grid modernization for enhancing the resilience, reliability,...

Scientia Iranica D (2016) 23(6), 2862{2873

Sharif University of TechnologyScientia Iranica

Transactions D: Computer Science & Engineering and Electrical Engineeringwww.scientiairanica.com

Invited/Review Article

Grid modernization for enhancing the resilience,reliability, economics, sustainability, and security ofelectricity grid in an uncertain environment

M. Shahidehpoura;b and M. Fotuhi-Friuzabada;�

a. Center of Excellence in Power System Control and Management, Department of Electrical Engineering, Sharif University ofTechnology, Tehran, P.O. Box 11365-11155, Iran.

b. Department of Electrical and Computer Engineering (ECE), Galvin Center for Electricity Innovation, Illinois Institute ofTechnology (IIT), Chicago, IL, USA.

Received 4 May 2016; accepted 19 November 2016

KEYWORDSGrid modernization;Smart grid;Reliability;Rresiliency;Security;Economics;Distributed supplytechnology.

Abstract. This paper reviews the merits of modernizing the power grid and discussesthe way electric utilities in various countries are directing their practices toward o�eringenhanced sustainability, reliability, resilience, security, and economics to their respectiveconsumers. The modernization of the electricity grid, which has evolved as the brainchildof electricity restructuring, has been made all the more urgent by the virtually pervasivedependence of modern lives on a reliable, clean, and secure supply of a�ordable electricity.The electric utility industry restructuring, which has staged many institutional, regulatory,and business models, has enabled the modern electricity grid to take full advantage ofa range of available energy sources and modern technologies pertaining to prosumersand transactive energy, renewable supply, storage, energy e�ciency, climate change andcarbon capture, electri�cation of the transportation industry, microgrids and resilience, andlarge fossil units that have helped the electric utility industry meet its global objectives.Understanding the dynamics of grid modernization, which can o�er a clear appreciationfor the use of innovation in electric power systems, and the impact that grid modernizationwill have on individual lives, is among the issues which will be discussed in this paper.© 2016 Sharif University of Technology. All rights reserved.

1. Historical perspective

Electricity is central to the well-being of any nation.The transitions from wood to coal to oil and therise of electric power were accompanied by sweep-ing technological, sociological, and economic changesin the 20th century. More concentrated and largeenergy sources enabled the industrial revolution andfacilitated mass migrations to cities of those who wereseeking prosperous job opportunities and more glam-

*. Corresponding author. Tel.: +98 21 66165921E-mail addresses: [email protected] (M. Shahidehpour);[email protected] (M. Fotuhi-Friuzabad)

orous styles of living in metropolitan areas across theglobe. Electricity allowed the rise of tall buildings onceelevators, which were equipped with electric motors,were invented, introduced electric appliances at home,and automated many daily tasks at workplace forincreasing productivity and enabling the digitizationof the world [1].

In 1882, Thomas Edison started the Pearl StreetStation in New York, which was the world's �rst centralpower plant and operated as the world's �rst microgrid(cogeneration plant). While the steam engines pro-vided grid electricity to neighboring homes and busi-nesses, Edison made use of the thermal byproduct bydistributing steam to local manufacturers and warming

Shahidehpour and Fotuhi-Friuzabad/Scientia Iranica, Transactions D: Computer Science & ... 23 (2016) 2862{2873 2863

nearby buildings on the same Manhattan block. Theisolated large power systems were established at theturn of the century, which revolutionized manufac-turing businesses and created industrialized societiesacross the globe. In the 1930s, isolated power systemsmelded into interconnected systems. In the 1950s and1960s, isolated systems were converted to large regionalpools. Using power pools, bulk power was generatedat centralized power plants and delivered over longdistances. With economies of scale, prices declined anddemands increased.

Today, an electric utility provides a commodityservice that is considered essential in many respectsto the general public. The electric utility service hasalso been deemed by several governments as a regulatedoperation because the service is a vital public interest.Traditionally, electric utility has o�ered a�ordableservices using a single supplier in a de�ned franchiseterritory because of the high cost of distribution in-frastructure. The cost of generating power continuedto decline as power utilities built ever-larger powerplants, which increased e�ciency and reduced produc-tion costs. Increased electric demand required evenlarger plants, which reduced costs further and increasedthe rate base. This era of development was historicallya win-win for everyone. Consumers had abundant, low-cost power at declining rates, increased electri�cation,and economic growth. Centralized electric utilitieswere also granted certain monopoly rights to preventprice gouging and encourage widespread access forselling electricity to retail consumers at regulated pricesin their speci�c service areas.

Key features of a regulated model for electricutilities included the following:

� Electric utilities generated and dispatched economicpower, served consumer demand, and maintainedreliability by large and centralized plants in theirservice territory;

� Electric utility used regional transmission lines,which were regulated by governments for wholesaletransactions;

� Major electric utilities imported power as deemednecessary and exported surplus power to meet adja-cent utility demands, and managed the economicsand the reliability of power transactions usingsophisticated Energy Management System (EMS)technologies installed in local dispatch control cen-ters [2].

1.1. Oil crisis of the 1970sThe 1970 OPEC oil crises changed the golden era ina ash. Rapid increases in fuel costs for operatingfossil-based power plants in many parts of the worldtranslated into large increases in retail power prices.The sustained increases in oil prices and unstable fuel

supplies in international markets led many electricutilities to construct new power plants that relied ondomestic fuel (e.g., hydro, coal, and uranium). Thesepower plants costed much more to build than the tra-ditional oil or natural gas-�red plants. Consequently,the �xed costs of electric utility operations increased,which further increased retail electricity prices globally.

