Grid Modernization - Challenges and Opportunities

by Damir Novosel of Quanta Technology

1.     Introduction

Modern society has reached a point where virtually every crucial, economic, and social function depends on the safe, secure, and reliable, operation of the electrical power and energy infrastructures. New technology trends include development of more efficient, reliable, and cost-effective renewable generation and Distributed Energy Resources (DER), energy storage technologies, Electric Vehicles (EV), monitoring, protection, automation, and control devices, and communications that offer significant opportunities for realizing a sustainable energy future. However, the electric power systems in the industrialized world, in addition to generally being quite old, particularly in large metropolitan areas, face challenges caused by physical and cyber security attacks, environmental concerns, new weather patterns, changing consumer needs, and regulatory requirements.

While the electrical power system is becoming, and will continue to become, more distributed, it is important to note that today’s interconnected grid began as a distributed grid. Interconnected grids were created to improve grid cost-efficiency, reliability, service quality, and safety. As technology advancements made it easier to deploy renewable resources and, controllable, more efficient distributed grids, the fundamental benefits of a connected grid still hold and in fact, become more important. While the present grid is generally considered reliable, as dependency on the digital economy grows, users will demand even more reliability from the electric power delivery in the future, including resilience during major weather or security events. Transmission and distribution systems are an enabler to deployment of renewable resources, providing pathways for the transport of clean energy between production and consumption centers and a means for resource movement and delivery, while at the same time fortifying electric system efficiency, stability, and reliability of supply. Integration of DER and distributed grids can increase efficiencies in the use of the existing grid, as well as become part of the overall development strategy to balance the supply-and-demand uncertainties and risks in a variety of different resources. In cases where distributed grids become predominant (e.g. renewable intermittent DER plus energy storage), and grid usage becomes equally as variable, assuring a safe and reliable supply will require an intelligent, modern, resilient, flexible and safe grid.

Several states in the USA, like California and New York, and countries such as Germany, Spain, and Australia have ambitious goals for achieving high penetration levels of renewable generation and DER in the electric power system in coming years. These goals are necessary if the energy infrastructure is to adapt to the transition away from carbon based fuels required to mitigate climate change. In achieving those goals, a key question is how much should be invested in the grid as more and more DER (e.g. microgrids or systems using PV plus energy storage) serve loads without utilizing the grid for the majority or extended periods of time. The follow up question is what the value of the grid is in presence of DER and energy storage. It is well understood by the industry as documented through independent and objective organizations such as IEEE (e.g. IEEE report on Quadrennial Energy Review per DOE request)[1] that the reliability and safety of serving electrical power load will be negatively affected if the T&D grid is not available to provide backup. Therefore, increasing the ability of the T&D system to host and enable the use of increasing penetration levels of DER is an essential step in achieving this medium and long-term vision.

2.     Modern Grid Ingredients

Building this intelligent grid is a monumental task (particularly on the distribution and grid-edge sides, which are vast and heterogeneous) that has led to the emergence of new concepts, technologies, and paradigms. Examples of this include debates regarding future grid architecture (a distributed, hybrid, or centralized grid); advances in grid modeling, simulation, and analysis; the introduction of the microgrid concept as an alternative to enhance resiliency and facilitate DER integration; and the convergence of information and operations technologies (IT/OT). The idea of the utility of the future encompasses the need for all aspects pertaining to the utility industry to evolve and adapt to this new and dynamic customer-centric reality. This includes business and engineering processes, regulation, policies, rate design, asset ownership, service diversification, and relationships with customers. Furthermore, changing weather patterns are leading to increased frequency of severe events and associated risks for electric utilities, such as extreme temperatures accompanied by abnormal peak demands, severe droughts accompanied by wildfires and infrastructure damage, etc. Average temperature rise stresses grid equipment (e.g. transformers and T&D lines), including reducing its life-time. In addition to adapting planning and operations practices to this “new normal”, the above effects require updated equipment design, as well as different engineering and construction practices to counteract the impact of climate change and enable the adoption of new technologies. For instance, impacts caused by the adoption of inverter-based DER technologies such as voltage fluctuations, reverse flows, low fault currents affecting system protection performance, and potential loss of inertia (requiring frequency regulation) need to be addressed.

