Smart Grid Stimulus: Did DOE Bet Wrong?

By Sunil Sharan

By allocating $4 billion of American Recovery and Reinvestment Act (ARRA) money to making the electric grid smart, the Obama administration has got right behind a hitherto-neglected but critical piece of our national infrastructure. ARRA has split the $4 billion almost evenly between smart meters on the one hand and emerging Smart Grid technologies such as smart transformers, automated substations, and in-home energy devices on the other. But how considered is this choice? This article argues that the proven technology of smart meters should have received much more of the Smart Grid pot and that a multi-billion dollar fillip for technologies that are still incipient could well boomerang.

Smart meters have gone through multiple generations of technology maturity and market validation. The Italian utility, Enel, has installed 30 million smart meters and is believed to be saving $750 million every year since 2006 from them. A fair number of other utilities, mainly in Europe and North America, have either installed a similar vintage of smart meters or are in the middle of deploying the latest generation. They too are confident of deriving substantial benefits. Altogether close to 40 million smart meters are installed worldwide. The European Union is so sure about the technology's environmental and operational benefits that it has mandated 80 percent of its 300 million households to have smart meters by 2020, with blanket coverage in another two years. The U.S, already trailing markedly, will fall even further behind at current rates of adoption. These figures factor in ARRA's support.

Instead the U.S. has hedged its bets by pinning big hopes on the other Smart Grid technologies, whose presence in the field is at least an order of magnitude less than that of smart meters. Time alone will tell whether these technologies will scale, how much they will cost and how much fruit they will bear. Much learning is in store, as Xcel Energy's SmartGridCity project in Boulder, Colorado demonstrates. Launched in 2008 with much fanfare, this project aimed to deliver a wide variety of Smart Grid technologies similar to those funded by ARRA to Boulder's 50,000 residents. The project has now reportedly run aground, with costs ballooning almost three times to $40 million from an initial estimate of $15 million. When costs will be recovered is unclear. State regulators have stepped in to examine the viability of the project and the utility itself is on the defensive, issuing disclaimers that the project is only an experiment.

Can the nation afford to spend billions of dollars on what might turn out to be similar experiments? Quite clearly no. A wiser choice would be to more fully ride the proven horse of smart meters while getting the other stuff ready for prime time, with smaller, less risky levels of investment. A complete makeover of the U.S. electric grid is projected to cost $165 billion. Much is at stake. Let's be sure to bet smartly.

Sunil Sharan, a director of the Smart Grid Initiative at GE from 2008 to 2009, has worked in the clean-energy industry for a decade. He can be reached at sunil_sharan@yahoo.com.

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