiency that will drive savings to consumers and
    businesses.
        The grid of tomorrow should offer new opportunities for
    consumers, savings on their electricity bills, and lower costs
    for businesses through new technology. These aren't obscure
    academic or regulatory debates. These things are hitting the
    streets today.
        States as diverse as Idaho, Georgia, New Jersey, and
    California have sped ahead with distributed generation, smart
    meters, and net metering. Some places around the world, like
    South Africa and Uganda, have skipped the capital-intensive
    steps of developing centralized grids and just used pre-pay
    options so consumers can benefit from cheap electricity using
    American technology. Cities in the United States like Spokane,
    Monterey, Salt Lake, and McAllen, Texas, have installed or are
    considering electric bus designs that include wireless charging
    stations embedded in roadways.
        My point is that we can't predict where the technology will
    take us, but we can invest in efficient electricity grids that
    make these innovations possible and give consumers more
    options.
        Our hearing today is about the savings, no matter what the
    source of generation, and putting that to use in a smarter way.
    It doesn't matter if your state relies on hydro power, like my
    State of Washington, or nuclear or fossil fuels. The cost of
    wind and solar has come down, and the cost of natural gas has
    come down along with the integration of smart appliances. The
    grid is being used in new ways to drive double digit savings.
        The challenges and opportunities we face in upgrading our
    electricity grid and thinking about the global markets is what
    the debate of this panel is today.
        According to a 2011 Electric Power Research Institute
    report, investments in the grid will require $300 to $500
    billion of new investment over the next 20 years.
        Bloomberg New Energy Finance calculated that global smart
    grid investments alone reached $15 billion in 2013, and Pike
    Research estimates that global spending on this will reach $34
    billion by 2020.
        I say those numbers because there's an opportunity here for
    the United States to continue to perfect technology that will
    then become a global platform.
        The first job of utilities, power producers, and technology
    vendors in each of our states is to sell and deliver reliable
    electricity. The federal government is uniquely situated to
    take the broadest and longest view of that electrical grid as a
    platform for economic development and diversification. This
    broad view enables smart people like the national labs, that
    are here today, and a program like ARPA-E, to explore solutions
    that are creative and promising, but offer no short term return
    and will challenge us on how to implement these over the long
    run.
        The grid's efficiency, enhancing its resiliency, security,
    and new technologies are all part of the decisions that we're
    going to hear from actual regulators today and how they're
    implementing those. Obviously some of these solutions are
    already being pushed in the marketplace and can deliver new
    efficiencies.
        As Chairman Murkowski and I discuss with our colleagues our
    broader energy policy for this Congress, I hope we can find
    some common ground on continuing the federal investment in grid
    technologies. It does pay off for consumers and our economy.
        The Bonneville Power Administration helped lead the way 15
    years ago towards a responsive grid by installing the first
    network of sensors to take wide-area measurements of
    transmission systems.
        We'll hear from Dr. Taft today from the Pacific Northwest
    National Lab, headquartered in Richland, Washington. The lab
    has a long history of working hand-in-hand with industry on
    pioneering new methods of controlling our rapidly changing
    electrical grid, with all sorts of new energy storage, new
    tools for predicting, and integrating the output of variable
    generation such as wind and solar. It was also an integral part
    of the largest smart grid demonstration project in the country.
        Grid technology companies like Itron, Schweitzer, and
    Alstom all have roots in Washington State and employ thousands
    of people. And as our economy grows, it continues to find new
    sources of distributed generation.
        So I want to applaud Secretary Moniz and the Department of
    Energy for convening the Grid Modernization Laboratory
    Consortium. This will help spread the wealth of the creativity
    of our national labs through our state, private, and academic
    partners.
        As I've said, I will continue to work with the Chair as we
    think about energy policy on how to support the investments in
    a smarter grid. Thank you.
        The Chairman. Thank you, Senator Cantwell. With that, we
    will begin with our panel. We'll start with you, Dr. Howard and
    just go straight on down the line.
        I ask that you to keep your comments to five minutes. Your
    full testimony will be included as part of the record.
        Welcome and good morning.

     STATEMENT OF DR. MICHAEL HOWARD, PRESIDENT AND CEO, ELECTRIC
                        POWER RESEARCH INSTITUTE

        Dr. Howard. Thank you very much, Chairman Murkowski,
    Ranking Member Cantwell, and members of the Committee. I'm Mike
    Howard, President and CEO of the Electric Power Research
    Institute.
        This is EPRI's 43rd year. We were started by the electric
    utility industry to focus on advancing the science and
    technologies needed to ensure that society continues to have
    reliable, affordable, and environmentally responsible
    electricity. That's been our focus for 43 years.
        We are a global organization. We work with utilities across
    the country and in 30 different countries globally, so we have
    a global perspective of some of the challenges that we're
    facing.
        Our research at EPRI focuses on the generation of
    electricity to the delivery of electricity to the end use of
    electricity including energy efficiency. Last year we published
    a report. The report is entitled, ``The Integrated Grid,
    Realizing the Full Value of Central and Distributed Energy
    Resources,'' and my remarks today are going to focus on that
    report and some of the key insights from that report.
        I'm going to use this chart, and you should have a handout
    as well. It's a simplified version of the electric utility
    industry, but I'm going to refer to that.
        Today's power system is extremely complex. It's an
    interconnected machine that includes everything from generation
    on the left-hand side, to delivery in the middle, to consumers
    on the right-hand side. Traditionally, the system was designed
    to flow electricity from the left-hand side all the way to the
    right-hand side.
        The system has to make sure that at every given second
    there is enough generation to supply consumer's demand for
    electricity, and that is a paramount criteria for the safe
    operation of the electrical power system. But the entire power
    system is changing, and it's changing at a very, very fast
    pace. Faster than I've seen in my 35 year career in this
    industry, and that's an exciting time to observe and be part of
    the technologies that are evolving.
        As an example of these changes, let's look at the customer
    side generation, which is on the right-hand side. It's causing
    power, in some cases, to flow from the right to the left, and
    this is introducing a two way power flow. It's just one example
    of some of the changes that are occurring.
        Most of these changes occurring in the power system are
    occurring on the right-hand side of this chart, which is at the
    edge of the distribution system, and they're related to
    technologies referred to as distributed energy resources. These
    important technologies include energy storage, demand response,
    and smart thermostats, which is another example of some of the
    technologies that are occurring.
        Our research suggests that the successful integration of
    these distributed energy resources must begin with the existing
    power system. However, the existing power system, specifically
    the distribution system, was not designed to accommodate this
    high penetration of distributed energy resources. To fully
    realize the value of these distributed energy resources and to
    serve all customers at the established standards of quality and
    reliability, we must integrate these technologies into the
    planning and operations of the entire power system.
        Most grid connected distributed energy resources benefit
    from the electrical support and the flexibility and reliability
    of the entire power system but are not integrated into the
    power system. For example, customers with distributed
    generation may not consume any net energy from the grid, yet
    they need the power at times when their own generation, such as
    rooftop PV, does not provide enough immediate electricity. So
    consumers need the ability or capacity to tap into the grid and
    even use grid power, though at different times of the day they
    may return actual energy to the grid. So with increased
    distributed energy resources capacity related costs will become
    an increased portion of the overall cost of electricity.
        One of the key points that I want to emphasize today is the
    importance of understanding capacity and energy and the impact
    that it has on the system.
        In my written testimony I've outlined in more detail the
    important items policy makers should consider to enable the
    integrated grid. I appreciate the opportunity to be here this
    morning, and I look forward to your questions. Thank you.
        [The prepared statement of Dr. Howard follows:]

       [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. Thank you, Dr. Howard. We will be sure to
    have some. Thank you for the model here of your integrated
    grid.
        Let's go to Dr. Littlewood. Welcome.

     STATEMENT OF DR. PETER LITTLEWOOD, DIRECTOR, ARGONNE NATIONAL
                               LABORATORY

        Dr. Littlewood. Good morning, Chairman Murkowski, Ranking
    Member Cantwell and members of the Committee. Thank you for the
    opportunity to appear before you.
        A reliable, efficient, and secure electrical grid is, of
    course, essential to the United States' prosperity,
    competitiveness, and innovation. As we've just heard, our
    existing grid struggles to accommodate the new economy that is
    emerging as the nation and the world shift to clean energy and
    to digital technology.
        Much of the grid was designed and built using technologies
    and organizational principles developed decades ago to serve
    vertically integrated markets with large scale generation
    sources located dozens of miles from consumers. They were
    designed to use centralized control schemes that deliver a one-
    way flow of power to customers. The emerging national economy
    needs a flexible modern grid that accommodates two-way flow of
    electricity and information, provides strong protection against
    physical and cyber risks and the impacts of natural disasters,
    and integrates widely varying, widely distributed energy
    sources such as solar and wind that produce electricity
    intermittently depending on the weather.
        Argonne National Laboratory is a DOE Office of Science lab
    with a long and distinguished history in power R & D. We
    recently joined 13 other DOE laboratories in the Grid
    Modernization Laboratory Consortium. I'll refer to this as the
    GMLC, a new initiative started last November by Energy
    Secretary Ernest Moniz.
        The GMLC is developing a vision and a plan for moving
    forward and has already identified three specific goals that
    can be achieved through a coordinated national effort to
    modernize the grid and to have in operation by 2025 which would
    yield a 10 percent reduction in the societal cost of power
    outages, a 33 percent reduction in the cost of utility's
    reserve margins, and a 50 percent reduction in the cost of
    integrating energy distribution within the grid.
        The GMLC estimates conservatively that achieving these
    three goals would save the nation's economy $7 billion a year.
    In addition, a coordinated national grid modernization effort
    would help ensure that the future grid is a flexible platform
    for innovation by entrepreneurs and others who can develop
    tools and services that empower consumers and businesses
    helping them make informed energy decisions.
        The GMLC has identified significant opportunities and needs
    in six broad technical areas that are critical to the
    establishment of the future grid. Sensing and measurement to
    report real time data from across the grid.
        Devices and integrated systems that can talk to each other
    over the Internet allow customers to make decisions about their
    energy use and implement those decisions remotely. For example,
    Argonne is helping to make hybrid and electric vehicles future
    grid friendly by working with the automotive and electrical
    supply industries to develop and test systems and technologies
    that let electric vehicles communicate with grid operators and
    to enable ``smart'' charging and discharging, depending on the
    condition of the grid.
