GETTING THE MOST OUT OF GRID MODERNIZATION

This research paper by Energy Innovation outlines a five-step framework for state regulators to design grid modernization programs that maximize benefits for customers. The authors emphasize the use of outcome-oriented metrics across three primary goals—affordability, resilience, and environmental performance—and suggest tying utility revenue to performance against these targets to align incentives.

• A successful grid modernization program should follow five key steps: conducting an assessment of costs and benefits of distributed resources and the modern grid, defining policy goals based on that assessment, tying quantifiable and independently verified metrics to those goals, setting realistic targets with stakeholder input, and considering linking utility revenue to performance against those targets.
• The authors advocate for 'integrated distribution planning' (IDP), which optimizes the system by considering demand-side and distribution-level investments alongside bulk-system resources. This process is necessary to understand how distributed energy resources can provide value to the grid and to generate the data required for setting rational performance targets.
• The paper identifies three primary goals for grid modernization investments: affordability, resilience, and environmental performance. It suggests using broad, outcome-oriented metrics rather than line-by-line reviews of individual investments to give utilities flexibility in finding the least-cost approach to achieve results.
• To measure affordability, the paper suggests focusing on overall program cost or bill savings per customer, as well as peak demand reduction or system load factor. Other useful indicators include enrollment rates in opt-in time-of-use rates and demand response programs, and the extent of customer and third-party information access.
• Resilience can be measured through reductions in outage frequency (SAIFI) and duration (SAIDI) compared to a baseline, using a three-year rolling average to normalize for unpredictable weather. For catastrophic events, regulators may prioritize these metrics for critical services such as hospitals, fire departments, and police stations.
• Environmental performance can be tracked through the growth of emissions-free distributed generation hosting capacity, electric vehicle charging capacity, and interconnection speed. The paper notes that Illinois has used an emissions intensity metric (lbs/kWh) to quantify the environmental benefits of grid modernization across all hours of the year.
• The paper proposes two financial structures to align utility incentives with customer benefits: a conditional rate of return, where returns on equity are linked to achieving specific outcomes (like peak demand reduction), and a budget cap with shared savings, which provides revenue certainty while incentivizing operational savings.

APA

AGGARWAL, S., & O’BOYLE, M. (2017). GETTING THE MOST OUT OF GRID MODERNIZATION. Energy Innovation. https://energyinnovation.org/wp-content/uploads/GridModernizationMetricsOutcomes_Feb2017.pdf

Chicago

AGGARWAL, SONIA, and MIKE O’BOYLE. GETTING THE MOST OUT OF GRID MODERNIZATION. Energy Innovation, 2017. https://energyinnovation.org/wp-content/uploads/GridModernizationMetricsOutcomes_Feb2017.pdf.

Wikipedia

{{cite report |last1=AGGARWAL |first1=SONIA |last2=O’BOYLE |first2=MIKE |title=GETTING THE MOST OUT OF GRID MODERNIZATION |publisher=Energy Innovation |date=February 2017 |url=https://energyinnovation.org/wp-content/uploads/GridModernizationMetricsOutcomes_Feb2017.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{aggarwal2017getting, author = {AGGARWAL, SONIA and O’BOYLE, MIKE}, title = {{GETTING THE MOST OUT OF GRID MODERNIZATION}}, institution = {Energy Innovation}, year = {2017}, month = feb, url = {https://energyinnovation.org/wp-content/uploads/GridModernizationMetricsOutcomes_Feb2017.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }