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Smart Grid Moves on a Fast Track

By Secretary Spencer Abraham

The benefits of investing in the construction of a national Smart Grid, in terms of energy efficiency, green energy development and the long-term viability of the power sector, have always outweighed its costs. Still, the nation has been surprisingly slow to embrace the much-needed overhaul.

Certainly, there are some who view the enterprise as little more than corporate welfare for the nation’s power companies, or who think it’s main goal is some misguided and costly effort to speed the transmission of renewable energy from distant wind and solar resources.

Yet for a majority of private and public sector leaders, repairing the nation’s antiquated electricity transmission system is viewed as a necessity. And after years of debate, there are finally signs that the momentum is now moving toward a nationwide renovation of the power grid.

A sign that Smart Grid development is on a fast track can be found at the U.S. Department of Energy’s Office of Electricity Delivery and Energy Reliability, which announced in April that it would award $3.4 billion in matching grants for projects that “verify smart grid technology viability, quantify smart grid costs and benefits, and validate new smart grid business models.”

By the August deadline for applications, requests had been filed for $9.4 billion in grants, and “DOE is extremely pleased with the level of quality” in the project proposals, John Jimison, majority counsel for the House Energy and Commerce Committee, told a Sept. 24 conference sponsored by the GridWise Alliance, a public-private consortium advocating for the Smart Grid.

The grant program funded by the American Recovery and Reinvestment Act may be one of the least controversial components of the $787 billion stimulus package, Jimison said. “I have a great deal of confidence that in the long run the Smart Grid portion of that investment is going to be seen as extremely important,” Jimison said.

“The stimulus has stimulated the Smart Grid, no doubt about it,” added Rich Senado, director of the Regulatory Assistance Project, a non-profit that helps public officials with electric utility regulation. “A lot of people are trying to navigate this exciting technology.”

Steps toward modernization of the power grid are being taken across the country:

In June, a group of companies, including Xcel Energy and software company GridPoint Inc., launched the first Smart Grid City in Boulder, Colo. The system, which took about 18 months to build, includes 200 miles of fiber optic cable, 4,600 residential and small business transformers and 16,000 smart meters. “We can now read customer meters remotely, identify and reduce outages and false power outage calls more quickly,” said Jay Herrmann, Xcel Energy regional vice president.

Pacific Gas & Electric Co. has set a goal of installing nearly 10 million smart meters for its California customers by the end of 2011, and is one of the first utilities to seek Federal Energy Regulatory Commission (FERC) approval of its cost-recovery and interoperability plans under a new FERC policy issued in July. “We’re excited about that project, but we have not yet entered our decision on it,” said FERC Commissioner Suedeen Kelly.

More than 30 electric cooperatives in Minnesota have begun coordinating development of communications systems and advanced metering technology to enhance the grid statewide. “While many are talking about smart Grids, Minnesota is actually doing them," said Ed Solar, CEO of Arcadian Networks, which is providing the two-way broadband network.

Minnesota Sen. Ellen Anderson, who chairs the state Senate’s Environment, Energy and Natural Resources Budget Division, said the goal of grid development in the state is to maximize the use of local and regional power sources, promote clean energy and increase efficiency in electricity delivery.

“No one is more excited than utility regulators,” said Rick Morgan, commissioner of the Washington, D.C., Public Service Commission, at the conference. “State PSCs are already rolling out projects.”

Energy Secretary Steven Chu announced at the conference that DOE will facilitate those efforts with $44 million from the stimulus program so states can hire new staff and retrain current employees so they can quickly review Smart Grid projects. Another $100 million will go to utilities for workforce development, he said.

Chu’s announcement followed DOE’s release of more than $57 million in July for Smart Grid projects, including a national information clearinghouse being developed by Virginia Tech with $1.3 million.

But the big push will come later this year when DOE announces recipients of the $3.4 billion in matching grants for Smart Grid investments and demonstration projects. The maximum investment grants will be $200 million and top awards for demonstrations will be $100 million.

FERC Commissioner Kelly lauded DOE’s decision to require open architecture for all projects that receive grants. “We think open architecture will facilitate Smart Grid development and will allow a large number of vendors to be involved,” she said. FERC has also provided input to DOE on how it should spend the stimulus money, Kelly said.

Morgan, of the D.C. Public Service Commission, voiced a word of caution on the pace of grid development. “We have to evaluate utility investments to ensure they’re in the public interest, and not “gold-plated” or “dead end” projects,” he said. “Federal funding could be helpful as a nudge, but we have to be sure we’re not getting pushed off the cliff in the process.”

Morgan also said PSCs will oppose the idea suggested by some in Washington that federal agencies should be able to override state regulations to speed grid development. But the states don’t want to hinder the Smart Grid, and most look forward to the benefits that will come in the way electricity is priced, Morgan said.

“Most utilities still use the legacy dumb meters that just measure kilowatt usage,” he said. “It’s like going to the grocery store and taking what you want and just getting a total bill each month. Customers will be much better off if they are given a choice of how and when to use electricity.  For example, they can decide how much they want to pay to stay cool on a hot day.”

Dynamic pricing can also help eliminate hidden charges for utility customers, he said. For example, most utilities use blending to keep rates stable while wholesale prices fluctuate, but these “hedge premiums” can add 15 percent or more to monthly bills, he said. “There’s no point in having smart meters if you’re going to have dumb rates,” Morgan said.

Alicia Jackson, a staffer on the Senate Energy and Natural Resources Committee, also warned states and utilities not to become too reliant on the federal gravy train. “There’s not going to be much more legislation after this because we just spent the money to jump-start the Smart Grid,” she told conference attendees.

The decision by the Administration and Congress to invest in Smart Grid research and development bodes well for both businesses and consumers. The Smart Grid is expected to cost an estimated $75 billion to develop, but it could save the nation trillions of dollars by more efficiently operating the grid, eliminating blackouts and helping to meet growing U.S. electricity demand. More importantly, it will be a transformational technology, a so-called &