        Advanced energy storage systems are critical to integrating
    intermediate, intermittent electricity sources within the grid.
    The Secretary of Energy recently stressed the need for us to
    consider grid and storage as an integrated activity. An
    excellent example of this integration is DOE's Joint Center for
    Energy Storage Research which leverages and expands current
    investments in energy storage research and is a vital component
    of the overarching grid strategy.
        We need to work on system operations and power flow,
    because today's grid relies primarily on control rooms and
    centralized operations.
        The future grid must also be secure and resilient in the
    face of disruptive threats that range from natural disasters to
    terrorist attacks.
        Today's grid is largely reactive, responding to failures
    after they happen. Although advanced control systems have
    improved automatic outage responses, they can expose the grid
    to new cyber risks as digital components proliferate and create
    new points of entry.
        As I mentioned earlier, advances in energy storage are
    critical to integrating clean, renewable energy sources such as
    wind and solar into our electricity supply and also to
    supporting fluctuating demand on microgrids. Breakthroughs in
    battery technology are needed to reduce our dependence on
    petroleum through a broader use of electric vehicles.
        Grid modernization will provide the nation with a reliable
    and secure system that delivers increasingly clean energy to
    business and residences in ways that optimize customers'
    ability to control how, when, and where they consume energy.
    Grid modernization also assures a system that remains resilient
    to a range of threats and vulnerabilities. Success will not
    only save the nation billions of dollars annually, it would
    also create new suites of advanced technology.
        Thank you for your time and attention to this critically
    important topic.
        I'd be pleased to respond to any questions you may have.
        [The prepared statement of Dr. Littlewood follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. Thank you, Dr. Littlewood.
        Next let's go to Dr. Taft, please. Good morning.

      STATEMENT OF DR. JEFFREY TAFT, CHIEF ARCHITECT FOR ELECTRIC
       GRID TRANSFORMATION, PACIFIC NORTHWEST NATIONAL LABORATORY

        Dr. Taft. Thank you, Senator Murkowski and Ranking Member
    Cantwell and the Committee, for inviting me here today.
        I'd like to offer three main points in my discussion.
    First, we're re-engineering the grid with advanced
    technologies, some of which you've heard about, to support many
    new capabilities. Second, these changes are actually
    challenging our existing grid structure and the methods that we
    use to operate it. Third, there are certain key technologies
    that can help resolve the widening gap in our ability to manage
    the grid reliably as we go forward.
        In the U.S. our modernization efforts with advanced
    technology support many new goals and emerging trends that were
    not envisioned for the 20th Century grid. It was thought of as
    a one-way electricity delivery channel with large centralized
    generation to passive users who had little or no choice in
    their energy sources, and it had surprisingly little in the way
    of sensing and measurement to guide operation of that grid.
        Our present modernization efforts are driving new
    technologies at an unprecedented pace, and some of these new
    goals that we have include expanding the diversity in consumer
    choice in electricity sources including distributed and clean
    generation sources.
        The emergence of what we call prosumers. That's a
    combination of a customer who has both the ability to produce
    and consume energy and so thereby put energy back into the grid
    at times.
        The ability of non-utility assets such as ordinary
    buildings to provide services to the grid and cooperate in
    managing grid operations. The convergence of fuel networks,
    transportation networks, and even social networks with the grid
    itself.
        And then, of course, a desire for greatly improved
    reliability, resilience, and security for the grid.
        These changes, some of which are actually occurring virally
    rather than being planned, are modifying the characteristics,
    the behavior, and in some cases the very structure of our grid
    and vastly increasing its complexity of a system that's already
    extremely complex.
        The forgoing are causing this widening gap in the ability
    of us to manage this grid as it evolves. As that gap widens,
    the ability of utilities to manage the grid reliably is
    increasingly challenged. The uneven penetration of new
    technologies mixed with legacy systems only increases that
    challenge. We need new methods and new tools for operating the
    grid in addition to having these new technologies, and we need
    some new kinds of components to help with the grid as well.
        Among all of the very valuable technologies that are being
    applied to the grid, a few stand out in particular as being key
    to resolving this widening gap between the grid as it is
    changing and our ability to operate it. These technologies are
    crucial to the future of the grid regardless of how
    modernization proceeds.
        In particular they are sensing and data analysis--the
    electronic measurement and then the processing of the
    information that results from those measurements to extract
    useful information on very large scales requires new kinds of
    analysis tools for the utilities.
        High voltage power electronics, adjustable electronics
    allow us to control grid power flows in ways that are more
    sophisticated than our present on/off, electric-mechanical
    switches.
        Fast and flexible bulk electric storage which can act as
    the buffer that evens out variations in power fluctuations
    caused by various diverse energy sources.
        And finally, advanced planning and control methods. We need
    new methods that will require the next generation of high
    performance computing coupled with new control mathematics.
        The last three of those have so much potential for positive
    impact that we view the combination of storage, power
    electronics, and advanced control to be a new general purpose
    grid component as fundamental as a power transformer or a
    circuit breaker.
        The Grid Modernization effort that you've already heard
    about, launched by Secretary Moniz, is an important effort to
    systematically address all of these emerging challenges. It's
    designed to leverage the broad assets of the national
    laboratory system and to deliver an integrated plan that
    connects all of the grid efforts in the Department of Energy.
    It also recognizes the importance of partnering with industry,
    the states and regional stakeholders in addressing these
    challenges going forward.
        Thank you, and I'd be happy to answer any questions.
        [The prepared statement of Dr. Taft follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. Thank you, Dr. Taft.
        Ms. Barton, welcome.

          STATEMENT OF LISA BARTON, EXECUTIVE VICE PRESIDENT,
                 TRANSMISSION, AMERICAN ELECTRIC POWER

        Ms. Barton. Good morning, Chairman Murkowski, Ranking
    Senator Cantwell, members of the Committee and fellow
    panelists. I appreciate the opportunity to speak with you here
    today.
        My name is Lisa Barton. I'm the Executive Vice President of
    Transmission for American Electric Power. I also serve on the
    Board of Directors of Reliability First Corporation.
        There are three key points that I'd like to leave you with
    today for your consideration.
        The first is that the grid is a natural enabler of new
    technologies. When I think about the grid and what it does for
    new technologies, I make the analogy between its and our robust
    data network. Today we have the ability with smart devices at
    any time, nearly anywhere, to pull out that device and be able
    to do tasks that ten years ago we never would have dreamed
    possible. The high voltage electric grid is similar and plays a
    similar role in society. It provides the backbone that supports
    diverse generation and distributed energy technologies.
        The AEP grid is designed to accommodate two way power
    flows, so it is different from the distribution system, and
    it's a point worth noting.
        It is also designed to withstand component failures,
    designed to withstand the loss of a large generator and the
    loss of one or more large transmission lines, so it is an
    extraordinarily robust system. The grid ensures that
    electricity is delivered in a cost effective, efficient, and
    reliable manner whether it's produced at a large power plant or
    on the roof of a house.
        The second point that I'd like to convey is the importance
    of ensuring a reliable and resilient grid for our economy and
    for our national security.
        The grid has evolved over time from a fragmented group of
    small, inter-dispersed systems to one that is a networked, a
    very strong networked system. It has been touted as the largest
    synchronist machine on the Earth. We own the system that many
    nations aspire to own. Therefore it is vital that we do not
    casually discount the power of the grid, the existing fleet of
    generation, and the tens of thousands of utility workers,
    particularly line workers, who stand ready to address system
    needs during times of system emergencies.
        The grid serves as the foundation of our economy,
    prosperity, and national security. As policy makers examine and
    evaluate the purpose of the grid and the potential for new
    technology such as wind, solar, distributed generation, battery
    technologies, and microgrids it's important to recognize that
    the benefits to consumers will be maximized by combining the
    strengths of these resources. It's imperative that we view
    these resources as complementing each other as opposed to
    competing with each other.
        Finally, it's imperative that we support diversified
    technological solutions. To maximize the benefits to the grid,
    we really need to avoid picking winners and losers and instead
    allow the market to identify the best solution for the
    particular circumstance.
        With respect to AEP's territory, one of the unique things
    that we have is a unique perspective given the vastness of the
    territory. We have 11 states where we have transmission
    facilities, and we're also constructing new projects in two
    additional states. Our service territory touches Mexico and
    goes as far north as Michigan.
        As noted in my testimony there are different solutions that
    are in place to fix the problem at hand. We do not have the
    same system in West Virginia as we do in Texas and therefore
    the technologies that we employ in the system itself are very
    different in each of those areas. There is no one size fits all
    solution with respect to the grid.
        Imagine a world where say, three years ago, we chose one
    application or one technology over another. We would have
    missed out on a much more advanced and better solutions, so
    it's important that we don't make those same mistakes with
    respect to the grid. By supporting a diverse set of generation
    resources continuing to invest in the backbone of the grid, we
    will ensure that energy is available, affordable, and reliable
    while enabling customers to optimize cutting edge technologies
    for their benefits.
        I thank you for the opportunity to speak with you here
    today, and I welcome any questions.
        [The prepared statement of Ms. Barton follows:]

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        The Chairman. Thank you, Ms. Barton. And finally, let's go
    to Ms. Edgar. Welcome.

     STATEMENT OF HON. LISA EDGAR, PRESIDENT, NATIONAL ASSOCIATION
     OF REGULATORY UTILITY COMMISSIONERS AND COMMISSIONER, FLORIDA
                       PUBLIC SERVICE COMMISSION

        Ms. Edgar. Thank you. Good morning, Chairman Murkowski,
    Ranking Member Cantwell, Committee Members. My name is Lisa
    Edgar, and I have the honor of serving as President of the
    National Association of Regulatory Utility Commissioners, also
    known as NARUC. I'm also a member of the Florida Public Service
    Commission, and my comments today reflect both
    responsibilities.
        Thank you for the opportunity to testify on issues
    regarding technological innovation and the electric grid. I
    applaud the Committee for holding this hearing and for
    recognizing the role and advances the states have made to
    improve electric service. For state utility regulators ensuring
    the safe, reliable, and affordable delivery of essential
    utility service is our most pressing duty.
        Today's hearing is very timely. Coast to coast change is
    happening all around the electricity industry from smart grid
    deployments to energy efficiency and distributed generation
    projects, state public utility commissions are on the front
    lines and pursuing new and innovative programs across the
    country. As you've heard today DG can offer economic,
    reliability, and environmental benefits to consumers who are
    able to access and use them. When combined with smart meters
    and other resources DG can significantly change how some
    consumers use and consume electricity.