Future grid capabilities could be divided into three broad categories: Technology and integration, processes and standards, and regulation and business models. Advanced monitoring, protection, automation, and control technologies, new tools for operations, planning, and communications, as well as robust and foundational infrastructure can facilitate the transition to a high renewables/high DER grid. Although grid technology related aspects are challenging and complex, changes and solutions in this area are at a more advanced stage than those needed to address emerging regulatory, policy, and business problems and needs (some of which are being triggered or enabled by technology developments). In summary, addressing the business, legal, regulatory, and policy side of the utility of the future is an area where significant work is required.

Integration of high penetration levels of renewables, DER, energy storage, and EV in the electric power system requires increasing the ability of the T&D system to host and enable the use of these resources, while improving the reliability, resiliency, and safety of the electrical power supply. Grid modernization is key to realizing this potential. The traditional assumption that T&D systems could be analyzed separately is no longer valid, and joint modeling, simulation and analysis of T&D systems (and particularly sub-transmission and distribution systems) is gradually becoming a need that requires new modeling approaches and simulation tools. This interdependency is progressively increasing and starting to impact operations and planning of T&D systems.

Utilities operating in states such as California (PG&E, SCE, and SDG&E) and Hawaii (HECO), where DER proliferation is already a reality and where aggressive DER adoption will continue to achieve to achieve renewables and environmental goals, continue this evolution toward a modernized distribution grid at a faster pace than utilities operating in emerging DER markets. Otherwise, DER proliferation will lead not only to significant operations, planning and engineering challenges and inefficiencies, but also will prevent utilities (and ultimately customers and society in general) to attain the potential benefits derived from the adoption of these technologies. Furthermore, since even larger-scale adoption of DER is inevitable, given the imminent (or existing) achievement of grid parity by PV-DG in these markets, additions in grid modernization infrastructures and systems should largely be considered “necessary” rather than “optional” investments to enable the normal operation of modern and future distribution systems. It is worth noting that utilities operating in states with incipient penetration levels of DER, recognize the imminence and urgency of preparing for the transition to this new paradigm, and are actively working on modernizing their distribution grids and overall practices so that they are suitable for operation in this new reality.

An important point to emphasize is that the pace of the transition toward a modernized grid, particularly on the distribution side, is a function of the existing and expected system conditions and trends of every utility system and market. Grid modernization and DER proliferation are certainly interrelated, but the latter is not a requirement for the former. Utilities such as Commonwealth Edison (ComEd), Dominion, and CenterPoint, which operate in service territories with incipient penetration levels of DER, have successfully implemented grid modernization initiatives with the purpose of improving grid reliability, resiliency, and system efficiency, addressing growing expectations regarding customer service, and replacing foundational aging infrastructure.

3.     Grid Modernization Requirements and Smart Technologies

The following are some of key areas for grid modernization. It is envisioned that further evolution and modernization in this areas is required to enable the T&D system of the future.