The higher electricity prices resulted in a pub-lic outcry, which ultimately increased the regulatoryoversight by governments for stabilizing the electricityprices. The consumer resistance to higher rates ofelectricity and poor economy resulted from higher fuelprices, ultimately culminating in a decline in electricityconsumption. In this era of decline, electric utilitiesended up with large stranded assets as they operatedtoo many power plants and/or plants that were toocostly. In the mid-1980s, the regulated electricitysituation appeared to be out of control in the westernhemisphere with electric utilities requesting higherregulated rates and several electric utility companies onthe verge of bankruptcy. In the early 1990s, the Stateof California had some of the highest electric rates inthe United States and was looking for ways to boost itseconomy in the aftermath of high cost of electricity forconducting business. In essence, economic developmentwas slowed down where electricity rates were high andmanufacturing �rms were ocking to low-cost states.

It was becoming apparent that regulatory ap-proaches for the electric utility industry in the UnitedStates were not working. In this regulatory envi-ronment where electricity prices were deemed to behigh, the potential implications of introducing a morecomprehensive electricity demand response, deploy-ment of distributed generation and renewable energyat increasing rates, introduction of new fossil-basedtechnologies for power generation, and growing oppor-tunities for introducing Smart Grid technologies andconsumer interactions with the power distribution gridwere further questioning the legitimacy of regulatoryboundaries on electricity generation and delivery thathad evolved over the past century.

1.2. Electricity utility restructuring in the1990s

The launching of several technological trends pavedthe way for electric utility restructuring in the westernhemisphere. The �rst approach, de�ned as the Inte-grated Resource Planning (IRP), was the introductionof energy e�ciency in both the production and theconsumption of electricity, which limited the peakload supplied by electric utilities. As a result ofIRP, government regulators required electric utilitiesto evaluate energy conservation and implement loadmanagement technologies rather than building newpower plants for managing utility loads. IRP wassuccessful in keeping retail rates in check, although

2864 Shahidehpour and Fotuhi-Friuzabad/Scientia Iranica, Transactions D: Computer Science & ... 23 (2016) 2862{2873

regulated rates were still considered to be relativelyhigh.

Rising fuel prices also hit the transportationindustry very hard. In response, engine manufacturersdesigned more fuel-e�cient motors and jet engines thatwere later used as peaking power plants in the electricutility industry. The combined-cycle natural gas powerplants based on the new jet turbines were smaller insize, had much higher energy e�ciency, and o�eredlower production costs. Thus, the notion of \the biggerthe better", which was followed in previous decadesby electric utility industry planners for installing largegenerating units, was put into questions.

The higher electric utility demand for natural gascould not be satis�ed at 1970 levels of production owingto peculiarities in the natural gas industry regulation.Solving the natural gas problem led to the restructuringof the natural gas industry in the United States byunleashing market forces to free up natural gas forelectricity generation, which paved the way for theelectric utility industry restructuring in the 1990s.

The electric utility restructuring path involvedexisting electric utilities selling o� their power gen-erators and the operation of transmission lines wastaken over by third-party grid operators (i.e., Indepen-dent System Operator) who operated the transmissionassets as a single system that would serve regionalcompetitive wholesale power markets. Figure 1 showsa conceptual comparison of vertically integrated and

Figure 1. Structure of vertically integrated andrestructured electric power systems: (a) Structure ofvertically integrated electric power system; and (b)structures of unbundled and restructured electric powersystems.

unbundled/restructured electric power systems.In the traditional vertical system, although a

utility might purchase power from neighboring electricutilities, it was primarily responsible for its own gener-ation, transmission, and distribution of power to retailconsumers in its service territory. In the horizontallyrestructured power system, however, generation andtransmission systems were unbundled and consumerswere free to purchase from any suppliers on the grid. Inthe restructured electric utility operation, transmissionscheduling was conducted by grid operators (ISOs)and power purchases were done collectively via marketmechanisms like the power exchange (PX).

Electric utility industry restructuring, which re-sulted in the growth of independent power producersand competitive wholesale electricity markets, intro-duced many new institutional, regulatory, and businessmodels. The restructuring models e�ectively demon-strated that the traditional practice of providing utilityconsumers with electricity from a vertical monopolyprovider was not as economical and giving retail con-sumers the opportunity to choose their power supplierstimulated electricity markets to reduce power costsand increase power products and services. The restruc-tured electric utility industry promoted higher qualityfor delivering energy services with lower electricityprices, which resulted in improving the productivityin various geographic regions, protecting the environ-ment, and ensuring the national security.

Restructuring has exacerbated the interdepen-dency of electric utility with other infrastructures in-cluding water, natural gas, telecommunications, trans-portation, and emergency response systems. Thehistorical perspectives have demonstrated that thesupply of oil and natural gas in the global arena isoften intertwined with political con icts, which havemade it more cumbersome to deliver the fuel supplyto generating plants. International con icts havealso caused overhead transmission lines to be veryvulnerable to physical attacks. The vulnerability oftransmission corridors in certain parts of the worldhas rendered it impractical to deliver large sums offossil-fuel based power generation over long-distances.The applications of distributed power systems andlocal microgrids may remedy some of these emergingproblems in restructured power system.

2. Grid modernization in the aftermath ofelectricity restructuring

The restructuring of the electricity grid allowed marketparticipants to take full advantage of a range ofavailable energy sources and technologies (e.g., energye�ciency, renewable energy, energy storage, carboncapture, electric vehicles, and other distributed tech-nologies as well as large nuclear, natural gas, and


hydropower generation) that helped electric utilityindustry meet its global reliability, resilience, security,and economic goals. A revolutionary application ofinformation and communication technology (referredto as Smart Grid) changed the nature of power genera-tion, transmission, distribution, operation, and controlin the aftermath of electricity restructuring. SmartGrid is designed to monitor, protect, and automaticallyoptimize the operation of interconnected power systemsand their elements, starting from central generationand distributed generation plants, transmission anddistribution systems, commercial and industrial users,to consumer devices, thermostats, and appliances.Smart Grid includes a host of new and redesignedapplications, such as phasor measurement units and ad-vanced metering infrastructure, that utilize advancedinformation and communication technologies to pro-vide substantial bene�ts to participants represented byincreased economics, reliability, security, and resiliencyof the power grid [3].

