Volt VAR Optimization

Applying technology on our distribution system allows us to monitor and more tightly control voltage, which creates energy and demand savings for customers. Known as Volt VAR Optimization (VVO), this technology has proven its technical viability in achieving demand and energy savings.

Looking up at the 120-foot pole at Elcona Station in Elkhart, Ind. The station is part of Indiana Michigan Power's volt var optimization project, a distribution automation system.

Typically, distribution lines deliver electricity at a voltage between 114 and 126 volts. Using the full range of voltage is common practice in our industry; it has been a way to ensure the strength of the voltage between the point of origin and the customer. But studies and our experience have demonstrated that optimizing voltage – delivering electricity at the lower end of the range – reduces customer energy demand and consumption, and thus lowers their bills.

VVO is a unique type of energy efficiency and demand reduction. Energy companies can identify the areas where the greatest increases in efficiency can be achieved, and it doesn’t require participation or behavioral change by customers. Upgrading the circuits with VVO control equipment enables other grid efforts to improve reliability and outage restoration with relatively small incremental investments.

To help us advance this technology, we signed a research and development agreement with Utilidata, a supplier of voltage optimization and digital automation systems for our industry, to accelerate the application of digital control technologies to high value smart grid solutions. AEP is providing Utilidata access to our operations and planning expertise to help guide the next generation of grid applications. The goal is to bring innovation to the market faster. We invested $4 million in Utilidata because we believe their technology is a provider of innovation to the market.

This is an example of the mutual benefits of energy and technology companies working together to develop the modern grid. We need each other to test and standardize technologies that smoothly integrate with the grid and give customers the flexibility they want. By working together we fulfill a mutual need and achieve a common goal.

Of the approximate 6,000 circuits on our system, we have deployed VVO on 87 circuits. Because VVO is such an effective tool in achieving demand and energy savings, it can have an immediate negative impact on a company’s financial results since most of the costs associated with serving customers don’t decrease as customers use less electricity.

VVO is a next-generation energy efficiency program and regulators should support it in the same way they historically supported other energy efficiency programs. This is simply another tool in the toolbox that enables AEP to create energy and demand savings for our customers. And there is widespread support for this approach.

In November 2012, the National Association of Regulatory Commissioners (NARUC) supported the adoption and rapid deployment of VVO. In addition, the National Electrical Manufacturers Association supports NARUC’s call to advance VVO technologies.

Within AEP’s service territory, the Michigan Public Service Commission and the Indiana Utility Regulatory Commission have approved plans for Indiana Michigan Power Company to qualify VVO as an energy efficiency program. The Oklahoma Corporation Commission has also approved VVO for a limited timeframe for the Public Service Company of Oklahoma.

We are actively discussing the application of this technology with regulators and stakeholders and need their support to enable us to achieve the significant levels of energy and demand savings that we know are achievable without financial harm to AEP.