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Secretary Locke Keynotes Annual GridWeek Conference

Monday, October 18, 2010

Commerce Secretary Gary Locke
Remarks at GridWeek 2010 Conference

Thank you very much for that kind introduction.

As we kick-off this conference, I want to publicly thank you and your smart grid team at the National Institute of Standards and Technology for your leadership in developing smart grid standards. 

In particular, George Arnold and his group of experts at NIST have done a great job accelerating the standardization process. And I want to congratulate George for winning this year’s GridWeek International Collaboration Award. 

Over the past year, George has worked tirelessly with his counterparts all over the world to create common standards so that smart grids everywhere will operate off nearly universal platforms.  Important progress has already been made on harmonizing software-based standards for the computers that will support a new generation of electronic grids. 

This award recognizes the incredible dedication that George and his team at NIST have shown towards this process.   

I’d also like to welcome all of the international smart grid delegations, participants, and speakers to this year’s conference. 

There are a number of international delegates representing Europe, the Americas, and Asia who are here to take part in this year’s event, and to exchange their insights on global smart grid policies and to meet with U.S. smart grid companies.   

So welcome to you all.  I hope you have fruitful and far-reaching discussions. 

As all of you know, the smart grid is critical not only to America’s economic, energy and environmental future – but to the world’s.   

If a smart grid is built here in the United States, it can help reduce power demand by more than 20 percent, which is significant enough to eliminate the need to run hundreds of power plants during times of peak demand. 

If smart grids are rolled out around the world, the reduction in global energy demand and the corresponding reduction in CO2 emissions will be transformative.

Without it, we will not be able to realize the full potential of making distributed power sources like plug-in electric cars, rooftop solar panels and wind farms bigger parts of the world’s energy mix.  In fact, the smart grid is the indispensible nerve center of an energy network where electricity is generated by diverse sources, and where some customers are consuming energy while others are returning it to the power grid.

Modernizing our electric grids and enabling them, across state lines and border crossings, to share energy and communicate with each other is a project of great urgency. 

And so much of that technology and know-how already exits today in one form or another.  A smart grid uses much the same networking technology that links computers together in an office or factory.  Innovations in smart grid metering, energy distribution and network management are rapidly being realized. 

But, the barriers to getting the smart grid up to scale are not primarily technical. 

The challenge, now, is to update the regulations and the standards that govern the patchwork systems of power generation and distribution.  If we can do this, we’ll incentivize the rapid roll out of the smart grid, while protecting consumers and lowering energy demand.

The upside of an international network of smart grids, or even regional and national smart grids, using harmonized standards, is vast.

You all know the benefits. Smart grid technologies can catalyze innovation and job creation all over the world. And the new technologies it spawns will change the way we use energy, increasing efficiency while reducing our reliance on foreign fossil fuels. 

The smart grid is a clear win-win--for our economies and for the environment. 

And it’s critical we get our innovators creating these technologies and getting them to market as quickly and as responsibly as possible.

That’s why, over the past year, the Obama Administration has taken steps to jumpstart America’s smart grid capacity while also working to set global standards so that smart grids around the world can use interoperable technologies.

Here at home, these steps include:

  • $11 billion in investments through the Recovery Act for smart grid technologies, transmission system expansion and upgrades, and other investments to modernize and enhance the electric transmission infrastructure.

Some of these funds are going towards support NIST’s mission of creating the foundational standards that will support the smart grid. 

Specifically, over the past year, NIST has:

  • Rolled out Version 1.0 of the Interoperability Framework, which identified, prioritized and addressed new requirements for smart grid interoperability and security.  Of the 75 initial standards NIST released, 77 percent of these are also international standards;
  • NIST also launched the Smart Grid Interoperability Panel, which is a public-private partnership that oversees the standards-development process and includes 600 organizations and 1,600 individual members;
  • And just this past month NIST issued guidelines for Smart Grid Cyber Security, to ensure the smart grid’s integrity and reliability.

These initiatives are a start ... and many more standards and protocols need to be developed.

But it’s critical that we get it right – not just domestically, but internationally as well.

Imagine the kind of innovations we’ll see if a small business in Silicon Valley or Seattle can sell the same smart grid product or service in South Dakota, as it does in Seoul and Stockholm.

Entrepreneurs everywhere will start developing smart grid products knowing they can sell what the make anywhere on earth. These economies of scale can kick-start an innovation revolution. 

But the key to this happening is the establishment of common protocols and a harmonization of foundational standards for Smart grids around the world.

To make sure this happens, the Commerce Department’s International Trade Administration has reached out to government ministries and industry leaders across the globe.