The modernization of the electricity grid stem-ming from Smart Grid implementations is made all themore urgent by the virtually pervasive dependence ofmodern life on a reliable and secure supply of a�ordableelectricity. Without electricity, navigation, telecom-munication, �nancial system, healthcare, emergencyresponse, and the Internet as well as all that dependon them become unreliable. However, a large electricityinfrastructure is often challenged by increasing vulner-ability to severe weather because of climate change,cyber and physical threats, and growing consumer-levelinteractions through Smart Grid. The threats to thegrid{ranging from malicious attacks on transmissionlines and substations to more ooding, faster sea-level rise, and increasingly powerful storms from globalclimate change{have grown steadily as society's depen-dence on the electricity grid has increased. In addition,consumer applications and digital technology havealtered society expectations of what the electricity gridshould o�er. Once satis�ed with a simple arrangementwhere electric utilities provided services and consumersbought power on �xed rates, individual consumers andcompanies are increasingly interested in controlling theproduction and delivery of electricity, and the enablingSmart Grid technology has become available to allowsuch consumer provisions. These trends, coupled with at or declining electricity demand (resulting from asoftening economy as well as the introduction of higherenergy e�ciency and demand response), have dra-matically altered electricity business models in whichlocal and distributed generation and storage are moreappropriately valued and utilized [4].

A positive resolution of grid modernization is thatit can mitigate growing vulnerabilities of the powergrid to cyber-physical and climate change threats inthe aftermath of electricity restructuring. The grid

modernization o�ers a broader perspective on energysecurity (which has previously focused mostly on in-ternational oil and natural gas supply security). Thebroader perspective includes not only the grid reliabil-ity, which pertains to the ability of the electricity gridto withstand incipient shocks in supply and deliverysystems (including international energy price hikes andpolitical con icts, thunderstorms, and cyber-attacks),but also a quick recovery from any extreme shocks(such as major natural storms) with devastating e�ectson the resilience of power systems.

Grid modernization supports a secure commu-nication network{its information backbone{that willenable communication among power grid components,from generation to consumer level, and protect thepower system from cyber intrusions. The communi-cation network will support the ability of a modernelectricity grid to monitor and control time-sensitivegrid operations, including the frequency and voltageregulation and optimal dispatch of constrained gener-ation, analyze and diagnose threats to grid operations,fortify resilience by providing feedback that enablesself-healing of the grid after major disturbances, andevaluate massive data provided by sensors (such asphasor measurement units) that enable the moderngrid to maximize its overall capacity in a dynamicpower system operation [5].

2.1. Impact of increased variability on gridmodernization

Grid modernization introduces innovative technologiesand services to power systems at an unprecedentedrate, but also injects uncertainty into the electricitygrid operations, traditional regulatory structures, andutility business models. For instance, the variability ofintegrated renewable sources of electricity is a utilitychallenge, which has been intensi�ed in the aftermathof restructuring. Modernizing the grid will introducechallenges that need to be addressed as a result ofoperating an electricity grid with additional variableelements. When an electric utility system has a largeshare of variable resources, fossil-fuel based powersources must be more exible for handling variableweather patterns that impact the availability of re-newable power sources. The greater the percentageof variable renewables in a utility system, the greaterthe exibility needed by the fossil-fuel based generatingsystem [6].

In addition to providing a mechanism for mitigat-ing the adverse consequences of variable generation,grid modernization will enable electric distributionutilities to actively control consumer-owned distributedgeneration units to improve the e�ciency, reliability,and overall performance of the electric distributionsystem. The need to deal with increasing penetration ofdistributed generation units, coupled with the need to


reduce electrical losses and improve overall e�ciency,has resulted in the growth of advanced distributionmodel-driven volt/var optimization systems. Manyelectric utilities are currently demonstrating volt/varoptimization on distribution systems as a key partof their grid modernization strategy. Distributedgeneration units equipped with smart inverters play arole in managing the volt/var optimization along thefeeder as well as supplying reactive power to improvethe power factor and reduce electrical losses [7].

2.2. Role of renewable energy integration ingrid modernization

A shift toward wind and solar is a shift away from thetraditional fossil based power that was readily availablewhenever it was needed. The challenge of variabilityincreases the cost of adding renewable electricity toa power grid. The power equipment will run at fullutilization more often at higher quality sites, producingmore power for the same investment. Any reductionin power generation from fossil fuels, when variablesources are available, is good for reducing greenhousegas emissions, but means that the fossil-fuel plants willface a more di�cult task of covering their �xed costs.In addition, some fossil-fuel plants are less e�cientwhen they are cycled up and down, adding costs tothe power system as a whole.

Accounting for these system-wide costs of inte-grating variable renewable resources is a subject thatwill gain greater attention as the share of renewablesgrows. The utility-scale electricity storage is a potentialtechnological solution to the challenge of variability,but such a solution has so far proved elusive. Largehydropower dams provide some element of exibilityand energy storage, and pumped-hydro storage unitsare designed to pump water into a reservoir duringtimes of low demand to release for power generationat high demand times. However, these systems arevery site-speci�c and expensive. The use of storagewill reduce the reliance on the back up grid power aswe increase the grid integration of wind and solar PV.However, the large-scale battery industry has a longway to go, though the payo� would be enormous. Itshould be noted, however, that storage will also bene�tconventional electric power generation by reducing theneed for fossil-fuel based power plants that only run attimes of peak load [8].

