The Smart Grid and the Evolution of the Independent System Operator

By Chris Thomas and Bruce Hamilton, ADICA, LLC

The global electric utility industry and its customers are faced with a set of challenges which are unparalleled since the advent of widespread electrification. Challenges including the increased likelihood of a carbon constrained future, significant requirements for new infrastructure investment, and increasing energy prices are converging to drive fundamental change in the way that energy is produced, delivered and used.

The electricity system of the future has to produce and deliver electricity that is reliable, affordable and clean. To accomplish these goals, both the electric grid and the existing regulatory system need to get smarter. This paper explores the smarter grid, the broader vision of a smart grid in the United States, and the role that the standards making process has in helping Independent System Operators (ISOs) evolve to meet the challenges facing the grid.

Most smart grid development in the US has been focused on regional issues related to utility deployment of AMI and other basic foundational systems. While this effort is important, placing meters at end user locations is only the first step in the development of a smart grid. A much more specific effort is needed in order to create the interoperable smart grid that has been envisioned by US federal policy. To realize this vision, every participant in the electric grid, from the consumer to the generator, needs to be engaged in a fully transactive system. This new, more transactive system will require the facilitation of millions, perhaps even billions, of new transactions by ISOs. This system is a logical extension of existing electricity markets, but it represents a monumental change in policy. 

What is a Smart Grid?
Defining a smart grid is not a simple task. The smart grid is more than just technology upgrades to the existing electric grid. It is a comprehensive vision that combines physical assets, operating systems, and new engineering design standards with economic, policy, and consumer behavioral changes. These system changes are dependent upon both the existing utility infrastructure and the existing regulatory environment. The US is a patchwork of both infrastructure and regulation that is surprisingly diverse. Because of this diversity, the most valuable way to define a smart grid is in terms of what it is capable of, often referred to as the grid's functional capabilities.

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