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Digitizing the Grid: Next Steps on Policy

Tuesday, December 5, 2017

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Digitization means applying recent advances in digital technology such as electronic devices or data and information systems, to improve the technical and economic performance of real activities, systems, businesses, and organizations. The Bipartisan Policy Center launched the Digitizing the Power Sector initiative to better understand the challenges and opportunities of digitization as applied to one of our nation’s most complex and vital infrastructure systems: the electricity grid.

The electric power sector is changing rapidly, enabled by digitization. Government officials at all levels are grappling with how to maximize the benefits and minimize the costs. The goal of this paper is to inform this national, state, and local policymaking.

This report explores how digitization can improve the efficiency, reliability, resilience, and performance of the power sector across the entire value chain.

Specifically, we explored how digitization can improve the efficiency, reliability, resilience, and performance of the power sector across the entire value chain—from electricity production to transmission, distribution, and end-use consumption—by helping key actors to better predict and respond to change. The benefits of this transformation could be enormous: According to the World Economic Forum (WEF), the potential value of grid digitization worldwide over the next decade is $3.3 trillion ($1.3 trillion for the utility industry plus $2 trillion in societal benefits).

The potential value of grid digitization worldwide over the next decade is $3.3 trillion. 

To realize these benefits, however, both private and public actions are needed. This paper focuses on the public policies and investments that could advance grid digitization, and on the challenge of maximizing associated benefits while minimizing costs and risks. Drawing on BPC’s own research and extensive dialogue with stakeholders, including input gathered at a public dialogue with industry leaders and a separate stakeholder meeting (held in May and July of 2017, respectively), we identify policy issues and options in several topic areas, including: public utility regulation and cost recovery; infrastructure investment; cybersecurity and privacy; power sector workforce challenges; the role of the Federal Energy Regulatory Commission (FERC) and the North American Electric Reliability Corporation (NERC); and research, development, and analysis needs.

Priorities for near-term action to advance grid digitization include:

• Establishing a task force, convened by the Department of Energy, to address issues of utility regulation and cost recovery;
• Including intelligent grid investment as part of national infrastructure legislation;
• Strengthening federal and industry leadership in cybersecurity;
• Integrating strategic digital workforce planning with other utility planning;
• Increasing federal R&D, and incentivizing private-sector R&D on grid digitization; and
• Conducting a U.S.-specific analysis of the potential public and private benefits of grid digitization.

KEYWORDS: DIGITIZATION

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