The potential for reverse power ow on distribu-tion feeders caused by a high penetration of distributedgeneration units poses signi�cant challenges to existingvoltage-regulating mechanisms. Sudden drop-o� ofsolar power installed at the consumer site due topassing clouds and of wind power due to lower windscould result in a signi�cant increase in fossil-fuel basedpower drawn from the electric utility and a resultingsubstation voltage reduction that must be countered

by voltage regulators and capacitor banks. The suddenreturn of wind and solar power generators may producehigh-voltage conditions at substations that must besimilarly countered. Distributed generation units cou-pled with energy storage and advanced control systemswill also enable electric distribution utilities to establishislanded microgrids for resiliency that can continue toserve consumers in the local community even whenthe microgrid becomes separated from the main gridand/or a widespread power outage occurs.

2.3. Role of grid modernization in cleaningthe environment

The traditional advances in electricity generation gen-erally focused on enhancing steady, reliable, yet largeand often polluting sources of energy. The powergrid infrastructure is shaped not only by the mix ofenergy supply technologies and end-use patterns, butalso by the characteristics of the environment wherethe infrastructure operates with greater vulnerabili-ties to earthquakes, extreme temperatures, hurricanes,drought, wild�res, intense precipitation, and ooding.Sea-level rise, thawing permafrost, and increases inweather extremes have already a�ected the grid in-frastructure in many global regions. Grid modern-ization takes into account the serious need to limitthe electric utility infrastructure's adverse impacts onthe environment. The regional grid modernizationfor mitigating unfavorable grid e�ects can include theestablishment of greenhouse gas emission standards,higher integration of renewable and cleaner electricitygeneration technologies, use of electric vehicles, contin-uing improvements in end-use e�ciency, and allowingthe energy consumption embedded in Smart Grid [9].

2.4. Role of energy e�ciency initiatives ingrid modernization

E�ciency is a means of dealing with three majorgoals of grid modernization{inexpensive, secure, andlow-carbon supply of energy. Ironically, the mostsecure and low-carbon form of energy utilization (i.e.,maximizing the use of energy e�ciency) is not to useenergy at all. Technological innovation and Smart Gridapplications allow consumers and businesses to do morewith less in terms of their energy use. Policy tools arebeing developed to help overcome barriers to invest-ment on energy e�ciency and market development forintegrating energy e�ciency. Variable energy marketprices and carbon taxes make e�ciency investmentsmore �nancially attractive to end users.

Grid modernization can also contribute consider-ably to energy e�ciency. Using grid modernizationtechnologies, the overall level and the composition ofenergy supply is optimized by more e�cient use ofenergy alternatives and transitions toward universallyadopted energy conversion. Advances in information


and communication technologies and data managementcan take this revolution even further by utilizing theinformation on the behavior and desired lifestyles ofmillions of empowered consumers. Smart Grid appli-cations and the use of computing architecture towardscognitive systems can help consumers and electricutilities better understand electricity demand patternsand automate the options for demand response tomaximize energy e�ciency.

In more practical terms, energy subsidy canmake investments on energy e�ciency and renewableenergy more attractive. Energy subsidies on fossilfuels are commonly applied, particularly in developingcountries, to reduce consumer electricity bills. Al-ternatively, redirecting subsidies towards low-carbonforms of energy use can help promote grid modern-ization. Also, subsidizing a lower level of electricityconsumption will guarantee that the subsidy goes intothe pockets of low-income citizens [10].

2.5. Role of customer communication devicesin grid modernization

The evolving role of the modern-day electricity con-sumer is transforming into a more dynamic and trans-active role in which consumers are both suppliersof responsive demand and producers of distributedpower. As suppliers of exible demand, consumerscan provide capacity resources to the power grid thathelp maintain the grid reliability at a�ordable prices,reduce greenhouse gas emission, increase resilience, andforestall infrastructure investments.

The residential and commercial building applica-tions of Smart Grid could include packages of pricing,in-home displays, smart appliances, and informationportals that would reduce building energy demand.Also, well-designed control systems for consumer appli-cations can increase the building e�ciency. Speedingthe adoption and accrual of potential consumer bene�tswill require the coordination of interoperability energydevices and business models that enable such bene�tsto be widely implemented. An open standard for theinteroperability of energy devices would be analogousto the voluntary industry standard developed for USBin the mid-1990s, which allowed simple plug-and-playbetween peripheral devices. The USB interoperabilitygreatly expanded the usability and types of personalelectronic devices among consumers.

Capturing these bene�ts in the utility industryrequires building communication networks, allowingcomponents to interoperate and respond to a facility-wide control. The applications of new informationtechnology enable new behaviors, market mechanisms,and monitoring and operating procedures. However,lack of regulatory standards is impeding the grid mod-ernization for a full utilization of information technol-ogy that can enhance the grid reliability and consumer

e�ciency. Lack of comprehensive communication anddata standards can hinder consumer values and inhibitthe adoption of Smart Grid technologies and controlstrategies for lowering the deployment cost at consumersites.

Furthermore, it is perceived that, while the re-liability and e�ciency of the utility system can beimproved in the long run by consumer participation,the information based grid modernization alternativescould pose a threat to the status quo in the util-ity industry and potentially present signi�cant andunintended consequences and ambiguous bene�ts forelectric utilities. As a consequence, there is a generalcaution in the utility industry associated with thewide-scale deployment of new information technologyinfrastructures and Smart Grid devices, which can onlybe dealt with through regulatory mandates in variouscountries.

2.6. Role of R&D in grid modernizationGrid modernization will aid planning activities in theelectric utility industry that can capture greater end-to-end e�ciencies and enhance the power industry'sability to reach its economic, security, and environmen-tal goals as discussed below:

Economic competitiveness: Modern grid shouldenable new architectures that can stimulate energye�ciency, economic transactions, and new consumerservices. The pertinent research on the modernizationof energy infrastructure should consider the design ofa utility grid which, under fair and transparent marketconditions, can produce products and services that areattractive to international markets while simultane-ously maintaining and expanding jobs and higher wagesextensively.