        These resources may also transform our current utility
    construct in ways we haven't even imagined. Yet it is important
    to remember that while consumers come in all shapes and sizes
    from residential to large industrial, the expectation and the
    need for affordable, reliable service is the same no matter who
    is producing or delivering their electricity.
        To be sure, states are leading the way in implementing DG
    programs. At last count over 43 states and the District of
    Columbia had adopted net metering policies. In addition
    numerous states have deployed smart and distributed resources.
        For example, in Florida, my state, one of our utilities
    recently installed a smart grid system called Energy Smart
    Florida. This program installed over four and a half million
    smart meters. Now, of course, this did not come for free or
    without controversy, but it is a concrete step to keep Florida
    on the path for a smarter, nimbler and more reliable grid.
        But while DG can have multiple benefits it also brings
    idiosyncrasies and challenges that cannot be ignored. Solar and
    wind resources are not dispatchable. So if they are needed at a
    time that the sun or the wind isn't producing those
    contributions are limited. Solar and wind also need support to
    operate under many different scenarios and configurations.
        Likewise small, backup fossil units can have worse air
    emission profiles than utility scale units. Grid operators
    generally don't control these resources, and it is hard to
    predict when they will come into the system, where and for what
    time period. These advantages and tradeoffs must be better
    understood and balanced while making policy and cost allocation
    decisions.
        In our view experience has demonstrated that states
    pursuing these initiatives at their own pace is good policy. We
    understand the value these technologies bring, but we also
    recognize the challenges associated with integrating them into
    the grid. Utilities are required to provide electricity 24
    hours a day, seven days a week. We need to ensure that the core
    responsibilities of reliability and affordability are
    maintained while taking into account our local and regional
    differences.
        At NARUC our members have passed resolutions recognizing
    the many collaborative efforts between regulators, consumer
    advocates, utilities and other key stakeholders to address the
    potential for DG and other technologies. These efforts continue
    to be important as we work to better evaluate the benefits and
    the costs as these technologies grow throughout the country.
        In addition hearings like this help ensure that necessary
    consumer protections are maintained.
        It remains our responsibility to facilitate the continued
    provision of safe, reliable, resilient, secure, cost effective,
    and environmentally sound, energy services at fair and
    affordable rates. As regulators part of our job is to bring
    certainty into this fast changing and uncertain dynamic to
    ensure safety, reliability, customer affordability, customer
    satisfaction, environmental sustainability, and financial
    viability. Our unique reality is that we must regulate in the
    public interest for consumers and communities while these
    systems are in transformation.
        Given our statutory responsibility many of these decisions
    are best addressed at the state level.
        Thank you for the opportunity to continue a dialogue and so
    that we all better understand the opportunities and the
    challenges. Thank you.
        [The prepared statement of Ms. Edgar follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. Thank you, Ms. Edgar.
        Thank you to all of the panelists this morning for your
    comments and for beginning what, I think, is going to be a
    very, very interesting discussion.
        Ms. Edgar, you summed it up there when you were talking
    about your responsibility as a state regulator to ensure the
    safety, reliability, customer affordability, environmental
    sustainability, and financial viability and do this all at the
    same time where every day you have to do the basic function of
    making sure that it happens. You have to be able to perform
    while at the same time you're pushing out and you're really
    leading.
        Ms. Barton, you mentioned that we are the envy of the world
    with our grid and what we have, yet we are certainly not
    sitting still here every day.
        We are seeing advances that lead us to be able to do more,
    quicker, faster, and smarter. But this, I think, is our real
    challenge here, and I would like to propose to anybody that
    wants to jump in here.
        You have got, almost, a do no harm type of philosophy that
    you have to get up every morning with, while you're pushing out
    at Argonne with new technologies. Those that are implementing
    and integrating need to make sure that you're able to do so
    without being so out of the way that things don't function
    anymore.
        The question I have is whether or not we can keep going at
    the rate that we are with the innovation and still keep the
    commitment to reliability, affordability, the financial
    security, and the environmental security. Is this sustainable?
    And I hope you say, yes. [Laughter]. Let's start with you, Dr.
    Howard.
        Dr. Howard. Okay. The answer is absolutely yes. The
    hallmark of this industry has been innovation and implement
    that while at the same time you absolutely maintain
    affordability and reliability, and that is the keystone of this
    industry.
        The Chairman. What do you think is the biggest impediment
    to doing all of this? What is your anchor here?
        Dr. Howard. Well----
        The Chairman. Your rock?
        Dr. Howard. We're advancing technologies and that's coming
    along. We need to continue to make investments in research so
    that we can continue to advance these technologies and many of
    which we talked about here today, power electronics, energy
    storage and reconductoring with advanced cables and so on. So
    there's a variety of different technologies and we need to make
    sure we continue to lead in innovation, that we can implement
    these innovations at the regional level because what happens in
    one part of the country is going to be different in another
    part of the country. So there's a lot of regionality issues.
    And we need to make sure that we continue to focus on not just
    an interconnected system which the system is now but an
    integrated system from end to end.
        These are very tough challenges, but I think it comes down
    to research, development and innovation that we're so good at
    in this industry.
        The Chairman. So just in terms of keeping up as these new
    technologies are being developed, being incorporated, you have
    your integrated grid here. It's being used in ways for which it
    was not initially designed. We have now recognized that you've
    got this flow both ways.
        Ms. Edgar, this is probably best directed to you so how do
    pricing mechanisms then need to be adjusted so the value that's
    generated from both the grid and the distributed generation is
    captured? Because if you've got a system that was in place and
    this is your base and you've got all these changes, is that
    keeping up with the technology?
        Ms. Edgar. Thank you, Madam Chair, for the question. As
    you're well aware, customers all across the country have
    invested a great deal of money, money from their utility bills,
    money from their monthly family bills, into the system that we
    have. A concern that I believe needs to be part of the
    discussion is that those customers continue to get value from
    those investments as we are integrating new technologies and
    new systems into the larger system.
        The Chairman. Are we getting that yet?
        Ms. Edgar. In some areas, yes and perhaps in some areas,
    less so. One of the discussions here today has been about how
    to maximize efficiencies by using new technologies, and that's
    an important balance in all of these discussions. As is how do
    we use traditional rate making, innovative rate making, how do
    we attract investment while giving good value to customers and
    continuing to have that reliable, resilient system?
        The Chairman. Senator Cantwell.
        Senator Cantwell. Thank you, Madam Chair.
        I think I am going to try to get three things in, since I
    don't know what is going to happen with votes.
        Dr. Taft, could you tell us what you think the three
    federal priorities should be to accelerate the transition
    that's already happening?
        Dr. Littlewood, how far do you think we are from game
    changing storage?
        Ms. Edgar, isn't the grid investment really part of our
    security? Ms. Barton mentioned it as well.
        When you talk about grid security or any security, it is
    always about hardening the targets and redundancy. And
    basically continuing the development of smart grid gives us an
    incredible amount of redundancy, juxtaposed to some of the
    other ideas that are being talked about in other committees.
    Investing in smart grid will help us with our security.
        Dr. Taft. I'll start. We need to be able to take advantage
    of the start we already have in adding instrumentation and
    measurement capability to the grid. A lot of work has already
    been done at the transmission level with the deployment of
    phasor measurement units. More work like that is being done at
    the distribution level. It produces enormous amounts of data.
        Going forward one of the things we need to do is be able to
    process that data to extract the useful information and connect
    that to decision and control.
        So it's really a three step process: measure, analyze and
    then control. We need more advanced capabilities for that
    control including distributed control as well as centralized
    control, and for certain key technologies like storage we need
    to continue driving the cost down so those become very
    practical.
        Lastly, I'll say because of the complexity and the growth
    in complexity we need better ways to look at and manage and
    understand that.
        We need architectural tools that help people. All kinds of
    stakeholders appreciate that you have this large tapestry and
    if you pull on the thread on one end something happens on the
    far edge. We see that in the New York REV process, for example,
    where they're working with and struggling with all the
    complexities. So we need tools to help them visualize and
    understand the consequences of changes too.
        Senator Cantwell. Dr. Littlewood, how far away are we from
    game changing storage?
        Dr. Littlewood. Because game changing storage is really a
    research activity, it's rather difficult to predict that. Let
    me first say that conventional storage technologies are
    improving slowly, a few percent a year, and have been doing so
    for a long time. Of course, if you project forward the time
    scale where they will have impact in this business it's
    probably another 20 years at that rate. So it isn't good
    enough. So that's why, of course, there are some major research
    efforts sponsored by Department of Energy and other agencies of
    the government to try and break out of that.
        What I will say is that the space, intellectually, for
    being able to do that is very large. And I am confident that on
    some time scale, which unfortunately I can't give you, we'll
    make the discoveries needed to get forward and do that.
        I would also say that there's a point where you're already
    beginning to see incorporation of storage within microgrids. I
    think the experiments that we'll be doing in the United States
    where microgrids are gradually being introduced in various
    areas and we learn how to integrate storage, wind, solar, small
    scale energy generation in rural areas will propel this much
    faster than it has been at the moment.
        Senator Cantwell. Thank you.
        Dr. Littlewood. I'm actually very bullish on this. I think
    there are great opportunities that will make a big difference.
        Senator Cantwell. Great. Thank you. Ms. Edgar, under 30.
        Ms. Edgar. Thank you, Senator Cantwell. Coming from
    Florida, clearly you can recognize that resiliency and
    redundancy are issues that are very important to us. When I
    first came to the Public Service Commission the issues that we
    were dealing with on a day to day basis were because over the
    course of two years Florida had eight hurricanes and two named
    storms hit our coastline and even into the central areas. We
    had areas of the state that had large outages, three, four,
    five times over the course of two years.
        That resiliency and redundancy is near and dear to the
    issues that we deal with. Changes with technology and
    incorporating new technology certainly will help us withstand
    cyber security risks, physical security risks, weather risks,
    but it also, as we make these changes, brings in new technology
    issues that need to be addressed. And one of the things, as a
    state regulator, that we want to do is make sure that no
    customer group is left behind and that there is transparency as
    we have the discussions about investment and cost allocation.
        Senator Cantwell. Thank you.
        Ms. Edgar. Thank you.
        The Chairman. Senator Barrasso.