  • DER technology - While vendor and developer information systems are certainly aware of new DER sales and installations, these sources of information need to be better integrated with utility systems, and privacy and cybersecurity issues should remain a high priority along with tackling consumer privacy and data ownership implications, especially for DER not owned and operated by utilities. The IOT promises low cost ubiquitous communications to DER which would facilitate incorporating them in advanced market and operations processes. However, distribution systems are expected to have a high level of reliability, security, and availability, even in catastrophic situations, requiring upgrades to improve the capacity and reliability with increased automation.
  • Smart inverter technology are helpful technologies to facilitate DER integration and have voltage and frequency “ride-through” capabilities. However, the utilization of this technology introduces additional challenges such as a need to provide enough fault current to activate protection devices during fault conditions and address significant reduction in the system inertia affecting the system frequency. While smart inverters can regulate voltage, the mitigating impacts of reducing voltage may increase the reactive power requirements from the grid. Thus, close coordination with Volt/VAR control is required. Smart PV inverters require additional equipment upgrades, much improved grid monitoring and control systems, new planning methods and tools, grid management systems that feature more interaction with DER, and implementation of appropriate interconnection standards.
  • Energy storage promises the ability to mitigate renewable DER variability and improve T&D utilization and economics, but technical, regulatory and economic barriers still impede its adoption even in states with aggressive programs for deployment. “Shared applications”, meaning multiple use of the same energy storage device, is a key to realizing the best economic potential from the technology. However, regulatory barriers and legacy paradigms are major obstacles to the rapid adoption of these technologies and their most effective uses. Energy storage is forced to fit into one of the generation, transmission, distribution or customer “buckets” and follow rules established for that asset class. Energy storage is in many viewpoints a new asset class of its own.
  • Microgrids can serve as a scheduling /dispatch /control entity responsible for balancing load and generation, and in grid connected operations possibly serving as a point of aggregation up to higher level operations and even to wholesale markets. They enable resources, customer, and network to be islanded from the main power grid so as to allow continuity of service on some basis during contingencies with energy provided by local resources. Grid integrated microgrids require protection, sectionalizing, monitoring, automation, and – most importantly – control capabilities beyond those typically used in distribution systems today.
  • Integrated, holistic T&D planning and operations – As the variability of distribution system net load increases, better coordination and information transfer is required. The ISO can no longer rely on simple load forecast bus allocation factors to forecast bus net loads but must be able to forecast PV production, as one example. More importantly, the use of DER to provide aggregated energy supply to the T&D system and ancillary services to the wholesale markets will be increasingly valuable.
  • Better visibility and control is vital to the electrical system of the future - Advanced sensors, controls, and management systems are required to operate the distribution system in real-time to manage reliability and operational challenges derived from DER variability and load. Cost-effective monitoring of key electric variables, including bi-directional power flows, voltages, currents, equipment and DER status, etc., as well as fault information to circuit breakers and other protection devices is necessary to provide situational awareness. The ability to control DER on a five-minute basis will require overall bandwidth beyond the typical AMI network capacity. There is an increasing need for advanced sensors with higher resolution and GPS-based time-synchronization capabilities to accurately capture distribution system dynamics and address operational and power quality issues derived from DER variability. Furthermore, faster more intelligent, and flexible volt-VAR schemes (such as distribution-class power electronics-based static compensators) that work in coordination with smart inverters are required. 
  • Advanced distribution and substation automation technologies enable enhanced grid flexibility as well as improved asset management that will increase asset lives, reduce costs, and improve reliability. However, only around 50% of US distribution substations are fully automated today. Digital relays, substation automation computers and data concentrators, and gateways to SCADA, DMS, and Energy Management Systems (EMS) systems – are fully commercial and proven technologies. They need to be implemented in large scale with full utilization of their key capabilities. Intelligent and adaptive reclosers and switches operating in Fault Location, Isolation and Service Restoration schemes can isolate faults in smaller sections to support increased flexibility and improve reliability with both traditional and distributed grids. Furthermore GPS based measurements may be able detect fault currents at a remote location or high impedance conditions not sufficient to trip the normal protection.
  • Adaptive system protection will need to be widely used. DERs with inverter technology create various operating scenarios which are not presently addressed by existing protection schemes. Circuit power flows and fault current levels will change based on DER size, output, and location on the circuit. It is technically possible to set relays remotely or even to program adaptive settings from the DMS. The capabilities of digital relays to support adaptive protection settings (which may be determined at the substation or system level via new applications) will be needed to support protection under high penetration levels of DER and resolve issues such as insufficient fault current, island operation, etc.
  • Electric transportation holds significant promise for reducing dependence on oil and carbon footprint. Electrical systems can help improve the livability, workability and sustainability of “Smart Cities”. Specifically addressing EVs, studies have shown that the first purchase of an EV is likely to inspire more in the same neighborhood, which can lead to the emergence of “clusters” and the overload of system components. Distribution system capacity upgrades in combination with solutions based on DER and intelligent load control could address these issues.

The ideal scenario of the grid of the future of being able to achieve all the above is difficult to achieve in the short-term, given the monumental size and complexity of the distribution grid, and the large investments and required infrastructure (including communications systems) associated to this activity. However, a gradual transition toward this vision is possible and necessary to be able to provide a reliable, resilient, safe and secure service and operate the complex and highly dynamic distribution grid associated to high penetration of DER scenarios.