Environmental responsibility: The pertinent re-search on energy infrastructure should develop andmanage an environmentally responsible operation, tak-ing into consideration the imperatives of climate changeand the societal costs and bene�ts of reducing oravoiding pollution and land-use impacts on a lifecyclebasis. The research on expanding the environmentalresponsibility should minimize the environmental foot-print of energy use while enabling better environmentalperformance more broadly for utility systems. It is alsoimportant for environmental studies to consider poli-cies that promote equity and avoid disproportionatesocietal impacts on any particular population.

Energy security: The pertinent research on gridmodernization should minimize vulnerabilities result-ing from disruptions to energy infrastructure andmitigate impacts of such disruptions, including socio-economic impacts. If disrupted by any extreme events


(e.g., hurricane, ood, earthquake, and cyber andphysical attacks), the modern grid should be equippedproperly to recover quickly. Energy security shouldsupport overall national security and encompass acollective approach to the security of the country'strading partners [11].

3. Grid modernization technologies

Key technologies and capabilities representing thefoundation for comprehensive grid modernization in-clude:

Wide-area monitoring and visualization. In amodern grid, integrated advanced sensors and robustcommunication systems provide greater visibility tothe power system state and enhance the situationalawareness for identifying the critical spots in thepower system hierarchy. Situational awareness meansunderstanding the current operation environment andbeing able to respond e�ectively and accurately to theanticipated future problems. In a more complex andmodern grid environment, utility operators would needto know with greater precision than ever before howclose the system is to the edge and how quickly theyare moving in any particular direction. Several electricutilities over the past decade have already deployedsynchrophasor technology to enhance the power systemvisibility and increased their use of synchrophasordata for on-line and o�-line monitoring applications.Numerous applications of phasor measurement unitdata include oscillation monitoring, event location, andextra-high voltage state evaluation. Power systemoscillations cause equipment damage, reduced stabilitymargins, and other operating problems. Event locationexpedites outage restoration by quickly identifyingprobable outages.

Modern grid communication technologies. Avariety of communications technologies{home area net-works, neighborhood area networks, and wide areanetworks{will be deployed in a modern grid to enhancethe utility grid operational performance and e�ciencyand to provide information and control data to SmartGrid consumers. In the near term, communicationsnetworks would typically be characterized as single-purpose, while the interfacing of data and systemswould be handled on an individual basis. It is envi-sioned that, in the longer term as we expand the stepsfor grid modernization, communications networks willbegin to converge on a larger scale and become uni�edfor utility applications.

Modern grid control technologies. In a modernutility grid, human operators use system-wide dynamic

control data for real and reactive power management.Advanced control devices and automated responsestrategies allow utility operators to manage an environ-ment which includes consumer participation, evolvingdemand response, and variable generation resources.The ability to harness storage capacity in a power sys-tem with variable resources provides important shock-absorber capability, complements variable generation,and provides better tools to utility operators for amore e�cient grid operation in an uncertain environ-ment [12].

Decision support tools. In a modern grid, decisionsupport tools organize large data ows in real time fromgrid and equipment sensors to automate processes suchas system restoration and grid power management.Decision support tools identify anomalies in large data ows that allow the system performance monitoringand compliance, as well as managing risk and resourceadequacy in a utility system with variable resources andmicrogrids. The following decision support capabilitiescan be enabled in a modern grid:

1. Advanced tools and techniques in control centersthat can improve the operator's situational aware-ness and decision making;

2. Simulation and modeling tools for o�-line studiesand real-time contingency analyses;

3. Energy Management System (EMS) tools that fa-cilitate fast and real-time contingency analyses andallow grid operators to transfer real-time data too�-line simulation study tools and to transfer thesimulation results back to the EMS environment fordisplay and monitoring;

4. System restoration tools that help identify an opti-mal path from multiple restoration paths availablefollowing major blackouts;

5. Wide area tools that can interface with the real-time data across large geographical areas for repli-cating system events, and facilitating the timelyinvestigation of major events for root causes, so-lutions, and what-if scenarios using EMS tools.

Bulk integration of renewable energy. The vi-sion of grid modernization for integrating bulk renew-able generation into the utility grid supports publicpolicies to reduce greenhouse gas emission with detri-mental environmental impacts, which are contributedby conventional fossil-fuel generation resources. Nu-merous technical issues are to be resolved, such as man-aging variable generation ramp rates, avoiding trans-mission congestion, and maintaining an adequate levelof system protection, for integrating bulk renewablegeneration into existing utility systems. The exibilitycan potentially originate from conventional generation


and new sources such as controlled smart charging ofelectric vehicles, energy storage, and additional systemcoordination. Additional transmission infrastructurewill be required to move the generated power fromremote areas where renewable resources are concen-trated to large load centers. Also, transmission systemsmust reduce the overall variability by aggregating andaveraging variable generation over large geographicareas. Hence, power system planning must expandbeyond traditional service territories to work regionallyand inter-regionally. Capacity planning will need tocover not only maximum load scenarios, but also lowand shoulder-load scenarios that may present higherreliability risks than before. It will also be necessary toincrease the power system exibility to respond to thevariability of resources.

Integration of distributed energy resource.Such resources provide consumers with a number ofbene�ts including increased electric system reliability,reduction of peak power requirements, provision ofancillary services (reactive power, power quality), re-ductions in land-use e�ects and rights-of-way acquisi-tion costs, reduction in vulnerability to terrorism, andimprovements in infrastructure resilience. Distributedenergy resources tend to supplement, rather thanreplace, the primary generation resources employed byelectric utilities. Widespread deployment of distributedenergy resources requires modernization in grid designand resource integration technology, including smartinverters and adaptive protection and control systems.Today's electricity grid was not designed for the largeintegration of distributed energy resource technologiesand Renewable Portfolio Standard policy goals in mind.Many of the distributed energy resources are variable innature and, depending on their capacity size, operationcharacteristics, and the nature of the electric systemto which they are connected, these resources need tobe paired with energy storage technologies. This pro-vision will improve control, accommodate uctuationin output levels, and address fundamental changes inutility grid operations such as bidirectional power owon radial distribution systems. Distributed renewableresources need to ensure e�ective management of feedervoltage maintenance and reverse power management.

