[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 
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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:]
    
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    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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