        Senator Barrasso. Thank you very much, Madam Chairman.
        Dr. Littlewood, in your testimony you state that our
    electric grid must be secure and resilient in the face of
    disruptive threats that range from natural disasters to
    terrorists attacks. You explain resiliency research is a
    particular strength at the Argonne National Laboratory, and go
    on to say that Argonne and other labs have developed the
    beginnings of a foundational key to secure the grid, the
    national power grid, simulator. The simulator would run virtual
    experiments to test potential vulnerabilities and to develop
    responses to various types of attacks.
        In January the Department of Energy's Inspector General
    released a report examining how FERC, the Federal Energy
    Regulatory Commission, conducted a similar process. In 2013
    former FERC Chairman, Jon Wellinghoff, directed FERC staff to
    identify critical electric substations by location. Chairman
    Wellinghoff also directed FERC staff to create failure
    scenarios to simulate the impact of the loss of these
    substations. The Chairman then decided to share this
    information with individuals and entities outside of the
    federal government. The Inspector General actually found that
    Chairman Wellinghoff made the decision to share the information
    without determining whether the information was classified and
    did so even though FERC staff expressed concern that the
    information, ``could provide terrorists and other adversaries
    with data they might use to disable portions of the grid.''
        Now personally I find these actions deeply troubling, but
    I'm even more troubled that emails between the Chairman and
    FERC staff on this issue were missing from the Chairman's email
    account.
        I understand that Argonne National Laboratory handles
    sensitive information on a regular basis. What steps do you, as
    the Director of Argonne, take to safeguard this information?
        Dr. Littlewood. Sir, Argonne has a prominent role,
    actually, in cyber security in a large number of areas, so we
    actually work very hard to make sure that all transactions like
    this are appropriately vetted and are not shared
    inappropriately.
        I share your concern, Senator, about the risks of
    potentially advertising the vulnerabilities of our network.
        I also think that we need to work, in fact, to develop
    cyber security protocols for how the future grid will operate.
    And this is a very important part, a kind of hidden part, of
    making sure that any developments that we move forward with on
    the future grid are, in fact, robust against terrorist acts and
    terrorist intrusions and other such things.
        Senator Barrasso. One other thing. I noticed in your
    testimony you compare the electric grid with the interstate
    highway system.
        Dr. Littlewood. Right.
        Senator Barrasso. The comparison might suggest that
    Washington should assume virtually all of the responsibility
    for funding the electric grid, but today the vast majority of
    investment for the electric grid actually comes from entities
    other than the federal government. Are you suggesting that the
    federal government be the principle source of funding the
    electric grid or how do you view that whole thing?
        Dr. Littlewood. I certainly didn't intend to suggest that,
    and it's none of my business, actually, to decide what the
    federal government should be doing in that area. I was simply
    pointing out the physical scale of the infrastructure.
        As I think I said earlier with regard to microgrids, one of
    the advantages the United States has over much more centrally
    planned economies is the ability to do experiments and actually
    to develop infrastructure in a way that's responsive to the
    market and enables us to take great advantage of the
    intellectual and scientific and engineering strengths that we
    have.
        So one of the challenges, I think, for the industry and we
    discuss this a great deal, is developing business models which
    are appropriate to be able to deal with that. Notwithstanding
    as we've already heard from EPRI something like $300 to $500
    billion of investment are expected to be required over the next
    20 years.
        Senator Barrasso. Thank you. Thank you, Madam Chairman.
        The Chairman. Senator Warren.
        Senator Warren. Thank you, Madam Chair.
        Last month Energy Secretary Moniz came before this
    Committee to discuss the Department's budget request, and
    during that hearing we had a chance to talk about the power
    grid and specifically how to make sure that the grid can
    reliably distribute electricity throughout the country.
        Well, our power grid has been reliable for so long that,
    for the most part, no one even thinks about it. The grid is
    aging. Much of the technology was developed by Thomas Edison
    and much of the structure was built shortly after World War II,
    and now this aging grid faces new challenges, particularly with
    the rise of extreme weather events that threaten to shut down
    parts of the grid during weather emergencies.
        During our earlier hearing, Secretary Moniz said that,
    ``Distributed generation and microgrids are themselves a
    resiliency tool,'' meaning that in addition to the
    environmental benefits a power grid with more wind and more
    solar spread across multiple locations can actually help
    protect against extreme weather.
        Dr. Littlewood, your testimony discusses how resiliency
    research is a specialty at Argonne National Laboratory which
    you run. Can you explain to us in more detail how it is that
    distributed generation itself can produce system wide
    resiliency?
        Dr. Littlewood. Thank you very much, Senator. That's a very
    prescient and precise question.
        The grid is a very complicated object, so even now when
    it's being driven in a one-way mode it interacts in very
    complicated and very subtle ways. And actually we do not
    understand it.
        If you look at it as a basic principle of resilience, you
    look for individual units that can continue to fight the war
    after the command or control has somehow been taken out. So
    that's one very basic principle about how you build a resilient
    network. It cannot be a single connected object. It has to be a
    web in the same way that the Internet is a web. So by having
    microgrids that can operate independently but still
    communicate, you have the opportunity in the case of a natural
    disaster to be able to reroute energy around affected areas to
    be able to make sure that the other infrastructure, which may
    be affected in the area of a natural disaster, is also not
    impacted.
        One of the dangers in major disasters, of course, is that
    you lose first the grid, then the Internet, then water, then
    the ability to distribute many, many different kinds of things.
    And the very basic principles of resilience tell you that one
    monolithic big thing is a dangerous thing to be working with.
        So the other side of that, the need that actually my
    colleagues have commented on for the ability to model,
    understand and work the operation of the grid in real time. And
    so that's the high level infrastructure which is necessary to
    monitor it, the sensors, the data, the integration, the high
    performance computing.
        Senator Warren. Thank you very much.
        The Energy Secretary and the technical experts at the
    Department are not the only folks who made this connection. A
    recent analysis from the World Bank showed that when there's
    more diversity of energy sources, including more renewable
    energy that's connected to the grid, the grid becomes more
    resilient. Similarly a Massachusetts Climate Change Adaptation
    report from 2011 also recommended diversifying energy supplies
    as a strategy to make our system less prone to failures.
        Extreme weather events are on the rise. Every year these
    events stress the capacity of our power grid. If our technical
    experts are telling us that plugging more renewable energy into
    the system can help protect the grid in the face of these
    extreme weather threats, then we should make it a priority.
    Whatever you think about climate change, we all have an
    interest in keeping the lights on. Thank you.
        The Chairman. Senator Risch.
        Senator Risch. Thank you, Madam Chair.
        Ms. Barton and Ms. Edgar, this question is for you. On the
    Intelligence Committee, we spend hours and hours and hours
    listening to and wringing our hands about the cyber threats.
    There's a lot of us who are convinced that that's going to be
    the next big one that hits the country.
        Can each of you please explain how this plays out in the
    real world? What challenges do you face in the real world
    dealing with this? Ms. Barton, why don't you start with you?
        Ms. Barton. Certainly. The cyber threats are something that
    the utility industry takes extremely seriously. We have a
    number of people who basically sit behind a desk, 24/7, and
    monitor all of the threats that are going on, the attacks that
    are happening, whether it be through fishing attacks and so
    forth or direct attacks with respect to the system itself.
        The ability of this industry to work with the federal
    government and other service providers has been outstanding in
    terms of being able to mitigate any threats. We have a number
    of people on our staff who have a secret clearance so they can
    get access to all kinds of different information.
        We have also paid a lot of attention with respect to
    physical security and our control houses and making sure that
    they are much more resilient than they have been in the past.
    In the end system redundancy is diversity and redundancy are
    really at the heart of reliability. So from a physical
    standpoint one of the things that we are doing is working with
    the RTOs who are responsible now for planning and determining
    what new transmission needs to be built, we are really
    encouraging them to take an accelerated view with respect to
    transmission investments so that the system itself can be more
    reliable by diversifying.
        Senator Risch. Thank you. I appreciate that, and it is
    interesting to hear you talk about your relationship with the
    federal government. As you know, we're struggling with that
    when you have the issues of privacy versus the issues of what's
    got to be done in order to stop this, so I appreciate your
    input on that.
        Ms. Edgar.
        Ms. Edgar. Thank you, Senator, and I'll approach the
    question from perhaps a slightly different angle.
        First off, I will say that, again, the issues of cyber
    security are truly something that, as regulators, do keep us up
    at night. None of us wants to get that call from the governor
    that says, the system is down. Somebody has hacked it. What are
    you doing to fix it?
        However, I can tell you I recently attended a meeting
    that's an ongoing collaborative effort between the Department
    of Energy, the Department of Homeland Security and EEI. I found
    it to be a very progressive and very forward thinking
    collaborative effort between the private industry, state
    regulators and the federal agencies, so I can tell you that a
    lot is going on that should give us all reassurance.
        However, as a state regulator one of the things that we
    struggle with, again, is the cost. Because much of this
    information is and necessarily so, confidential, it is
    difficult when utilities come to us, as a state regulator and
    economic regulator, and we are asked to approve these
    investments and put them into the rate base, into the monthly
    bills of consumers. Yet, because of the security issues, we
    cannot really closely evaluate where that money is going and
    what for. That is something, at the state regulatory level,
    that is still a puzzle that we are needing to work through.
        Senator Risch. That's interesting. I think most consumers
    really aren't fully aware of the challenges the utilities face.
    We all take for granted when we flip the switch, the light goes
    on. And when that doesn't happen, the reasons for it are
    complicated and could be a real danger to the security of the
    United States. So, thanks, thanks for all of that.
        My time is almost up.
        Dr. Taft, I'm aware of the Pacific Northwest smart grid
    demonstration project that you're working on, and I have a
    couple of questions regarding that. Since my time is up and
    with respect to the other people, would it be alright if I
    submit those in writing and you could respond?
        Dr. Taft. Absolutely. We will be very happy to respond.
        Senator Risch. Thank you very much, Dr. Taft. I appreciate
    it.
        Senator Barrasso [presiding]. Thank you, Senator Risch. To
    members of the panel, we're in the middle of roll call voting
    on the Floor of the Senate. You'll see some of the Committee
    members leave and then come back.
        And with that, Senator Franken, you're next.
        Senator Franken. Thank you. I'm sorry. I'm going back and
    forth to the HELP Committee, health hearings.
