The Utility Industry is Entering a Period of Potentially Profound and arguably beneficial change, driven by new legislative and regulatory policy, economic rationale and social consciousness. On the policy front, the United States has declared its support for the modernization of the nation's electricity transmission and distribution system.

Electric modernization — aka the smart grid — is becoming a viable pursuit by many of our nation's utilities, large and small alike. Regulators in select states are already actively engaged in reviewing cost-recovery filings associated with demonstration projects and even full-scale deployments. Recent funding appropriations in the American Recovery and Reinvestment Act have been earmarked toward stimulating increased demonstrations for smart grid technologies and applications. Finally, with an ever-increasing focus on reducing our reliance on fossil fuels from unstable nations and carbon-based energy sources, we are heading toward an era of increased usage of renewable and distributed energy sources.

We have the opportunity to transform this industry by updating outdated infrastructure with a more intelligent power grid. As was expressed by former New York Gov. George Pataki at a keynote address in May 2008: “We as a country need to be bold. We as a country have to look at solutions that bring together…national security, climate change and economic growth. The only area where that happens is in energy.”

Indeed, we are seeing unprecedented cooperation in state and federal circles in support of smart grid deployment, including the formation last year of the Smart Grid Collaborative between the Federal Energy Regulatory Commission and the National Association of State Regulatory Commissioners.

CONCERNS ABOUT THE SMART GRID

The media and policymakers, however, have expressed concerns regarding the potential risks and vulnerabilities of a digitized and automated power grid. Recent cyber security demonstrations, solicited and otherwise, have shown that some smart grid technologies and applications (advanced metering infrastructure, for example) are vulnerable to intrusion.

Armed with a few hundred dollars of equipment and sufficient electronics expertise, one can remotely capture, and ultimately destabilize, sections of the distribution or transmission grid, causing large-scale blackouts and economic chaos, according to one major national news source.

Given the disconnected nature of our distribution networks — the protection schemes in place at the transmission-substation-distribution interface points — these claims would seem to be somewhat exaggerated. In fact, if you look more closely, the claimants quoted in these stories are often the ones most likely to profit from such fear and uncertainty.

In addition, state regulators will be concerned about data privacy protection. In one such demonstration, the infamous Aurora Project, the U.S. Department of Homeland Security simulated a cyber attack by remotely accessing a large diesel generator, resulting in significant financial damages as well as displaying the grid's exposure to adverse impacts.

As a result of these incidents and media attention, some groups are calling for reductions in the pace of smart grid advancement to protect the reliability of the nation's bulk power system. Some industry organizations are even suggesting that the Department of Energy not award any of the US$4.5 billion in stimulus funding until we develop acceptable standards.

REQUIREMENTS AND STANDARDS

It is refreshing, however, to note that we are moving forward in the right direction. Many smart grid standards working groups are offering frameworks and recommendations for both interoperability and security protection.

For example, the AMI Security Task Force, made up of 11 U.S. utilities collaborating with the Department of Energy, just released its AMI System Security Requirements. In addition, the National Institute of Standards and Technologies has been awarded $10 million in stimulus funding to advance the nation's smart grid standards, including security considerations.

MOVING FORWARD

Cyber security issues exist and will be addressed as smart grid technologies and applications are developed. We certainly should be concerned about the broader implications that these isolated demonstrations may have relative to automated devices on the distribution or transmission grid.

Therefore, let's not let fear and uncertainties force our hand back to an incremental approach. We need to continue down the bold path of modernizing our nation's grid, creating and transitioning jobs and economic security, as well as addressing our longer-term needs for sustainability and climate change reduction.

Rob Wilhite (robert.wilhite@us.kema.com) is the senior vice president of KEMA and a 24-year veteran of the utility industry. He also serves on the Board of Trustees of Utilimetrics and is the chairman of the Utilimetrics Education Committee.