Smart Grid, Clean Energy and US Policy

In the US, smart grid and, more generally, clean energy policies enjoy a surprisingly wide consensus. Although the consensus is strong, smart grid deployment has been hindered by barriers established by a century old fossil fuel energy policy that has had the effect of entrenching both private firms and the regulatory bureaucracy. This paper will first describe the failures to modernize US electricity markets which have led to a failure to modernize the grid. The paper will then describe the key responses to overcoming those impediments. In brief, smart grid development is central not only to more competitive and more efficient electricity markets, it is central to a clean energy economy. However, before the smart grid can be fully deployed in the US, three things must occur. First, a national innovation policy must be further developed and federal resources must be, and are being, directed to smart grid innovations. Second, federal and state regulators, together with industry and consumers, must renegotiate the traditional regulatory compact with the specific intent of designing a clean energy future and with it a smart grid. And, third, incumbent private utilities will have to retool the way they do business to optimize their use of available funds and innovation opportunities.