        Dr. Howard, I like distributed energy, and I like
    distributed generation. It makes our grid more resilient,
    allows critical infrastructure, like hospitals and military
    bases and others, to stay online during an outage which is very
    important. That's why I've always supported the increased
    deployment of things like combined heat and power and district
    energy, which we have in St. Paul, burns clippings and tree
    limbs and stuff like that then provides electricity for
    downtown St. Paul and heats and cools the buildings. So I like
    distributed energy.
        So I want to ask the panelists about another aspect of
    distributed energy and that's grid scale storage. I apologize
    if this has been discussed already, but I think this is a real
    game changer because it will allow us to deploy renewables,
    more renewables, wind and solar, when needed. It will help
    stabilize the grid, and it will improve our resiliency by
    making sure that we have electricity available on demand and in
    case of an outage.
        Can the panelists in the national labs please describe some
    of the recent advances in grid scale storage and what your
    visions are for deploying this technology in the future?
        Dr. Taft. So let me start, Senator Franken. One of the
    things that we have been doing is looking at storage both in
    terms of the core technology, the fundamentals of how the
    storage devices work, but also how they can be used as system
    components. And you mentioned grid scale storage in particular.
    The ability to use storage in multiple modes is one of the
    things that makes it most interesting. There are a variety of
    functions that it can supply that are useful to the grid, and
    unlike most components, storage can be used in multiple ways
    simultaneously.
        So one of the things that we have been working on is how
    you actually use that in a multi mode fashion because that
    helps spread the cost over more capabilities and make it more
    cost effective.
        The reason that we think of storage, power electronics and
    advance control as a new grid component is because of those new
    capabilities and so many of them as opposed to other components
    that have one function. That's why we think that will become a
    general purpose tool for buildings and grids of the future, and
    so we focus a lot on how to apply it as a system component.
    I'll stop there and let my colleague take over.
        Dr. Littlewood. Thank you. I agree with those comments. Let
    me focus a little bit on the technology side of that.
        Since the need for grid scale storage has only recently
    emerged, it turns out that there's a substantial vacuum in
    technology and science which is needed to support that. Unlike
    mobile storage which has been driven by the consumer
    electronics industry for the last few years, this is a recently
    emerging driver. And that's one of the reasons that the DOE has
    been heavily investing in fundamental research on the basic
    science to be able to do this with the main goal of taking
    prototypes that we already know and understand and have
    opportunities to work with and drive the cost down so that they
    are appropriate for the grid.
        I actually think that on grid scale storage, at least
    electrical storage, we will make some very substantial advances
    within the next few years of driving costs down because this is
    an area which has been underexploited for quite some time.
        Senator Franken. I agree, and I'm glad you're doing this.
        Let me ask about like electric vehicle storage. I mean,
    there you have like at night, wind blows, wind. Electric
    vehicles can store at night. Drive, less gas. Then during the
    day the sun is shining so we get solar, and what are the
    benefits of this approach in terms of reducing our carbon
    emissions?
        Dr. Littlewood. I think they're actually very substantial
    over the long term.
        In the short term, it actually involves getting, you know,
    the electric vehicles to a stage where they are widely adopted.
    And that's largely, again, a matter of cost in it, cost to do
    this.
        Senator Franken. Right.
        Dr. Littlewood. It also involves, I think, doing
    experiments with microgrids because this is the first
    opportunity to do so.
        I think there are big opportunities in rural areas and
    there are big opportunities in certain subdivisions to design
    microgrids that are able to take solar, wind and electrical
    storage and use them effectively. I think a number of utilities
    are actually exploring models by which they can introduce those
    and that involves developing new business models which go along
    with the technologies as they're being invented.
        Senator Franken. I know I'm out of time, but this is
    exploding. I mean, this is happening faster than anyone could
    have conceived. If you look at the explosion in cell phones and
    think about that technology and think about what we're going to
    be doing with all of this stuff. This is a revolution, right?
    And it's good, right? Except for Ms. Barton, right? It's good
    for you too?
        Ms. Barton. Diversity in the generation portfolio is always
    a good thing.
        Senator Franken. Okay, good. I'm sorry I went over my time.
        Senator Barrasso. Thank you, Senator Franken. Senator
    Daines.
        Senator Daines. Thank you, and thanks for holding this
    hearing today.
        I represent the State of Montana. Certainly innovation and
    reliability in the electric grid is an important topic for our
    consumers back home. And thank you for what the witnesses have
    relayed today regarding the challenges that the modern electric
    grid faces.
        But too often the change in generation sources is brought
    by misguided federal policies. And somebody from a state like
    Montana we have truly an all of the above energy portfolio. The
    sun shines a lot. The wind blows a lot. We have an abundance of
    coal, oil, natural gas and hydro, but Montana consumers rely on
    over half of their electrical supply from coal. Montanans are
    severely concerned about the impacts of the EPA's regulation on
    their energy prices, transmission capacity, grid reliability
    and the very jobs that depend on coal production in Montana.
        The Crow Tribe, for example, their unemployment rate today
    is 50 percent. If we lost the coal mining jobs on the Crow
    Reservation, their unemployment rate goes to somewhere north of
    80 percent.
        The tax revenue of coal production in Montana is $118
    million a year. That is how we fund our infrastructure, our
    teachers and our schools. These proposed EPA clean power plant
    rules could threaten operations at Colstrip.
        In fact it threatens coal-fired plants in other states like
    Michigan. In fact it's coal for Montana that powers those
    plants in Michigan, that supplies electricity for the auto
    manufacturing industry there in Detroit.
        My questions surround the impact of clean power plan on
    electricity reliability.
        Ms. Barton, Nick Akins, the CEO of American Electric Power,
    has been outspoken on grid reliability. About a year ago he
    stated in testimony before this very Committee that the
    country, ``dodged a cannonball during the polar vortex.'' He
    also reiterated a point he made a month earlier that AEP used
    89 percent of generation that will retire in 2015 to meet
    electricity demand during the polar vortex.
        My question is this. Will the EPA 111D rule on existing
    power plants impact conventional sources of electricity like
    coal? And if so, how will that impact grid reliability?
        Ms. Barton. Thank you. Will the EPA 111D impact
    conventional generating units? Yes, it will.
        One of the things that we have been doing is we have been
    studying the grid, in particular, studying the PJM system, to
    really understand and appreciate the impact of what some of
    these retirements are. I think it's important to note that when
    you talk about the grid, the grid is the combination of the
    generation, transmission and distribution system that is there
    in a given area. The grid in New York City is very different
    from the grid in Montana, the grid in Texas and so forth. And
    so it's very important that we appreciate the inner workings of
    the grid in those regional areas.
        PJM, for example, has actually recently done a study and it
    has gotten some news attention. And that is an economic study.
    An economic study really is just looking to determine is there
    a sufficient amount of generation on the system. Their next
    stage is to look at a load flow analysis. The load flow
    analysis really looks at can you get power from that generation
    to your load centers. In that recent analysis there are
    basically five load pockets that did not have enough import
    capability in a post 111D world, to be able to function
    reliably.
        So when you look at the impacts of really any government
    initiative, whether it be 111D or what have you, it's important
    to take a step back and really take a look at the reliability
    of the grid. We have incredible modeling technology. We have
    folks who basically are station operators who are looking at
    the system and appreciating what needs to happen to keep the
    system reliable at any given moment.
        We then have a number of regional transmission planners who
    are looking at that system ten years into the future, five
    years into the future. What you end up having in some of these
    situations is a chicken and egg situation. You need to first
    identify well, what generation is retiring? Where is it
    retiring? What then changes are necessary with respect to the
    transmission grid to be able to maintain the reliable and
    stable system we have today?
        Senator Daines. Thanks for your insights into the supply
    chain. I appreciate that.
        Commissioner Edgar, similarly, do the federal regulations
    like 111D help your Commission create certainty or do these
    regulations create uncertainty for consumers?
        Ms. Edgar. Certainly. Thank you, Senator.
        Well at this point there is great uncertainty. As you're
    well aware, we are in the stage of, still in the stage of
    rulemaking or EPA is still in the rulemaking stage. Many, many
    discussions have occurred about what the proposed rule really
    means, what it requires, what costs will come from the changes
    that it may or may not require? But of course, it's still a
    proposed rule at this point in time.
        And consumers, regulators, states and industries are
    continuing to make investment decisions in order to meet the
    needs of customers, short term and long term, not knowing what
    the final rule is going to be or even once it comes out what
    the implementation processes will be. So yes, there is
    certainly uncertainty now as that process moves forward.
        Senator Daines. Thank you.
        Ms. Edgar. Thank you.
        The Chairman [presiding]. Thank you, Senator Daines.
        You will see that members have fled for the votes, but they
    are on their way back. So as members come in I will turn to
    them, but let me ask another series of questions here.
        I mentioned in my opening comments my interest in the
    potential that we have for microgrids and recognizing, as you
    pointed out, Ms. Barton, that there are great differences
    region to region and that's why there can't be a one size fits
    all application when it comes to our energy sources and how our
    grid functions here.
        Dr. Littlewood, what kind of coordination goes on with our
    national labs and what the states are doing or even more
    locally? For instance, in a very small village in the
    Southwestern part of Alaska, not connected by road, there's a
    village by the name of Kongiganak, with their own little
    microgrid between three wind turbines, a battery storage unit
    and small heating units within homes which is perfect for them.
    They've really pioneered much of what they have provided for
    their community of several hundred.
        How much coordination goes on between the labs and then
    what we're seeing within the states, whether through our
    universities or just from those that, by necessity, are pulling
    together these very small microgrids?
        Dr. Littlewood. So one of the things that the labs are
    doing is trying to develop test beds that can be used for
    communities to do virtual experiments within the lab system to
    be able to design systems that could be exported to be used in
    small communities.
        So I'll mention a program at the NREL, National Renewable
    Energy Lab, which is ESIF which actually provides a kind of
    basic test bed. There's similar work been going on at PNNL and
    at Argonne and at many of the labs.
        So, of course what we can't do always is to connect with
    individual communities one by one, but we do work quite closely
    with a view, to get a view, both from regulators or from within
    individual states with those states running those kind of
    experiments.
        I think the labs would say that they would, in fact,
    benefit from the attention coming from states who have
    particular problems and particular issues that they want to
    solve. For example, I think my colleagues would be interested
    to come and study while it's actually going on on the ground.