Aggregated energy storage for utility appli-cations. Modern grids will typically employ largersums of energy storage located on transmission anddistribution systems and at consumer sites. Storageis unique because it can take energy from the grid,add energy to the grid, and supply a wide rangeof grid services on short (sub-second frequency) andlong (hourly reserves) timescales. For instance, con-centrating solar power paired with thermal storage

becomes a dispatchable resource for grid operators.Energy storage technologies include: compressed airenergy storage, pumped-hydro storage, lead-acid bat-teries, supercapacitors, sodium-sulfur batteries, zinc-bromine batteries, vanadium redox batteries, lithium-ion batteries, ywheels, thermal storage, and hydrogenstorage. Some storage technologies such as ywheelshave fast response rates (seconds to minutes); otherstorage technologies, such as compressed air energystorage, are better suited to o�er exibility in thetime frame of hours to days. Pumped-hydro storageis usable on a second to a day timescale.

Distribution system management. Distributionsystem management refers to the Smart Grid's abilityto monitor, manage, and control distribution systemsfor speci�c applications. Automated distribution sys-tem devices have the promise of not only enablingDistribution System Operators (DSOs) to change thenetwork topology, use local distributed resources formanaging the grid (utilizing transactive energy forreducing operation costs, managing frequency andvoltage) but also reducing the workload for �eld crewswhich use a two-way communication between the de-vice and DSO to identify system anomalies remotelyand momentarily. Distribution system managementwill require area-wide solutions and visualization withcentralized modeling and operation. This critical areaof grid modernization will give way to software-drivenintelligence with central and distributed control sys-tems for enhancing the utility grid reliability, resilience,and economics [13].

Consumer energy management tools. A moderngrid will provide utility consumers with better infor-mation, choices, and control of their electricity servicesusing the following approaches:

1. Value-added web tools will help consumers un-derstand their energy usage on a historical basis,including trend analyses and benchmarking;

2. Authorized third-parties will gain access to andanalyze consumer data, which can help consumersoptimize their energy usage;

3. Consumers will be able to install Smart Grid de-vices that o�er remote control capabilities via Weband automatically provide trade-o� energy cost,comfort, and environmental impact based on userpreferences;

4. Authorities will be able to use consumer access datato inform consumers of any emergency situationsand guide consumers to �nd shelter points in theshortest possible time.


Use of demand response. Demand Response (DR)involves the active management of consumer loads ona daily basis to balance the electricity supply and de-mand. DR, which will likely occur through automatedload control, Smart Grid and smart metering, real-timepricing, time-of-use tari�s, and event based programs,can minimize the need to build costly new generationand delivery infrastructures. DR can be a cost-e�ectivegrid resource, though it requires strict regulations forresponse time, minimum magnitude, reliability, andveri�ability of demand-side resources. The potentialDR programs will tend to be optimized for operationalvalue and targeted at speci�c consumer segments thatare most able to respond to real-time events. Ac-cordingly, fast communications for load managementtechnologies are required in modern grids to helpmaximize DR convenience and cost-e�ectiveness.

Integration of electric transportation. The num-ber of Plug-in Electric Vehicles (PEV) is expected toincrease dramatically in the near future as the high-density battery technology gets to be mature and addi-tional battery charging stations are installed through-out communities. The present research examines theinteraction utility grids, renewable energy sources, andPEVs, integrating energy management solutions andmaximizing potential greenhouse gas reduction whilesmoothing the transition and reducing costs for EVowners. In the near term, modern utility grids mustfocus on deploying smart charging programs, includingrates that require discrete measurement, such as time-of-use and demand-side management technique (e.g.,PEV demand response). Smart charging programswill enable electric utilities to o�er PEV consumerswith cost saving and grid friendly methods of vehiclecharging. In the longer term, with expected highlevels of PEV penetration, electric utilities may have anopportunity to use PEVs for advanced smart chargingtechniques such as energy storage or vehicle-to-gridprograms, which can ultimately support the integra-tion of increased renewable resources into the moderngrid.

Grid e�ciency and voltage regulation. Thescope of this area of grid modernization is to improvethe power factor of distribution power ow, reducedistribution line losses, increase the utilization factorof grid assets, reduce the need for peaking generators,and enhance e�cient operation of loads by reducingconsumer consumption, thus contributing to overallpeak demand reduction in power grids. In orderto transform the distribution system data generatedinto actionable information that can be directly usedby DSOs for grid modernization, data managementand processing systems, as well as optimization algo-

rithms, are required for utilizing Conservation VoltageRegulation (CVR) approaches and solutions that canenhance the e�ciency of modern grids. The majorityof CVR schemes contain two fundamental components:reactive power compensation and voltage optimization.Reactive power compensation is achieved through theoperation of shunt capacitors in order to maintainthe power factor at the substation transformer withina prescribed band. Voltage optimization is achievedthrough the operation of substation voltage regulatorsin order to regulate the voltage at speci�c end of pointswithin a prescribed range. In this way, the peak load isreduced and the annual energy consumption is reduced.

Asset management and performance optimiza-tion. A modern utility grid will enhance the valuederived from power grid assets through asset conditionmonitoring, leading to a faster and more comprehensivecondition based maintenance evaluation. Asset condi-tion monitoring will be enabled by the installation anduse of various cost e�ective sensor technologies in powergrids, which can collect real-time data relevant to thestate of power system assets through an adaptive andrelatively inexpensive and distributed communicationinfrastructure. The new set of embedded and auto-mated �eld devices, such as smart transformers andcommunicating fault indicators among others, will in-tegrate the monitoring and data collection capabilitiesof modern grids. Advanced data analytics functionssuch as tracking and monitoring algorithms, predictiveanalysis, and enhanced visualization tools will enablethe transformation of �eld data into useful informationto be used by modern grids in asset management andperformance optimization processes.

