A Washington Insider’s Advice for CIOs

National energy policy is changing faster than ever. GridWise Alliance board member Mark Maddox gives Utility Automation & Engineering T&D his top tips for utilities to navigate wisely to the coming smart grid era.

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Maddox serves as chief strategist on government policy for Arcadian Networks Inc. He delivers energy insights based on a 25-year career as a senior strategic policy, communications and government relations expert. He served as director of the Energy Practice Area for the Livingston Group, LLC. In his role as an assistant secretary at the Department of Energy (DOE), Maddox oversaw a $750 million budget and played a leading role in historic energy initiatives. He chaired the 21-nation Carbon Sequestration Leadership Forum Policy Committee and has led working groups with China and India. He served other leadership roles for the DOE and as a director in Lockheed Martin’s Integrated Management Systems Division’s offices of Government and Public Affairs. Maddox earned an MBA from The George Washington University in Washington, D.C.

UAE: What is the most important thing for CIOs to know about the stimulus, and how they can participate to advance their utilities’ smart grid efforts?

Mark Maddox
GridWise Alliance board member
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Maddox: First, any applications should be consistent with the utility or cooperative’s business plan. The idea behind doing a limited deployment is to prove a business concept that can be scaled up.

Second, as you look at your project, understand there may be certain fixed costs regardless of the size of the project. For instance, software purchased to manage a regional project may be identical to full deployment, meaning the larger deployment can be significantly discounted. The same can be said for meters, radios and spectrum.

Third, understand that every question needs to be thoroughly addressed. The DOE only knows what you write down. There is a story that makes the rounds in my old program about a utility that did not take a question regarding management experience seriously and lost a grant due to a low score.

UAE: Do you have any insight on what sort of grant application is most likely to succeed?

Maddox: I know there is a great deal of concern regarding applications, and there will be differences based on whether an entity is seeking a demonstration grant or a stimulus grant.

Demonstration grants are for commercial-scale proof of concepts and imply a fair amount of reporting for the department to draw conclusions as to the merit of the policy course. The good news is that the DOE has not fully developed its reporting requirements and has some flexibility in creating these requirements. The bad news is that it has not developed its reporting requirements. This means they have no template to work from and may be inclined to be overly prescriptive.

Making agreements even more difficult is the intense scrutiny that everyone in the process will be under as a result of the stringent oversight requirements. If you have been selected for a grant, it would be useful to all parties to have developed an initial reporting structure that attempts to synchronize your internal reporting system, your public utility commission’s and the DOE’s.

Also, there is going to be more than one round of solicitations, and it is important to apply in the first round. If you win, great; if you lose, you can learn from your mistakes. While I don’t know if they will do it with this solicitation, in the past the DOE has given losers a debriefing on their applications’ weaknesses.

Finally, remember the professionals are trying to close the deal. They have deadlines to award this money, and each wants a successful project to grow from his or her efforts.

UAE: What about security? What practical advice do you have for utility CIOs preparing to deal with new and pending cybersecurity regulations?

Maddox: There is not enough space for me to cover everything going on in this area, and I don’t claim to be a security expert. But I will say this: Everyone needs to understand shoring up our cybersecurity is a priority in Washington that policymakers of all stripes share. One of the reasons for the tremendous attention this issue is receiving is a perception that the industry did not react quickly enough to the initial NERC rules. If I had to give advice, it would be to aggressively address the issue and then communicate to policymakers what you have done. Be proactive.

In the DOE grants, the solicitation makes it clear that not having an adequate security program can disqualify an otherwise meritorious grant.

UAE: What policy and standards trends will influence CIOs’ actions?

Maddox: Smart grid, cybersecurity and renewables will each require CIOs’ attention during the next few years. Smart grid and renewable standards are going to entail the movement of a lot of information. Users will want increased access to information. They may demand mobile access to information, and utilities will become information providers. CIOs will need to balance these increased information demands and the explosion in the number of users and find ways to make their systems more secure. It’s a challenge akin to building a fence ahead of a stampede. The key is creating architecture for the network management and security as integral parts of the network itself.

Standards are another tricky issue. Right now, standards are caught between Washington’s desire to act promptly and the time-consuming development of consensus-based standards. Everyone seems supportive of goal-based standards, but every vendor and utility is wrestling with its own insecurities over having its operating systems excluded.

My sense is that there will be an interim approach along the lines outlined in American Recovery and Reinvestment Act calling for an open standards approach, with more concrete standards to follow. Everyone likes to talk about the VHS-Beta shakeout and all of the people who guessed wrong. But there is a tendency to miss the larger lesson. Videophiles and engineers loved Beta’s better picture. VHS became more widespread because it was easier to use and recorded longer. I worry that the desire to create the perfect standard will preempt the necessary deployment experience that needs to occur. Much of the technology that will be used in the smart grid has been used by other security-conscious industries and governments globally. Vendors, utilities and governments likely will apply these technologies to U.S. smart grid projects. Moreover, leveraging existing standards helps promote interoperability.

UAE: How important is interoperability?

Maddox: Interoperability is increasingly important. When you had closed utility systems, there was less concern. The utility was the only customer, and the device was built to its specifications. Today, end-users want their meters or at least a choice of meter capabilities. Large box retailers are centralizing the energy management systems today and customizing their store operations. Endpoint users will customize their in-home energy systems the way audiophiles customize their sound systems using a combination of Pioneer, Sony and Harmon components. Instead of a Blu-ray, digital player and equalizer plugging into a component, it’ll be a refrigerator, dishwasher, three flat screens, a dryer and maybe an electric car communicating to a central device or meter. From the most outlying substation to the commercial and residential end customer, interoperability will be intrinsic to the entire power distribution system, and CIOs need to by savvy in assessing investments in technologies that will support interoperability.

UAE: What role do communications play in smart grid planning?

Maddox: Smart grid is all about communications to meters, PMUs, substations, transformers, renewables and your work force. CIOs must involve their entire companies when they create their architecture with the idea that every business unit will be leveraging the information that is being created. And CIOs will need to proactively identify their communications users to create a structure to their systems’ development. It just won’t be possible to stovepipe users anymore. When CIOs take an enterprise view based on use-case and not just whatever hodgepodge of technologies may have been used in legacy communications, they can build the kind of two-way communications network that serves as the very backbone for the smart grid.

UAE: What about rate recovery? What’s happening, and how does it affect CIOs?

Maddox: There are 50 rate structures, so it is hard to make a general statement on this. A former public utility commission chairman told me the other day that he felt the best path was to show the concrete savings you could create on the operations side by creating a communications architecture and that the consumer benefits are more likely to fit better in a down-the-road scenario. For CIOs, the issue is trying to balance the political pressure supporting smart grid deployment against regulatory skepticism. A wild card is how cyber issues may influence the need to upgrade systems across the board.

UAE: What is your advice on timing? Should CIOs wait for federal guidance before investing?

Maddox: My company’s experience is that there is a tremendous amount of learning. Several utilities have issued and withdrawn RFIs as they discover new issues. So my advice is to start sooner rather than later so you have time to learn the ins and outs, rather than finding yourself scrambling to meet a deadline. Regarding waiting for federal guidance, my sense is there is enough out there on standards and cyber to begin the process.

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