    And we do, in many places, like can't vouch for the fact that
    we've been to a particular village in Alaska, although I'm sure
    that there are some pretty creative ideas which are on the
    ground there already.
        The Chairman. I think it would be helpful for all of us to
    have a better understanding in terms of what is happening in
    some pretty unique situations, because of necessity in so many
    of these areas, and then integrating that with our brilliant
    minds that we have in our laboratories.
        Dr. Taft, you had mentioned four technologies that are key
    to modernizing the grid. And this is a sensing and data
    analysis, high voltage power electronics, fast and flexible
    bulk energy storage and then the advanced planning and control
    methods and tools. Which of these is most readily deployable?
    And as we are moving toward this modernization, of these four,
    where's our biggest challenge? So what can we do to deploy
    quickly? And again, what's our drag here?
        Dr. Taft. The utilities have had an opportunity recently to
    expand their capability to make measurement, especially at the
    transmission level, some at the distribution level. More is
    coming.
        So we're at the point of needing to be able to manage and
    analyze that data. And just to give you a sense of how much
    more data we're talking about, an ordinary utility in the past
    might collect up enough data to fill up a book like a Tale of
    Two Cities, once every second. And what we're looking at now in
    the future is being able to fill up a book like War and Peace,
    846 times a second.
        So the need there is to be able to sift through all of that
    data and get the useful information and then act upon it.
    That's an immediate need because the sensor capability is
    coming online. The tools to do that in other industries exist
    but the tools to do it in the utility industry are somewhat
    lagging. So we need that. We need it immediately. We also need
    advanced controls.
        And you talked about microgrids. You know, when we did the
    grid architecture work for DOE last year we looked at
    microgrids as a specific example, looked at NRCA work in that
    area because that more distributed architecture has lessons for
    us to learn. And so we started to gather that kind of
    information and make use of it and think about that in terms of
    how we would go forward.
        The control systems for all of that are an area where we
    need considerable work. And there's a lag there because the
    industry doesn't invest a lot in research. They can't do a lot
    in research. So the vendors see a thin market and there's a
    nice role for the federal government to do the key development
    and demonstration of that capability so that it moves forward.
        The storage technologies are moving forward commercially,
    but there's a great deal to be done to drive the costs down to
    make them more effective and to make them flexible.
        So all four of those technologies are, kind of, in the same
    place in a sense of there's not one that's way ahead of the
    other as we, kind of, need all four. But that's why I talked
    about them as a group. That we need to advance all of those
    together and when you put together the power of electronic
    storage and control, in particular, you get this remarkably
    flexible tool that can be applied at the microgrid level, at
    the bulk system level, even at the individual building level,
    for example, if you think of a building as acting like a
    microgrid on its own.
        It's imperative that we move those forward because they
    have so much flexibility to help us deal with all of these
    variations, fluctuations and complexity that we're faced with
    going forward.
        The Chairman. Thank you.
        Dr. Howard, you have said that a consumer with distributed
    energy resources is not necessarily a self-sufficient energy
    consumer. Talk a little bit about that because I think you have
    folks that think, well, wait a minute, I've got solar. I've got
    panels on my home, and I'm seeing those benefits. I am a self-
    sufficient energy consumer.
        You say that they are not necessarily so. Speak to that and
    what would it take for an energy consumer to really become
    completely self-sufficient?
        Dr. Howard. Okay. The answer to that question really gets
    to the issue of capacity and energy. A consumer that has, for
    example, solar PV, may at certain times have excess energy that
    is being produced. But when they don't have that excess energy
    they need to tap into the grid. And at that point they hope
    that the capacity is available to get access to that energy
    that they need.
        And so it's really a two way street. And that's why it's
    important going forward that we really understand that a lot of
    these different technologies may be rich in energy, but you
    need to also tap into the power system to get access to that
    capacity that's needed so that when the sun doesn't shine, they
    have electricity now.
        The Chairman. But hope doesn't necessarily----
        Dr. Howard. That's right.
        The Chairman [continuing]. Get you to the reliability----
        Dr. Howard. That's right.
        The Chairman [continuing]. Piece of it, so----
        Dr. Howard. That's right. So you need devices that we
    referred to here like smart inverters or power electronics. You
    need sensors. Also energy storage can play a very important
    role in helping to certainly end those times when the sun isn't
    shining then you can either use energy storage or the biggest
    energy storage device is the grid itself and tap back into the
    grid to get the electricity that you need.
        So it all has to work together. But as we look forward I
    think there's a whole new approach that we need to think about,
    not just energy, but also making sure that we have the capacity
    available at every single minute to provide the energy that's
    needed.
        The Chairman. Well, let's talk about the capacity here. And
    you used the term capacity related costs because in my opening
    statement I, kind of, teased and said I wanted to know what's
    our time line for development here and what are those costs.
        I'm pretty sure that Senator Cantwell used the same number
    that I did that we're looking at a cumulative investment of
    between $300 and $500 billion over the next 20 years to really
    modernize our grid here.
        When we're talking about this capacity related cost is this
    the number that we're talking about here?
        Dr. Howard. Yeah, yeah, that's right. We, EPRI, did a
    report in 2011, and it's called ``Estimating the Costs and
    Benefits of the Future Grid.'' I will make sure that that
    report is available for this Committee.
        The Chairman. Okay.
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        Dr. Howard. It outlines that the costs over a period of 20
    years is at the top end of about $500 billion.
        Now capacity, a lot of times we mistake capacity as being
    generation capacity. But we also have to think about it in
    terms of capacity on transmission and distribution as well. And
    so, you know, is the capacity available in the distribution
    system to provide the energy?
        The study that we did in 2011 looks at all of those costs
    and we estimate that, at that point, about $500 billion is the
    top end.
        The Chairman. Is there agreement on the panel that this is
    the number that we're looking at as effectively, $500 billion,
    top end?
        Ms. Barton. I think generally speaking, yes. One of the key
    things I think that's important to remember is that if you have
    market-based solutions you can make sure that these
    technologies, using your words, Senator Murkowski, pass the do
    no harm test, but I would add, at a reasonable cost to
    consumers. And what that cost to consumers is with respect to
    these integrated technologies really varies in terms of what is
    that technology is thought to be integrated in order the system
    needs. If it's a market-based solution then consumers will
    really choose what's important to them.
        We have used, for example, in Presidio, Texas, which is on
    the border of Mexico. And it would have cost a lot of money for
    a new transmission line to be put in place there. We basically
    have two, 2.4 megawatt NaS batteries in place to basically
    serve to enhance the transmission grid there. So that's just an
    example of how technology can be used to meet a specific need.
    And I think it's very important that it be solution-based.
        The Chairman. Senator Cantwell, I have been asking a series
    of questions and have gone well over my allotted five minutes.
    But if you're ready to proceed?
        Senator Cantwell. Yes.
        The Chairman. I will turn to you. Thank you.
        Senator Cantwell. Thank you. Thank you, Madam Chair.
        I don't know all the questions you asked, but we were
    discussing earlier about, obviously, how do we make investment
    and get recovery on these issues. Ms. Barton, your company
    operates in 13 states and I understand that in Ohio the federal
    government funded about half of your 150 million smart grid
    demonstration projects.
        Ms. Edgar, your association represents regulators in every
    state. In your own state, Florida Power and Light's smart meter
    installation program was funded in part through $200 million in
    the Recovery Act.
        What examples can each of you give of investments and the
    cost of recovery mechanism?
        Ms. Barton. Sure, I'll start. As you mentioned, we have
    transmission facilities in 13 states. We have regulated utility
    operations in 11 states and by virtue of that territory it
    gives us a unique perspective and information from which to
    draw from.
        So in Indiana, for example, we have launched a solar
    project, a pilot program, where we're looking to basically have
    about 16 megawatts worth of solar capacity integrated into the
    system. That's been very successful.
        I just recently talked about a project in Presidio, Texas,
    and we also had one in West Virginia which uses NAS batteries
    which is Sodium Sulfur batteries.
        These technologies, while they are expensive, in unique
    grid situations can really amount to be the best solution.
    We've had tremendous success in a number of our states with
    bolt bar technology. And what bolt bar technology is is
    basically controlling through a series of complex communication
    the voltage on the system through regulators and capacitors.
    What that does is basically reduce the level of voltage that
    folks receive in their home and it results in significant
    energy savings.
        So in the jurisdictions that our states have been
    supportive of that technology, we have gone forward with that
    technology. We try to stay very close with our states and our
    regulators to make sure that we're implementing the types of
    technologies that meet the state's needs.
        Ms. Edgar. Thank you, Senator, for the question. Much of
    what we've been discussing today is the recognition that the
    grid is a technology integration network and that distributed
    generation, although offering many advantages, is often
    intermittent and that it does require investment in both new
    transmission and distribution and in modernizing the system,
    both transmission and distribution that is already there.
        So the role of the federal government in supporting
    research and in bringing that research in new technologies to
    scale, cost effectively, so that states and communities and
    consumers can take advantage of those resources is key, I
    believe, in helping us move forward.
        Senator Cantwell [presiding]. So how well established do
    you think we are in those kinds of recovery ideas?
        Ms. Edgar. You mean cost recovery?
        Senator Cantwell. Yes.
        Ms. Edgar. The rate making process at the state level is
    tried and true. The cost causer pays looking at actual cost
    before putting them into the rate base and then looking at
    projected cost. The challenge now moving forward is how to
    continue to attract capital investment so that consumers are
    getting a good value from the investment that they are making
    and also trying to look at alternative rate making mechanisms
    to take advantage of the cost efficiencies that are out there
    in the future that may not be here right now. And that is
    something that we are grappling with.
        Senator Cantwell. I remember probably 20 years ago when
    some of the first ideas were being surfaced on metering and
    things of that nature and they were turned down by UTC. But
    now, how many states have policies around this?
        Ms. Edgar. Probably most. I don't have an exact number, but
    I would say more than half and probably beyond that.
        You mentioned a project that I mentioned in my testimony,
    and yes, that project was partially paid by federal dollars. I
    do believe it's an important investment in my state to helping
    us move the grid forward.
        But of course, we're still learning how to take advantage
    of that technology so that consumers really benefit and then
    all of the other issues with data collection, data management,
    privacy and security.
        Senator Cantwell. Dr. Taft, could you talk about the
    Recovery Act funds that were part of the $4.5 billion of money
    that was spent and what lessons we've learned?