Large power plants in modern electricity grids.Electric utilities are retiring a number of baseload coaland nuclear power plants, globally, which will a�ecttransmission infrastructure planning and operation.The potential forecast for retirement in the UnitedStates is 50 gigawatts between 2013 and 2020. Thefactors driving such retirements include soft economyand declining growth in electricity demand, lowernatural gas prices, and environmental regulations. Re-tirements are also a�ecting the nuclear power industryin the United States, with closures announced in 2012-2013 of �ve nuclear reactors, the �rst since 1998.Nuclear power supplied nearly 19% of U.S. electricityin 2013 (carbon free), which accounted for 10% oftotal installed capacity, with a record average of 90.9%capacity factor for the 100 nuclear units in the UnitedStates. The loss of these large plants could lead toa dramatic shift in power generation mix and moderngrid implementation across the utility system acrossthe globe.


Increased use of natural gas for electric powergeneration. Abundant supply of natural gas withcomparatively low prices has increased the interdepen-dency of electricity and natural gas and a�ected electricpower markets in the United States. Recent environ-mental regulations have further encouraged the electricpower generation by natural gas and renewable energyunits with lower greenhouse gas emission pro�les. Atthe same time, dynamic systems in oil, gas, and alter-native fuels infrastructures are increasingly monitoredand controlled remotely through cyber networks thatare powered by electricity. However, infrastructuralchanges may be needed to accommodate the futuregrowth in natural gas use for power generation, in-cluding repurposing and reversals of existing pipelines,more looping and compression to the existing network,potential new pipelines, and additional processingplants and high-deliverability storage. The pumpsand compressors along with natural gas gathering andtransmission pipelines are often fueled with the naturalgas ow through the station. When there are concernsabout greenhouse gas emissions, there is even greaterreliance on electric compressors. The increased relianceon electricity-powered compressors could increase thevulnerability of the gas transmission system to poweroutages. Centralized gas control stations monitor the ow of natural gas and collect, assimilate, and managedata received from compressor stations all along thepipeline. These control systems can integrate naturalgas ow and measurement data with other accounting,billing, and contract systems. The data is transmittedthrough a privately owned or public communicationsnetwork. The total loss of communications could resultin manual operations of a�ected pipelines, which couldbe time consuming and at times detrimental to thesystem operation [14].

Electricity market signals for exibility. Estab-lishing short-term market products for exible capacityin modern grids can incentivize available resources torespond to imbalances caused by variable resourcesover the minutes-to-hours time frame. In such marketstructures, demand response, demand-side resources,and storage devices could provide low-cost grid ser-vices, allowing more e�cient grid operations and avoid-ing additional asset investments. Cost savings of thepower system attributable to demand managementand energy storage in modern grids can conceivablybe much larger than the revenue market participantsreceive in current electricity market structures.

4. Example of market signal for gridmodernization

Large errors in load forecasts may occur when highlevels of renewable energy (e.g., 50%) are integrated

in electric power systems. Such errors may be causedby sudden unforeseen drops in renewable energy andlate-day load pickups, which are coincident with reduc-tions in solar photovoltaic generation as the sun sets.Accordingly, one option for reducing forecast errors isto utilize ramping reserves provided by conventionalgenerators, which may leave the power system morevulnerable to equipment malfunctions. In such cases,the supply of ramping reserves may no longer leavesuch generators to compensate the grid for unforeseencontingencies. Another option is to utilize SyntheticRamping Reserves (SRRs) provided by DERs and exible loads in a distribution grid, which may o�ersigni�cant cost advantages over conventional spinningor non-spinning ramping reserves. However, there isa considerable challenge for utilizing the exible loadoption due to the fact that load responses will berequired quickly. It is likely that DER or exible loadoptions would not sustain a useful response over anylengthy periods without disrupting customer services.

This section considers the use of Transactive En-ergy Provision (TEP) as an SRR option for aggregatingand coordinating the dispatch of widely dispersedDERs in a utility system. TEP can o�er SRR withdesired ramp rate characteristics over the required timeperiod. TEP represents an enabling technology thatfacilitates a large-scale coordinated rescheduling of net-load for providing fast acting SRR services to a powergrid. Figure 2 shows the TEP control algorithm inwhich the DSO integrates DR options for the powersystem operation and control. The DR options rangefrom utilizing the onsite generation, energy storagesystem, and Conservation Voltage Regulation (CVR)to load shifting and load curtailment. The DSO utilizesan optimization model for the SRR procurement inwhich the key objective is the selection of optimalDR options based on the transactive energy controlrather than applying the traditional command andcontrol techniques. In Figure 2, TEP selections rely onenergy market prices and the willingness of various DRproviders to participate in power system operations.Here, the transactive energy applied to TEP refers tothe use of optimization techniques by DSO for man-aging generation, consumption, and power ow using

Figure 2. DSO Controller for implementing TEP.


market based signals, which consider grid reliabilityconstraints.

A typical transactive energy link has two signals:transactive incentive signal and transactive feedbacksignal. A transactive incentive signal represents thecost of energy delivered to a power system. This signalincludes the existing cost and a forward projection cost.A transactive feedback signal represents the behaviorof responsive power system elements.

Figure 3 demonstrates the TEP control mecha-nism for the DSO's optimal operation. In this �gure,the incentive signal from the DSO to individual DRdevices is a combinatorial pricing scheme, which isbased on wholesale energy market prices. IndividualDR devices in TEP will accordingly optimize theirresponses and provide DR capacities as transactivefeedback signals to DSO. Collectively, TEP emulatesthe DSO's transactive energy provision for deliveringSRRs. TEP provides predictable and consistent SRRquantities for extended hours without degrading endusers' Quality of Service (QoS).