So far, we’ve made good progress:

  • In July, here in Washington, we launched the International Smart Grid Action Network to advance international smart grid coordination, and to gather under one umbrella all the numerous smart grid bilateral policy and commercial dialogues.
  • Last week, a team from the Commerce Department was in Santiago, Chile where it participated in the first Latin America Smart Grid Summit with eight Latin American countries;
  • We’re also spear-heading a public-private partnership that brings together stakeholders from the NAFTA  countries to coordinate standards so power lines can more easily cross international borders.
  • And outside of the Americas, the Commerce Department is engaging:
    • Japan
    • South Korea
    • Israel
    • Australia
    • Brazil and
    • Russia. . .

. . . among other countries, on smart grid policy, and commercial exchanges on standards harmonization. 

Not surprisingly, the United States is not alone in building up the global community of smart grid expertise:

  • Japan is engaging with India, Spain, and France on smart grid programs;
  • China and the European Union have fostered smart grid partnerships, and
  • Brazil is collaborating with European companies on smart meter implementation projects. 

But as we all move forward, it’s critical that nations developing smart grid systems do so cooperatively and with common purpose. 

If we don’t, if smart grids develop in a piecemeal and fragmented manner, we will lose the economies of scale. Those losses will translate smaller market opportunities for key products and higher costs. And if the market heads toward fragmentation other countries may adopt their own standards simply to protect their markets. 

We have seen such non-tariff trade barriers erected in other contexts, and we know that they not only frustrate trade but threaten innovation

Smart grid innovators must not be held hostage to standards requirements and predilections of any single country. 

A balkanized approach also will almost certainly lead to delaying the emergence of the smart grid industry and limiting its economic and environmental benefits.  .

Establishing common standards for Smart grid technologies is an attainable goal, and one we’re going to continue to work hard to achieve.

But even if we solve that challenge, we still must overcome a great deal of inertia that’s become built into our current system.

As in other countries around the world, in the US, the existing model for how we think about the generation and the distribution of power is as anachronistic as much of the technology that undergirds our electrical grid.  

And like the grid itself, it’s critical that we update how we envision both consuming and delivering electricity.

Altering the status quo won’t happen overnight.

Consumers will need to understand the benefits of upgrading to smart grid technology.  Up until now, they’ve not had to worry about whether their washing machines or dishwasher can “talk” to the grid. 

And they’ve never before been able to easily monitor their electricity consumption or minimize their costs by timing when they used their appliances. 

But that’s what the future holds.

We also know that new bargains have to be struck between the providers of electricity and government regulators. 

We know there are complexities that make it difficult to develop a one-size-fits-all regulatory solution.  This is certainly the case here in the U.S. and I’m confident it’s equally true around the world.  

Ultimately, the major challenge we face when altering the distribution of electricity boils down to this: 

How do we update the incentives for all stakeholders in order to facilitate the widest smart grid adoption?  

Providers in different regions and in different nations have different ownership structures and rarely have the same embedded costs. 

And it’s critical that rule makers take these regional nuances and differences into account when updating energy regulations.  

For instance, it’s important to ask how much risk is reasonable for ratepayers to bear?   Or, how well demonstrated are the promises of Smart Grid technology given the costs in a particular region? 

At the same time, electricity providers may argue that the regulatory structures they face don’t offer them the right incentives to use Smart Grid technologies to help customers save energy or otherwise influence consumer behavior.

So it’s critical that regulations reward providers that enable real gains in efficiency.

To help grapple with all of these very nuanced challenges, the U.S. federal government recently established an internal panel of experts. 

The White House’s National Science and Technology Council has created a smart grid subcommittee, co-chaired by Pat Hoffman, from the Department of Energy, and NIST’s George Arnold. 

The smart grid subcommittee is charged with looking at the range of technical, economic, regulatory and sociological hurdles to smart grid up-take. 

It’s consulting with stakeholders from different sectors and from around the country. 

In particular, I know that the subcommittee has initiated what we hope will be a mutually productive dialogue with state regulators.

The subcommittee also has asked for written input from the community on a range of questions.  The comment deadline is November 1st.  We all are looking forward to your input.   

We are very much aware that because of the critical importance of the energy industry, reforming it, let alone dramatically modernizing it, will not be easy.

But that is exactly what we must do.

I’d like to conclude with an anecdote James Rogers, the CEO of Duke Energy, often talks about.  Duke Energy is one of the strong strongest supporters of making the US Grid smart.

James Rogers points out that in the 1930s the major energy challenge facing the United States was how to supply enough energy to all its residents.  Regulations were put in place to incentivize energy production and energy accessibility.  Energy efficiency was not high on the agenda.  And the fact that about two-thirds of the energy produced would be lost in transit was not considered a drawback. 

Well, today, we have universal electrical coverage.  Federal, state and local governments helped solve that challenge.

But 80 years later, the whole world faces another challenge.  But this time, we face this one together. 

If we get this right, all of us have an almost unprecedented opportunity to – in one stroke – change how we use electricity, reduce greenhouse gas emissions, and create new jobs in an emerging industry in developed and developing economies. 

As smart grid trade, standards and policy discussions move ahead throughout the upcoming year, I look forward to working with all of you to meet this historic challenge.