Smart Grid Utility-Broadband Partnerships Seen Hit By Divergent Regulations
The “diametrically opposed regulatory paradigms” in the states that govern the energy and broadband sectors is hindering rather than encouraging smart grid partnerships between the two sectors, said a Time Warner Cable study. “The economic incentives created and fostered by these disparate regulatory regimes have divided two sets of potential partners in the smart grid space,” said the report from Time Warner’s Research Program on Digital Communications.
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Many states and federal agencies have suggested proposals for “bridging these divides,” but “little progress has been made toward aligning the incentives of both sectors to facilitate the rapid deployment of a national smart electric grid,” the report said. While utilities are subject to “very exacting” regulations that largely insulates them from competition, broadband providers are lightly regulated, leading to competition across a variety of broadband platforms, the report said. This regulatory approach gives utilities very little incentive for investing in new services and pursuing new lines of business, the report said.
The “state-centric” nature of utility regulation also “complicates more robust” smart grid deployments, the report said. The patchwork of state regulations will affect the pace of grid modernization at the national level, it said. With revenue from broadband consumer subscriptions expected to flatten over the “next few years,” broadband service providers are looking for new revenue streams, it said. But that doesn’t mean they are “attempting to become de facto healthcare and energy providers by delivering telemedicine and smart grid services via existing broadband connections,” it said.
"Broadband service providers view partnerships with utilities as an obvious convergence that would bring together essential components for the smart grid in an efficient and cost-effective manner,” it said. They want to partner with utilities to create a “new class of specialized” energy services for consumers so they can “differentiate themselves in an already competitive marketplace.” Utilities and broadband providers often have “divergent views” on the ability of commercial networks to accommodate the needs of smart grid services, the report said.
Issues that utilities have brought up in relation to using commercial networks include backup power for communications services and priority of service in the event of an outage or congestion, the report said. But several contractual agreements and government program already exist that would allow utilities to arrange priority of service with network owners, it said. Utilities haven’t fully used those options, the report said, citing the Department of Energy. And as broadband providers develop specialized service agreements for telemedicine services, their ability to “guarantee priority of service for emerging smart energy applications will be tested and honed,” the report said. “Broadband service providers have a significant economic incentive to perfect these agreements lest they foreclose a potentially lucrative new line of business."
Utilities tend to build proprietary communication networks because they are assured of recouping their investments and will be guaranteed rate increases to offset likely decreases in energy use, the report said. But the proliferation of proprietary networks designed solely for the smart grid could impede interoperability with commercial networks and “decrease potential consumer welfare gains,” it said. Proprietary networks also face possible “technological obsolescence” because the communications needs of the smart grid are “still in flux and will continue to change rapidly in the coming years,” the report said.