        Dr. Taft. I can talk about some of that. I don't have all
    the details with me, but a lot of those projects were to
    improve the basic ability to measure on the grid. So we saw a
    lot of investment in phasor measurement units. We saw a lot of
    investment in AMI. We also saw large scale projects such as the
    one in the Pacific Northwest to take a look at how to integrate
    large numbers of resources and coordinate them in such a way
    that they would operate collectively even though many of them
    were not part of the actual utilities.
        And the lessons coming out of those are going to be
    available shortly. There's going to be a, actually, a report
    and seminar about that project in particular.
        So these projects move things forward because they brought
    a lot of money off the sidelines and helped establish things
    that the utilities needed to understand. When it comes to
    things like storage there are quite a few projects that are now
    finishing up this year that will have lessons learned, and
    there are a number of states working on determining the cost
    justifications based on those lessons. So, very valuable in
    helping people understand how the technology can work, but also
    how the economics of those technologies will work out going
    forward.
        And moving forward, fundamentally, the basic measurement in
    observability/capabilities of the grid so that we begin to get
    the data that we'll need for the next stages also has been a
    crucial aspect of that very valuable for the utilities.
        Senator Cantwell. Well I know we, in the region, talk so
    much about some of the things we were able to do out on the
    Olympic Peninsula, but maybe it's worth reminding people of
    some of the efficiencies that were delivered through those
    analysis and how we now take that data and try to scale it.
        Dr. Taft. So I haven't brought all the numbers with me. I'd
    be happy to supply them.
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        Dr. Taft. But what has been demonstrated there is that you
    can coordinate very large numbers of consumers and their
    appliances and equipment in such a way that they reduce the
    peak demands on the utility significantly. They operate in a
    more efficient mode overall, and they do a better job of
    coordinating with variable energy resources.
        So the impacts have been significant. The final details are
    coming out shortly, and we'd be happy to supply them for this
    hearing.
        Senator Cantwell. My understanding is that you were able to
    demonstrate you might be able to get as much as double digit
    savings out of current supply.
        Dr. Taft. The indications from those experiments----
        Senator Cantwell. I mean I'm not talking like 20 or 30,
    but, you know, 10, 11, 12?
        Dr. Taft. Yeah. The indications are, in fact, that such
    results are practically achievable. The results from that
    program showed that on scales that were larger than any that
    have been tried anywhere else. So that's a solid justification
    for saying that some level of double digit improvements are, in
    fact, achievable using these methods.
        Some of the methods involve new forms of control and new
    forms of coordination necessary in order to make all those
    pieces work together, but when you can do that there's an
    enormous synergy from all those pieces and that's why you can
    get the double digit savings.
        Senator Cantwell. I know the people that will discuss what
    does that mean to the consumer and as you said in this case,
    they buy in. I'm waiting for the smart appliance that says turn
    my dish washer on at the lowest megawatt rate today. And
    obviously some intelligence for these, you know, big energy
    users in the household.
        Dr. Taft. Well and that's a crucial issue is how in fact
    can you make that work and make it work in an unobtrusive
    manner? People are not interested, probably, in spending a lot
    of time trying to micromanage the thing, so it needs to be
    automatic. And a lot of the work done on these programs is to
    show how to automate that.
        Senator Cantwell. Thank you.
        Senator King.
        Senator King. Thank you. Following up on that discussion.
        If you have ever toured a sawmill most modern sawmills now
    have a device called an optimizer which takes a computerized
    picture of the log as it comes in, calculates the most
    effective way to cut it and checks with the market at that
    moment to see whether the market will value two by fours rather
    than two by sixes. It seems to me that is exactly what we are
    talking about here. We are talking about dishwashers and
    clothes dryers and heaters that will check the grid, understand
    what the needs are, what the price is and will automatically
    optimize, if you will, I mean, that's sort of what we were
    talking about.
        That leads me into a, sort of, general observation here. We
    are talking about a disruptive technology. We are talking about
    a fundamental change in an early 20th Century model for how
    electricity is generated and delivered. If you look back, I can
    remember the phone company. I am old enough to remember the
    phone company saying it's impossible. It will be disruptive. It
    will ruin the system if people can choose their own phones.
        Then, of course, it was cellular phones. You've got to have
    a phone in your home. That's gone by.
        Cable TV, you know, you can only get your news through
    cable TV. All of a sudden people are getting--streaming.
        I believe that distributive generation a, is going to
    happen, b, it's a disruptive technology. The only question is
    how do we manage it?
        I think the real question is who will supply the battery?
    Who will supply the battery for distributed generation on your
    roof? Will it be the grid as the backup or will it be batteries
    in your basement?
        The grid, speaking largely as a large institution, has a
    choice to make. They can price themselves out of that market
    and thereby make batteries more economic which is what people
    will then choose or they can choose to adapt to this disruptive
    technology and figure out ways to make it work.
        I think one of the great questions is how do we price store
    it? How do we price backup? How do we price the backup charge?
        I think it is reasonable that utilities should, if they
    have to be there and maintain the wires and backup capacity,
    how do we price that both in terms of benefits and costs? It
    seems to me that is the really fundamental question here, and
    the price should be reasonable and not so high as to be
    punitive in order to ward off this change which is going to
    come anyway.
        Mr. Taft, what are your thoughts about how you price? How
    do you price backup?
        Dr. Taft. So, pricing is not a specialty of mine, but I do
    have a couple of comments that are related.
        You're probably familiar with the effort in the State of
    California where they determined that they'll have 1.3
    gigawatts of storage on their system. And the California ISO
    has produced a road map for achieving that.
        One of the things that's going on though now is exactly
    that question of how to determine the pricing for the services
    that can be supplied by storage, in particular. There's not a
    settled answer to that yet, so they're working hard with
    vendors and others in the State of California to see if they
    can develop a model for that.
        Separately, but in a sense related, is the activities going
    on in the State of New York with the New York rev process where
    they're looking at restructuring the rules and responsibilities
    of distribution companies, and a lot of it has to do with the
    penetration of distributed energy resources and storage. And so
    they're looking at changing the very structure of the industry
    in their state so that they can facilitate that but are faced
    with the same question ultimately, and they're asking
    themselves how are these going to be valued? The answer is not
    known.
        Several states are working on trying to determine value
    propositions for storage, in particular, that includes the
    State of Washington, for example, Oregon, Hawaii and so on. So
    we don't have a settled answer for that yet.
        And, you know, most people think that a way to get at that
    is to make it a market function and let a market determine
    those values.
        Senator King. Well, you are talking about a classic non-
    market situation. You are talking about monopolies who deliver
    the power whether they're monopolies and generations. So saying
    to let the market do it and then allow the utility to impose a
    $100 a month backup charge--that's not the market. I am all for
    markets, but only if they are real markets.
        Dr. Taft. Well and I think that's what some of the states
    are trying to sort out now is how they can actually accomplish
    that. And I reference California ISO trying to understand how
    they can allow third parties to offer services based on storage
    and figure out what those values would be. So there is a
    complex question there. I don't think it's settled.
        Senator King. One market related point, and I will end with
    this. This is not a central part of the discussion, but it
    seems to me that time of day pricing is one thing that would
    make some sense in order for the market to drive more efficient
    utilization of the grid. There's a lot of excess capacity both
    in terms of generation and transmission at night, and if you
    had time of day pricing and people just routinely saying oh,
    I'm not going to turn the dryer on until after nine.
        I can remember making those decisions about long distance
    phone calls, you know, looking at my watch and saying I am
    going to make my call at 9:05. If people started making those
    decisions about utilization of the grid that would be much more
    efficient, but it won't happen unless people get the price
    signals. It seems to me time of day pricing is something that
    we ought to be thinking about because of the fact that there is
    so much excess capacity.
        Madam Chair, I am very pleased that you are having this
    hearing. I think this is a fascinating topic, but the bottom
    line for me is we are talking about a disruptive technology. We
    have got to figure out how to adapt to it, not fight it and
    strangle it in its crib because that isn't going to happen
    anyway. I think this is a very important subject. Thank you.
        The Chairman [presiding]. Well it is, Senator King. I
    certainly agree with you.
        When you mentioned the point about making telephone calls
    based on the time of day, I think we're both dating ourselves
    there. But that was absolutely----
        Senator King. I do that all the time, but I have given up
    on worrying about it.
        The Chairman. Yeah, yeah, I suppose. [Laughter].
        Let's go to Senator Heinrich.
        Senator Heinrich. Thank you, Madam Chair.
        I am not going to try and date myself that hard, but I will
    say my father was a utility linemen, and I appreciate some of
    the comments about the work that they do. One of the things
    that I had when I was a kid was a t-shirt that said, I turn on
    after seven, and I don't think I got the joke.
        The underlying message from the utility he worked for was
    about peak load management and about trying to shift loads to
    later in the evening just in the way that the long distance
    pricing regime shifted people to using their long distance
    later in the day.
        I think that Senator King is right. Anything we can do to,
    sort of, actively make the market work in our favor in terms of
    both loads and then hopefully storage and utilization of
    storage over time.
        So I want to start out with a quick question for Dr.
    Littlewood. I am a big fan of the work that is being done at
    DOE's joint center for energy storage research. And while I
    think most of us here agree that the pricing regimes and the
    market to the extent that we can have an efficient and
    transparent market will settle out the winners and losers with
    regard to energy storage over time.
        I am wondering if you can talk a little bit about the state
    different technologies for utility scale storage and the
    challenges inherent in scaling that. What are you excited
    about? What do you see rising to the top of that very exciting,
    emerging technology sector?
        Dr. Littlewood. Thank you very much, Senator. I'm glad you
    like the program because we do too.
        What else? I mean, I think our view of storage is that it
    is not going to be a single solution.
        There are solutions which may come through improved storage
    which is actually mobile. We were discussing earlier that if we
    could actually make electric vehicles more effective they are
    affected. You also have storage medium on the grid. That will
    be one class of storage. There will be classes of grid storage
    which will involve very different technologies that can be very
    large and cumbersome, not mobile, but have to be made extremely
    cheap.
        One should also remember that there are storage on the grid
    which is distributed across the grid in a way that you can't
    see it.
        To be a little bit philosophical and look very far ahead, I
    will say that our goal, actually, is to turn electrons into a
    medium of exchange.
        The thing that will happen in the very long term,
    eventually, is that indeed this will be distributed where you
    do not know how. But that you will be able to go there in the
    same way that there's a bank. That means that I would also
    expect that we would have a system which looks like the banking
    system. There will be big banks. There will be small banks.