5. Conclusions - A vision for gridmodernization in the utility industry

A modern grid can seamlessly promote greater re-liability, resilience, security, and economics, whileachieving better environmental performance, includingreductions in greenhouse gas emissions. The traditionalgrid{where the electricity typically ows from centralstation power plants in one direction to consumers{isfundamentally di�erent from a modern grid, where two-way power ows will be common on both long-distancehigh-voltage transmission lines and local distributionnetworks. To accomplish the task of modernizing thepower grid, the grid will have to accommodate and relyon an increasingly wide mix of generation resources,including central station and distributed generation,energy storage, and exible load. The modern gridshould support a highly distributed architecture thatintegrates bulk and distributed system operations. Thegrid should also enable the operation of microgridsand aggregated controllable loads, which can operatein both integrated and island modes and range from

Figure 3. DSO's TEP Mechanism.

individual buildings to multi-building industrial parks,hospitals, military bases, and academic institutions.

Grid modernization is an emerging concept thatde�nes the utility grid as not just a physical structure,but one that encompasses a range of players. Themodern grid will be an essential element in achievingthe broad goals of promoting a�ordable, reliable, se-cure, resilient, and clean electricity and doing so in amanner that minimizes further human contributions toclimate change. This new and broader concept of powergrid architecture considers information systems, largeindustry participants, end-use retail consumers regu-lating agencies and market operators, communicationand control networks, data management structures,and many other elements that exist outside the utilityoperations but interact with the grid operations. Gridmodernization is shaped by public policies, businessmodels, historical and cultural norms of practice, newtechnology derivatives, and socio-political factors.

It is clear that understanding the dynamics ofpower grid modernization and its transitions to betterserve a modern society requires a clear appreciation forthe use of innovation in managing the grid resilience,reliability, security, and economic objectives and theirimpacts on our daily lives. Will the transition to amodern grid be accompanied by larger changes in oursocietal behavior? Or will it ultimately be representedby a procedural change in how energy is produced anddistributed? As to that, time will truly tell.

References

1. Shahidehpour, M., Yamin, H. and Li, Z., MarketOperations in Electric Power Systems, John Wiley andSons (March 2002).

2. Shahidehpour, M. and Wang, Y., Communication andControl of Electric Power Systems, John Wiley andSons (June 2003).

3. Madrigal, M. and Uluski, R., Practical Guidance forDe�ning a Smart Grid Modernization Strategy, AWorld Bank Publication (2015).

4. Buchholz, B. and Styczynski, Z., Smart Grids - Fun-damentals and Technologies in Electricity Networks,Springer-Verlag Berlin Heidelberg (2014).

5. Technical Report \The integrated grid", ElectricPower Research Institute (2014).

6. Wu, L. and Shahidehpour, M. \Security-constrainedunit commitment with uncertainties", Chapter inPower Grid Operation in a Market Environment: Eco-nomic E�ciency and Risk Mitigation, John Wiley andSons (2016).

7. Shahidehpour, M. \Long-term electric and naturalgas infrastructure requirements, national association ofregulatory utility commissioners", http://www.naruc.


org/Grants/Documents/ISPC%20Long%20Term%20Electric%20and%20Natural%20Gas%20Infrastructure%20Requirements%20WHITE%20PAPER.pdf.

8. Haddadian, G., Khodayar, M. and Shahidehpour, M.\Accelerating the global adoption of electric vehicles -barriers and drivers", Electricity Journal, 28(10), pp.53-68 (Dec. 2015).

9. Investing in Grid Modernization, [Online]. Available:https://www.PerfectPowerInstitute.org (2010).

10. Warwick, W., A Primer on Electric Utilities, Deregu-lation, and Restructuring of U.S. Electricity Markets,Paci�c Northwest National Laboratory (2002).

11. Technical Report \Grid modernization distributionsystem concept of operations", Sothern CaliforniaEdison (2016).

12. Technical Report \Energy transmission, storage, anddistribution infrastructure", US Department of Energy(2014).

13. World Economic Forum Report \Energy vision 2013energy transitions: Past and future" (2013).

14. Haddadian, G. and Shahidehpour, M. \Ripple e�ectsof shale gas boom in the united states{Shift in thebalance of energy resources, technology deployment,climate policies, energy markets, geopolitics, andpolicy development", Elec. Journal, 22(2), pp. 1-22(2015).

Biographies

Mohammad Shahidehpour is the Bodine ChairProfessor and Director of the Robert W. Galvin Centerfor Electricity Innovation at Illinois Tech in Chicago.He is also a Research Professor at Sharif Universityof technology, King Abdulaziz in Saudi Arabia, andseveral universities in China. He was the recipient ofthe IEEE PES Outstanding Power Engineering Educa-tor Award and the IEEE PES Douglas M. StaszeskyDistribution Automation Award. Dr. Shahidehpour isa member of the US National Academy of Engineering,a Fellow of IEEE, and Fellow of the American Associ-ation for the Advancement of Science (AAAS).

Mahmud Fotuhi-Firuzabad received the BSc andMSc degrees in Electrical Engineering from Sharif Uni-versity of Technology and Tehran University, Tehran,Iran, in 1986 and 1989, respectively, and the MScand PhD degrees in Electrical Engineering from theUniversity of Saskatchewan, Saskatoon, SK, Canada,in 1993 and 1997, respectively. He worked as aPostdoctoral Fellow in the Department of ElectricalEngineering, University of Saskatchewan, from January1998 to September 2001. He worked as an AssistantProfessor in the same department from September 2001to September 2002. Currently, he is a Professor andPresident of Sharif University of Technology.