Smart-Grid Technology Is an Investment Worthy of Stimulus Funding

BusinessWeek recently published a special report on smart-grid technology, a subject that we have followed closely in the past. The idea of developing an electric grid that can pass information and energy in both directions between utilities and customers seems to be exactly the kind of infrastructure that could provide lasting benefits for society. It is a sign of the dysfunctional environment in Washington DC to find that only $4.5 billion of the $787 billion stimulus package was allocated to smart grid technology.

Here are a few excerpts from the Business Week article.

A $20 Billion Market in Five Years

The Electric Power Research Institute, a nonprofit research and design group, estimates that it will cost $165 billion, or roughly $8 billion a year for 20 years, to create the smart grid. The market for the gear needed to overhaul smart-grid communications alone may reach $20 billion a year in five years, Cisco (CSCO) estimates. Other technology companies developing smart-grid software and hardware include IBM (IBM), Oracle (ORCL), Google (GOOG), and Siemens (SI)..

Benefits For Solar and Wind

Another benefit is that customers may soon get more leeway in determining the nature of the power they purchase, more easily opting for renewable energies such as solar and wind, says Matthew Trevithick, a partner at venture capital firm Venrock. Companies that are actively trying to cut their carbon footprints, such as Coca-Cola (KO), may be able to specify the percentage of renewable energy they buy, opting to pay more for wind, for example, if it helps them meet go-green targets.

But questions abound over who will foot the bill for the grid’s modernization. The American Recovery & Reinvestment Act has allocated $4.5 billion in grants and loans through the Energy Dept. for the smart grid to enhance security and to ensure reliability of the electric grid to meet growing demand.

Incentives for Timing of Energy Use

But as information on usage is extended further to the residence or business, customers will be able to see just how much energy their lighting, air conditioning, and appliances use. “The idea is that electricity costs more at peak-demand times, so if you showed those pricing signals to people, they can choose to shift usage to off-peak times,” says Jeffrey Taft, global smart-grid chief architect at Accenture (ACN). The smart grid will also give utilities the ability to automatically turn down business and consumer appliances on peak days. Customers would probably be given some sort of discount in exchange for letting the utility cut power to certain systems at key times of the day.

With the benefits associated with widespread implementation of a smart-grid system, it seems like exactly the kind of program that deserves funding under a stimulus measure. The smart-grid is an investment that will provide tangible benefits for society for decades to come and can be compared with funding for the interstate highway system. Furthermore, if there is any possibility of bi-partisan consensus in the current political climate, one would think that funding a smart-grid would be a good place to start.

Future generations will be paying for the current stimulus spending binge for decades to come and we might as well leave them with some useful infrastructure as part of the bargain.

Comments

[bluesky123:]

Innovation led growth is the only answer for America. We used to be a nation of risk takers and doers. Now we're a nation of talkers.

Oct 07 04:45 AM

[William Taylor:]

Ravi, do you have any opinion about BCON? I have seen it's flywheel system in operation and it is very impressive. This does not, however, mean it will be successful!

Oct 07 09:41 AM

[Alan Young:]

I agree that the low amount of grid stimulus is disappointing. The most likely explanation is that is was not deemed stimulative enough in the short-term to have political value.

Important as it is to make the grid smarter, maybe the first priority is to make it more robust. We need to add renewable energy sources: wind and solar "farms"; and the biggest impediment is transmission capacity. This kind of buildout is essential, but it's also expensive and politically complex (due to jurisdictional rather than ideological issues, for a refreshing change). Small wonder this has been pushed to the bottom of the to-do list, not only by the current administration, but by the previous 2 or 3.

Oct 07 11:10 AM

[cyberclark:]

The smart grid commentary is made of up fact coupled with relative descriptions. Such descriptions are "controlling costs by moving usage away from peak power times"

I envisage a graph with a peak showing at peak power. This graph coupled with revenue intake by the power companies is where they are now working.

Consider if a power peak is flattened left and right, mellowed so to speak. The gross revenues would remain the same if the costs were constant.

I see smart grids as being the way of the future, if we can afford them.

Oct 07 12:16 PM

[JasonEMorris:]

Smart Grid is also a worthy investment because it will eventually know no geographic boundaries. Developing countries will need a good way to modernize their energy infrastructure meaning advances made today will eventually impact the world. It also means the US can export some of its technology and services, provided there are incentives to keep companies and manufacturing here.

Oct 07 03:23 PM