There are some other necessary ingredients for successful grid modernization:

  • Standards are more critical for both users and vendors to streamline deployment of both existing and new technologies and support interoperability among devices and systems as well as the use of best industry practices. For example, the IEEE 1547 Series of Interconnection Standards is critical for reliable and cost-effective DER deployment.
  • Well-trained workforce, capable of dealing with grid changes, is necessary. A range of initiatives addressing grid modernization should be planned, including development of new curricula at universities, enhancement of secondary and post-secondary energy sector workforce training programs, attending tutorials, apprenticeships, and sharing and using best practices. This includes participation of individuals in standards development, professional activities and conferences, and continuous education.

Furthermore, the ongoing evolution of the electric power industry also involves changes to existing electricity market and regulatory frameworks, which are aimed at satisfying the growing expectations of end users. The advanced monitoring, protection, automation and control infrastructures and capabilities introduced by grid modernization are vital enablers for the successful implementation of these initiatives. In the specific case of electricity markets, Transactive Energy (TE) and the DSO are two concepts widely discussed as being key elements in the Utility of the Future, in integrating DER with wholesale markets, and in applying market concepts to DER dispatching and operations on the distribution system. The spectrum of these discussions ranges from radically new paradigms to application of wholesale market design to the distribution system, including the introduction of Distribution Locational Marginal Pricing (DLMP).

The TE advocates envision a future market where a “platform” allows buyers and sellers to find each other and where the energy markets are built around bilateral individual transactions ranging from real-time to months forward. These models have other commodities markets as their guiding light. However, the TE models have so far not shown how real world implementation including reliability and obligations with critical customers can be made to work, and are not “mainstream” today.

The DSO or the Distribution System Platform (DSP) model is very much mainstream. Basically, wholesale concepts of day ahead, hourly, and real-time markets using locational pricing to manage congestion are the guiding principles. Considerable theoretical work as well as some rigorous cost-benefit studies have been done on this model. The undergoing Reforming the Energy Vision (REV) process in New York is definitely considering it seriously. However, as the DSO model is also based primarily on the wholesale model which relies on gross profits from dynamic energy market and ancillary prices to incent investments in generation as needed, more analysis is needed.  For example, any DER locational needs (in fact, one could argue most) will not be able to reduce congestion but will be able to avoid backfeed (curtailment or local energy storage) and to manage voltage and power fluctuations. These may turn out to be both “zero marginal cost” kinds of resources and also ones with significant capital costs – and where the relationship to the energy markets is tenuous, especially in the case of voltage support. So alternative schemes, such as distribution level capacity markets, may be called for. Furthermore advanced sensors and tools to enable are required to proper operate the distribution market. The conclusion is that initial DSO functionality and design should “keep things simple” to avoid error-prone complexity and to be robust against likely early stage data base and data errors.

4.     Recommendations

We are at a crossroads of making business and technical decisions that will allow us to optimally and cost-effectively manage the electrical power delivery. The electrical power and energy sector will continue evolving as consumer expectations and options will change, technology breakthroughs will happen, and energy sources and their usage will be transformed. Use of electricity is expected to grow even with improvements in energy efficiency as it is expected that electrical energy will replace other forms of energy (e.g. transportation). As business models and technology are changing, the future grid is becoming a hybrid grid with distributed energy resources and microgrids integrated in traditional, but modernized, grid to fulfill all the consumer needs to balance the supply and demand uncertainties and risks with a variety of energy resources

The following are overarching recommendations to achieve safe, resilient, reliable, and cost-effective delivery of electrical energy while supporting environmental targets for years to come:

  • There is a need for grid modernization, with the speed of modernization adjusted to the pace of needed safety and reliability improvements, and the integration of clean DER and environmental and other regulatory targets.
  • The architecture and design of the grid will have to be updated to accommodate very high penetration of DER and customer driven operations and planning.
  • Enabling the transition to a modern grid requires changes in business models and regulatory policies, as well identification of the technical needs and development of new technologies.
  • Continuous focus on improving safety, resiliency, reliability, cost-efficiency, and customer flexibility to choose.


In summary, Quanta Technology team has been very privileged to have continuous opportunities to work on the above topics either in partnership with a number of global utilities and IOU, supporting DOE and regulatory agencies, or through IEEE, CIGRE and other industry initiatives. We are proud to support and provide global leadership to our industry and the overall society on important grid modernization initiatives enabling safe, resilient, reliable, and cost-effective energy future.

Damir Novosel