    There will be local communities with local community banks. And
    all of those will be based around different technologies and
    different ways of doing it.
        I think that we are doing very well in developing new
    technologies which push the price down in the area of large
    scale grid storage, and that's partly because this is an area
    which has not been explored very much.
        I think that there are vast opportunities, more broadly,
    for moving forward even with conventional technologies based
    around lithium ion, and the reason is that the community which
    has been pushing that technology forward, which was your cell
    phone, is now beginning to understand that there's a business
    opportunity which involves something different.
        So it's a very exciting time to be in there. I think it's
    really important to be engaging in all of this. You know, one
    shouldn't make predictions about the future, but I'm very
    positive about it.
        But just a quick philosophical comment on phones. I used to
    work for Bell Labs, and I worked for Bell Labs at the time when
    I was part of the long distance network and we were inventing
    the cell phone. While my colleagues were doing that we were
    kind of aware that we were putting our company out of business,
    but it turned out that we were all so confident that that was
    going to happen anyway we might as well be the ones that did
    that invention.
        Senator Heinrich. It's interesting that you bring that up
    because it's always interesting to look back at what was said
    about the adoption of cell phones early on and the penetration
    and numbers of that adoption and how dramatically we all
    underestimated that technology early on.
        It's not unlike when, you know, 20 years ago in terms of
    people looking at a technology that hasn't changed much in
    terms of photovoltaics and what the eventual generation from
    that would be. Looking last year at the gigawatts that were
    installed in this country alone, I think, we are realizing now
    that we are on the edge of a very changed landscape. We have a
    lot of work to do to manage the grid and to manage the
    transition in all of this into some very new territory.
        Thank you, Madam Chair.
        The Chairman. Thank you, Senator Heinrich.
        You used the terminology, Ms. Barton, that the grid can be
    a natural enabler of new technology. I think that this is what
    we see play out all the time.
        Let me ask just one last question for you and then I'll ask
    if others have a desire for more. I know that we have some
    panelists that need to leave at noon.
        How can we do a better job in so far as the utilities
    identifying or quantifying the costs of the ancillary services
    that are provided by the grid and ensuring then that these
    costs are perhaps born proportionately by all the customers
    that are utilizing the grid? How do we do a better job here?
    I'd ask Ms. Barton and then Ms. Edgar, if you'd like to comment
    as well.
        Ms. Barton. I think that's an excellent question. We've
    talked a lot about distributed generation, and we've talked
    about it as being a disruptor. I really think it is more of a
    complementary technology to the grid.
        And if you really think about the origins of the grid where
    it started off as, quite frankly, a series of small microgrids,
    is what you really could have called them back in the day. They
    got stronger by being networked together.
        There is an incredible value associated with having that
    grid as a backup, and I'll just use the example of super storm
    Sandy. While there are a number of customers who were out of
    power for a few weeks, that's nothing compared to if their only
    option was a roof top solar facility to provide them with
    generating capacity.
        So the grid has an incredibly inherent value, and a lot of
    it has to do with the line workers and the tree crews who,
    quite frankly, can travel across the country and get to any
    place where they need to be through our mutual aid agreements.
    There is value to that as well.
        I think that that becomes part of the philosophical debate
    as to what is the value of the grid, and I would say the value
    of the grid is not defined as backup power. The value of the
    grid is that it is an enabler and therefore you have to support
    the costs and the infrastructure of that grid and so that those
    costs are not disproportionally spread to other consumers.
    Unfortunately that's some of the things that we're seeing
    happening. If you advocate the view that I can just have my
    solar roof top, solar generating facility and unplug from the
    grid, you know, that's different than wanting it there as a
    resource. And the vast majority of Americans have become very
    relying upon a very reliable grid and an affordable grid.
        It's that balancing act that we need to pay attention to,
    but there's a lot of fantastic technologies out there. Right
    now a lot of them come at a fairly significant cost and that
    affordability feature is key.
        The Chairman. Let me ask you for your comments, Ms. Edgar.
        Ms. Edgar. Thank you, Madam Chair.
        So many issues here and this kind of brings it all home,
    the value of the grid.
        Something that a number of states are looking at is trying
    to put, for example, a value on solar as different states work
    their way through their different processes, and the other
    states can learn as they're moving through is part of what
    makes all of this so exciting.
        Many cost tools that are out there, capacity charge,
    service charge, fee based, cost causer, time of use, all of
    this, I think, needs to come into play as we recognize, again,
    yes, the value of the grid, but also the very essential nature
    for public health, for public safety, for community
    interaction.
        We haven't talked much today about economic development,
    but the key for the grid and new technologies for job creation,
    for work force. And then, I think, to bring it all back is, as
    we have these discussions, what our members would ask of
    Congress and governors and state legislators and other policy
    makers, is that we have transparency as we are talking about
    those cost allocation issues and cost burdens recognizing that
    how that falls, for instance, on a very large industrial
    customer is going to be different than how it falls on, for
    instance, a retiree on a fixed income and how we try to make
    sure that everybody is aware and is served well.
        The Chairman. Very important considerations.
        Senator King.
        Senator King. Ms. Barton, I wanted to follow up. You made
    one statement that I thought was very important. You said
    diversity and redundancy are at the heart of reliability, and
    it seems to me that that's part of what we're talking about
    here, the ultimate in diversity and redundancy is distributed
    generation. It's people having their electricity on their roof
    as part of the system.
        So it just seems to me that we are really on the edge of a
    very important discussion to get back to what I mentioned
    before. How do you value the plusses of distributed generation
    in your own words, diversity and redundancy, versus the costs
    which is the maintenance of the grid and the backup generation
    in order to have customers ultimately make rational, economic
    decisions, based upon the true costs of whatever it is that
    they're using?
        I just think that this is a development that's going to
    happen anyway, and the real question is how is it adapted to
    and how does the grid facilitate rather than block what I
    think, in the long run, will be very salutary developments on
    behalf of all of our citizens?
        Ms. Barton. I think the key is that there's value on both
    sides of the transmission system is maybe one way of looking at
    it.
        Senator King. Absolutely.
        Ms. Barton. In terms of distributed generation can be
    certainly valuable in terms if you aggregate. The grid is
    really an aggregator. It's an aggregator in days of old, of
    large generating plants and taking that power through
    substations to consumers, and today it's basically an
    aggregator in both directions. So it's aggregating those
    distribution resources and distributive technologies as well as
    the larger scale generating facilities.
        When you look at the utility infrastructure, the math is
    maybe a little bit easier in the sense that it's a cost-based
    model. And for, you know, a reasonable level of return the
    investors in the utility industry that we go to to borrow the
    capital really require that level of transparency to say I know
    I'm going to give you this dollar and you are going to give me
    a return on this dollar, plus this dollar back in a reasonable
    period of time. And so, I think, making sure that that is in
    place helps to take care of the utility side of the equation.
        With respect to the distributed energy side of the
    equation, I think that there's a lot of different ways of
    valuing that. Part of it can be from what does it do for the
    benefit of that consumer? For example, the pharmaceutical
    industry often needs to have a heightened level of reliability
    that, quite frankly, they're willing to pay for that heightened
    level of reliability. And so it's very valuable to them.
        There's also benefits with respect to the ancillary
    services market in various market driven ways of estimating the
    value of those resources. And, you know, that can be done
    through the RTOs and how they have established their energy
    markets and how they're valuing those resources. So I think
    it's really a balance of that.
        Ultimately the states play an incredibly important role in
    determining what level of energy efficiency, what level of
    distributed generation that they want to advocate and how it's
    paid for.
        Senator King. Of course, there are two pieces to this which
    is generation as backup and transmission and distribution to
    deliver the generation. So there are two pieces of analysis
    that have to be done. And part of the analysis of how much
    backup capacity, generating capacity, do you need, is a
    question of a complicated analysis of what are the resources on
    the grid.
        Insurance companies don't have all the money in the bank
    for people's accidents or health insurance or particularly,
    life insurance. They invest it. They have actuarial studies,
    engineering studies, if you will, as to when the draw will be.
    And so you don't have to have every bit of capacity there to
    backup if every solar insulation goes out at the same moment.
        And of course, as you distribute these kinds of facilities,
    solar and wind, across the landscape you mitigate somewhat,
    it's not going to be cloudy everywhere, for example. So I just
    hope that we can develop policies that will be fair to all rate
    payers, fair to investors, but also not inadvertently obstruct
    what could be and can be and will be, I believe, very positive
    developments both for rate payers, for individuals and we
    haven't mentioned the environment much, for the environment in
    terms of moving away from fossil fuel generation.
        Thank you very much, Madam Chair.
        The Chairman. Thank you, Senator King.
        Senator Cantwell, any final questions, comments?
        Senator Cantwell. Well I would just, again, thank all the
    witnesses and Ms. Edgar said we really didn't talk about the
    whole plethora of economic issues, but I do think it's
    something we should work with our colleagues on. I went
    recently to the 110th anniversary of the IEEE in Seattle. And
    the fact that that organization has been around that long, of
    electrical engineers and all the things that they have done and
    then the next generation of things that they're creating I
    think is important for us to remember that the workforce here
    within the United States on these issues is a great potential
    for us.
        So, thank you and thanks for holding this hearing.
        The Chairman. Well, thank you, and thank you to all of our
    panelists. This has been very helpful and informative as we are
    building out some of the discussions that have gone on with
    some listening sessions and figuring how we move forward with a
    broader energy vision, an updated vision. Clearly in the
    electricity space what we have been talking about here this
    morning is so key.
        Again, a reminder that while there is so much happening out
    there in terms of the technologies and the advancements and the
    modernization, we can remain excited about it, but we also need
    to make sure that the boring work of turning on the lights
    around the country, every day, stays in place. So it's pushing
    out on the technology side, but it's performance as well and
    performance at a time that we are focusing on security,
    absolutely the cyber piece, on reliability, on customer
    affordability, on environmental sustainability and financial
    viability as we have been reminded by Ms. Edgar.
        It's a big challenge, but thank you for what you do within
    your respective spheres to make it happen. We appreciate it,
    and we appreciate the time that you have given us.
        I know that members will likely have questions so we will
    submit them to you and we look forward to those replies as
    well. So thank you for being here before the Energy Committee.
        And with that, we stand adjourned.
        [Whereupon, at 12:01 p.m. the hearing was adjourned.]

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