SmartGridNews.com The insider's guide to the modernization and automation of electric power
Why Interoperable Grid Software Will Pay for Itself By Guest Editorial Jun 20, 2007 - 1:00:00 PM
Can we use studies from other industries to estimate the payback of wide-scale interoperability in the North American power grid? Such an investigation can be meaningful if one is careful to align the studies. My firm recently used three studies to estimate the value of grid interoperability. Two are from the National Institute for Standards and Technologies (NIST) and one from RAND Corporation.
The full white paper (see link below), explains our methods and conclusions. In brief, we found that all three studies had tangible cost savings in the same range. In addition, all three studies predicted sizeable intangible benefits. The table below shows the low and high payback range from each of the three studies.
Thus we conclude that a grid interoperability program will have the same or more tangible benefits as the program examined in the RAND study.
The RAND study was of an innovative consumer ‘demand response’ infrastructure that would require interoperability to accomplish its goal. The RAND study showed an annual high savings of $4.26B billion (on a revenue stream of about $350B). Meanwhile, a NIST testing infrastructure study had a “found high” of $1.47B and an “expert projected intuitive high” of almost $3B. A NIST study on solving interoperability issues showed high savings, approximately 3 times that for implementing the ‘demand response’ program – a savings of $12.6B.
Consequently the conclusions are two from this comparison:
1) Interoperability programs for the North American Electric Power grid would have the same or higher range of the GridWise ‘demand response’ program from the RAND study.
2) Failure to ensure hardware and software interoperability would significantly reduce the payback of that ‘demand response’ program (just as it has in the other industries studied by NIST).
Obviously, we are dealing in ranges, not hard and fast numbers. The only way to more precisely estimate the savings is to do a study specific to the grid environment. Because of differing business processes, software and markets, an analysis across industries is always somewhat nebulous.
Yet after spending significant time analyzing these studies, I believe the comparison is valid. A well-orchestrated grid interoperability program could save up to 4% of revenues, or roughly $12.6B per year.
SGN Hosted White Paper on Interoperability, by Rik Drummond (PDF)
Rik Drummond is the CEO of Drummond Group Inc., an interoperability software testing and consulting company, and the past Chair of the GridWise Architecture Council. Subscribe to our FREE eMail News Alert!
Smart Grid Newsletter (SGN) is the insider's guide to the Smart Grid revolution. It consists of a FREE bi-monthly email summary, along with a companion Web site that contains the full stories and other helpful materials. Benefits of subscribing: SGN is the only central source for all of the news, trends, research and marketplace information relevant to grid automation. In it, you will read about cutting edge technologies; successful pioneers and how they got ahead; regulatory changes that could unleash new markets; the latest research; and new opportunities for sales of grid-related products and services. © Copyright 2008 SmartGridNews.com | |||||||||||||||||||||||||||||||||||||||||||