When the DOE announced its preliminary thinking on ARRA-funded Smart Grid projects back in April, the reaction was swift. SGN Managing Editor Philip Bane, you may remember, was loud and clear in his complaint that the DOE’s first draft was unfair to IOUs and smart meter projects due to the low ceilings.

And he wasn’t alone. Industry insiders and elected officials objected that the proposed $20 million project caps were too low to finance meaningful initiatives.  Others decried a cart-before-the-horse mentality, insisting standards and security should be addressed sooner rather than later. In all, DOE says it received more than 600 comments in response to its Smart Grid funding drafts.

Our read of the two final Funding Opportunity Announcements (FOAs) issued last week suggests the DOE has probably managed to at least placate if not totally win over the naysayers. Among DOE’s new directions are the following:

• The agency agreed early on to raise the caps and the new FOAs reflect that, with a ceiling of $200 million for the grants (along with a promise to fund plenty of small projects too) and $100 million for the demonstration projects.
• Smart meter proponents may not see the funding set-asides they hoped for, but they did get the clarity they need to move forward.
• DOE pulled industry groups together and set an aggressive agenda for work on grid standards

The Clock Is Ticking

Are the FOAs perfect? Probably not. But the DOE gets an A for effort —and the bottom line is they’re finally out and the clock is ticking. Letters of intent for Phase 1 of the $3.4 billion in Smart Grid Investment Grants (SGIGs) are due July 16; final applications by Aug. 6.  SGIGs are for commercial-scale projects that “enable Smart Grid functions... as soon as possible” and require cost-sharing. Those applying for a piece of the $615 million available for Smart Grid Demonstrations have until Aug. 26. Those demonstrations are intended to show how “emerging technologies can be applied in innovative ways.”

Other Key Provisions

Those with a stake in the outcome should, of course, read the FOAs for themselves. You can find full details and copies on our new sister site, SmartGridStimulus.com. Here are some clauses worth noting:

• Both FOAs require applicants to meet very specific guidelines relating to both interoperability standards and security.
• One of the metrics used to analyze projects will be the percentage of customers served by dynamic pricing (such as time-of-use pricing), which could benefit demand response programs (and the equipment necessary to achieve DR).
• The FOAs still contain language about two-way communications, the integration of renewable energy, and jobs creation.  

What Next?

In the weeks ahead here are some things we’ll be watching closely:

• The broadband piece is still to come. The Recovery Act includes more than $7 billion for broadband. The official funding announcement is anticipated any day now. It’s a hefty sum and much of it will likely target rural areas currently underserved by broadband. But funding for a “national broadband plan” is also expected and that could have implications for advanced metering since the communications infrastructure represents such a big chunk of AMI costs.
• Who’s posturing and who’s partnering. We’ve seen major players enter the Smart Grid space in the last couple of months with the stimulus money dangling out there. Now the pedal hits the metal as vendors partner up with each other and with utilities. It may be too soon to pick winners, but we could see some early losers.
• Lessons from the trenches. What we hear from other sectors already awarding bids for Recovery-funded transportation and school construction projects is that competition is fierce and margins are razor-thin. A project that may have received three or four bids a year ago may see double or triple that number this year and the bids are highly competitive. That scenario could hurt smaller firms competing on Smart Grid projects — or it could lead to some hurried M&A activity.

Another big question mark going forward will be DOE’s bandwidth. The agency has a huge number of balls in the air right now, and the review process for the Smart Grid projects alone will be intense and consuming. The agency says it will bring in experts to help. Still, getting it right will require, well, a lot of energy. 

   SmartGridStimulus.com: Highlights of Smart Grid FOAs

   ENR.com: Razor-Thin Margins as Contractors Fight for Stimulus Projects