Technical Barriers

Most of the technologies needed for modernization of the T&D system are available now, but some technical hurdles, such as energy storage, remain. In addition, some technologies are still expensive; R&D is necessary to reduce costs and improve performance. Yet the rate of technology research, development, and deployment in the power industry is low compared to that of other industries.

Utilities, at least in part because they are regulated, are relatively risk averse and may be reluctant to deploy new T&D technologies—particularly new transmission technologies—until they are fully proven. Also, modernization technologies must be deployed in unison to achieve their full benefits, posing challenges in integrating technologies. For example, universal communications standards as well as a common architecture that promotes interoperability are needed. However, the security issues that are involved in an open system must be met with industry-approved and -adapted standards and protocols.

Investment Barriers

Modernization will cost more than simply building more transmission lines and replacing aging equipment. Even though the additional investment would eventually pay off, financial markets and regulatory constraints drive utilities to minimize investments.

In addition, some of the benefits of modern grid technologies are societal (higher quality, more reliable power) and not typically internalized in a company’s decision making. The companies, however, must bear the full cost of modernizing the parts of the grid that serve their customers. This barrier is more significant for the transmission system, which is inherently interconnected: many entities own and regulate different parts of it. Cooperation will be needed among utilities and regulatory agencies.

Regulatory and Legislative Barriers

As noted above, utilities are cautious about adopting new technologies that may involve some risk. This is especially true when familiar technologies have lower first costs and utilities are given no incentive to invest more than the minimum required to maintain operations. If modernization is to occur and produce all the advantages it offers, legal and regulatory changes are likely to be necessary.

Legislators and regulators have not taken a strong leadership role regarding grid modernization, nor have they adopted a clear and consistent vision for

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