Washington (Platts)--23Jul2009

Smart grid technology should include protection against cyber attacks, US
Federal Energy Regulatory Commission and Department of Energy officials told
members of Congress Thursday.

Also during the hearing, FERC Commissioner Suedeen Kelly said the agency
is considering developing a pricing policy for energy storage devices.

FERC's Office of Energy Policy and Innovation, about two months ago, "put
on their list of things to do, whether we should come up with a pricing policy
on energy storage," Kelly told reporters after testifying to the House of
Representatives Committee on Science and Technology's Subcommittee on Energy
and Environment.

As a first step, commission staff are seeking information from members of
the electricity storage industry "to understand better what storage is
actually being used, and how it's being used, and the problems that industry
is running into, if any, with how we're classifying it," Kelly said.

On July 16, FERC issued a policy statement on smart grid principles in
which it voiced support for creating smart grid standards to coordinate the
integration of emerging technologies such as renewable resources, demand
response resources and electricity storage facilities.

An electric storage facility could arguably be a "transmission asset or a
distribution asset, or a demand response asset," Kelly said. If a storage
facility is holding electric potential, "then when [the facility] releases it,
it's a generator. When it is getting that potential, it's a consumer," she
added.

The dilemma is whether or not FERC should classify electric storage
devices, Kelly said. Or should the commission "evaluate each one for how it's
being used and give it different treatment for how it's being used?" FERC
staff does not have a deadline for completing its research and making a
recommendation, said spokeswoman Mary O'Driscoll.

Government and professional associations will play an important role in
the research and development of smart grid technologies "and in setting the
standards that will govern the new electricity delivery system," said
subcommittee ranking member Bob Inglis, Republican-South Carolina.

Smart grid projects may help with the implementation of renewables and
distributed generation, such as storage devices, Kelly said. But because the
smart grid is expected to allow for two forms of two-way communications, there
will be increasing opportunities for cyber attacks, said energy experts and
some members of Congress.

"The smarter we make the grid, the more vulnerable we are," said Roscoe
Bartlett, Republican-Maryland. Unless the system is protected against cyber
and electromagnetic pulse attacks, it will continue to be vulnerable.

"It is paramount that smart grid devices and interoperability standards
include protections against cyber intrusions," said Patricia Hoffman, DOE
acting assistant secretary for electricity delivery and energy reliability.

Smart grid systems should be designed with cyber security tools imbedded,
and not need patches added on at a later time, to prevent hackers from
disrupting grid operations and from gaining entry through the "millions of new
portals created by the deployment of smart grid technologies," Hoffman said.

DOE has made about $4 billion available to utilities for smart grid
projects, with the first application deadline on August 6. DOE on July 20 said
it would provide $47 million for eight smart grid demonstration projects. In
its smart grid funding announcement, DOE said cybersecurity should be
addressed in every phase of the engineering lifecycle of the project.

A critical issue in deploying a smart grid "is the need to ensure grid
reliability and cybersecurity," said Kelly. "The significant benefits of smart
grid technologies must be achieved without taking reliability and security
risks that could be exploited to cause great harm to our nation's citizens and
economy."

Also, federal and state regulators should work together to develop
complementary standards "to avoid conflicting regulatory signals," Kelly said.

--Esther Whieldon, esther_whieldon@platts.com