Crunching costs and benefits for smart grid projects
We received two basic responses to my column last week titled, “Are smart grid projects worth the cost?”
Clearly, when I write headlines, I act as provocateur. The article itself focused on a new study from the Electric Power Research Institute (EPRI) that laid out a methodology for assessing the costs and benefits of demonstration projects initiated in 2008-2009. Looking forward, the same methodology can be applied to full-scale deployments. More on the practicalities in a moment.
Not surprisingly, we received more than a handful of enquiries from utilities on how to get the report and EPRI, of course, obliged. We also received a passionate post that responded to the provocative headline.
“I was professionally into ‘energy cost control’ on an industrial level before it became sexy,” our correspondent wrote. “Not as ‘theory,’ but as the engineer, designer, installer and financier of numerous projects that were carefully vetted for after-tax ROI in advance of committing a single client dime. Given my background, I find the whole ‘smart grid’ trend to be ill-conceived, ill-applied, mostly a lie and, frankly, a distraction born of Big Green.”
Further, our correspondent argued: “I submit that waste still exists and some of it can be saved. But as evidenced in Boulder, CO of all places, there are limits to what residential consumers are willing to do (short of governmental coercion) in return for practically invisible monthly cost savings. At the risk of being labeled a crank, I believe the entire trend is expensive folly.”
I’m naturally tempted to take the bait and go to a rebuttal, but I think it’s more useful to use this reader’s remarks to underscore the purpose of the EPRI report.
Knowing full well that they need to make their case both to regulators and to the public, utilities rightly seek the tools that result in a legitimate, defensible business case. For what? For improving efficiencies, strengthening reliability-related technology and having digital communications that provide near-real time insights into grid performance and behavior. Oh yeah, the consumer piece, too, that seeks demand management. (Perhaps placing smart grid opportunities in this order would assuage those making grand connections between government bailouts, stimulus grants and mind-boggling smart meter rollouts. Perhaps not.)
“This work affects [utilities’] bottomline, they want to do it right,” Matt Wakefield told me last week. Wakefield is the EPRI program manager for smart grid demonstrations and, thus, for the report in question. “Our methodology provides a systematic approach to evaluating projects on a consistent basis. Some utilities already have their own processes, but our goal is to meet the needs of the largest audience we can.”
Having fleshed out a methodology, EPRI will apply it to its own smart grid-related demonstration projects and produce software-based tools and a printed guidebook on applying the methodology “in the field,” a result due out by mid-year.
Wakefield acknowledged that the smart grid discussion has been tangled in hype. (And surely, I thought, readers no longer earn “street cred” for pointing that out. Henceforth, let’s agree that’s a given.) Thus, the intent of the cost/benefit methodology and related studies by the National Energy Technology Laboratory and Pacific Northwest National Laboratory that seek to translate this work directly to legitimate business cases is to strike a blow for the cold facts.
In an aside, Wakefield did employ the phrase du jour – which I do appreciate – “I’m not an economist.” (Can one imagine a more welcome opening statement, whether you’re in a professional setting, sitting down at a family gathering or bellying up to the bar?) But he emphasized that the team that produced the report included respected economists and employed “recognized economic principles and commonly used best practices.” Therefore, Wakefield said, he hoped the report and its forthcoming guidance materials will represent “a very large leap forward for industry consensus.”
If any utility representatives would care to comment, we’d love to hear from you on whether an EPRI-generated tool that can be widely applied to generate costs and benefits and monetize them is useful in your work.
Phil Carson
Editor-in-chief
Intelligent Utility Daily
pcarson@energycentral.com
303-228-4757
Comments
POST ROLLOUT ANALYSIS
"Having fleshed out a methodology, EPRI will apply it to its own smart grid-related demonstration projects and produce software-based tools and a printed guidebook on applying the methodology “in the field,” a result due out by mid-year."
Look, something about this simply doesn't wash. Leaving myself open to the possibility of being wrong I have to ask: Why is the EPRI analysis essentially following the national rollout of smart meters? Seriously Mr. Carson, I'm within a coop service area and they've already installed the meters. Like others, the coop leadership is enthusiastically promoting the technology while touting the promise of consumer savings and efficiency. So far, as a consumer, I've seen nothing from the coop supporting their claims, only what must be called "marketing". Meanwhile, these meter-swap programs are gaining momentum from coast-to-coast-to-coast.
As both a long-time analyist and burgeoning crank, I'm going to dedicate some additional personal time to looking into the question above as well as the validity of the claims being made. Having spent all too much time around "developers", I'll apologize in advance for being highly suspicious of half-glass-full claims. That said, understand that I have no vested interest in the outcome, only a dedication to engineering ethics and the very strong desire to see evidence supporting the universal installation of residential smart meters. The numbers will speak. If they support the rollout, I'll join the enthusiasm. If not, I suppose I'll be forced to my professional obligation to the public.