A2X Consulting

What is a Smart Grid?

When you read about advances in green technology, the term smart grid seems to pop up everywhere. Smart Grid talk is hot. It even received a 30 second ad in this past Super Bowl. What is a smart grid and will it live up to all this media attention? A smart grid is being compared to the Internet for the electric power industry. It is a vast network of transmission lines that will allow utilities to know where electricity is being consumed and it will signal a potential blackout. Consumers will know which appliances are consuming the most and the least energy, which will affect their abilities to control their power usage and decrease their electric bills.

President Obama has declared that federal buildings will reduce energy consumption by 25% or save $1 billion with the help of smart grid technology. The same would apply to state and local government buildings.

And now the American Recovery & Reinvestment Act 2009 contains plans for boosting the electric utility industry and it has a provision of $4.5 billion for Smart Grid projects. Since President Obama’s been in office, 40 million smart meters and 3,000 miles of transmission lines have been slated for installation throughout the country. According to the U.S. Department of Energy, the smart-grid project would cost about $400 billion over 10 years and it would help save between $46 billion and $117 billion over the next 20 years by reducing inefficiencies and power failures.

Isn’t the Smart-Grid Stimulus Huge?

According to The Brattle Group’s, report “Transforming America’s Power Industry,” the American electric utility industry will need infrastructure investments of up to $2 trillion. According to Ed Legge, an analyst with the Edison Electric Institute, at least $50 billion is needed for all the investor-owned utilities to roll out smart grid networks. Each utility would require an investment of $500 million for the project. The $4.5 billion stimulus money seems like a drop in the bucket of investment needed for building a nationwide smart grid.

Stimulus Funds for Smart Grid Upgrades

The Stimulus package contains the following funding provisions to support smart grid upgrades:

1. $100 million for smart-grid project training for workers.
2. $80 million for resource assessment.
3. $10 million for the development of inter-operability framework.
4. $10 million to the Western Area Power Administration for upgrading the grid.
5. $3.25 billion in borrowing authority to both WAPA and the Bonneville Power Administration.

By mid-April, The Department of Energy plans to set up competitive procedures for the Smart Grid Investment Matching Grant Program. This will allow businesses to receive grants of up to 1.5 the cost of the smart grid project investments.

Barriers to Smart Grid Adoption

The speed at which the country adopts smart-grids, such as installation of two-way meters or high capacity transmission lines powered by alternative energy sources, could be derailed by several factors.

1. Consumer advocates are fighting over how the grid should be funded: on a “least cost basis” or “lowest lifetime cost.” Also the lack of evidence to justify the benefits of demand-supply sides may pose another issue for the utilities for deployment of smart grid projects.
2. The electricity industry is a highly-regulated market. There are lots of utilities that have a monopoly on the industry. Their focus is on minimizing risk. They are slow at adopting new unproven technologies. And the economic downturn is just the wrong time for any big change. So the utility companies may slow things down to guard the status quo or the so called “institutional inertia.”
3. The other big barrier is about regulatory authority. At the federal level there is no authority to site the construction of smart grids. The lack of federal authority, oversight & control, could slow down the development of a smart grid project.
4. Cost is a big challenge in the project implementation. The initial capital required for smart grid technology is significant. The stimulus package may only cover a small portion of the overall cost.
5. Smart grid technology is still evolving. It lacks a standard framework and consistency across the industry. As technology changes so quickly, by the time a utility company is ready to implement a smart grid, it may become obsolete. This will prove to be very costly.

Job Creation Resulting from Smart Grid Technology

According to GridWise Alliance, a broad consortium of 75 companies, academics and electricity providers advocating for power grid upgrades, could generate 75,000 jobs in the first year. Their Smart Grid Jobs Report estimates that up to 280,000 new jobs can be created directly from the deployment of smart grid technologies.

According to industry expert Howard Scott, the stimulus spending of $4.5 billion and the additional $4.5 billion by utilities, could create 4-year jobs for 10,000 equipment installers and 10,000 software engineers.

Opportunities for businesses, consumers and job seekers resulting from Smart Grid advancements appear to be tremendous – stay posted for more updates on Smart Grid technology as they evolve!