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So you applied for stimulus funding, now what?

The American Reinvestment Recovery Act’s (ARRA) first major deadline has passed with more than 450 anxious organizations each hoping for its piece of the $3.3 billion matching grant smart grid dream-maker. The organizations crunched and crammed to get their proposals in by the August 6, 2009, deadline to the Department of Energy and are now breathing a sigh of relief as they anxiously await word from Washington to realize their hopes and dreams of matching grants.

Another group of firms opted to wait until the next round -- hoping that there will actually be monies left over after this first tranche. And, finally, a third group decided the time was too late, the restrictions too severe, reporting requirements too onerous, or their half of the matching funds were too dear even though they have projects and/or pressures to produce a smart grid.

The real issue for those who will ultimately receive the funds, those who are passed over and those who wish they had applied is: Now what?

As the 400 or so reviewers plow through the 40-page documents plus attachments and work through the virtual peer review system, smart applicants should be making preparations whether or not they receive the monies. The pressure on organizations to perform to government standards and to live up to expectations, now that the initial work has been done to apply, will continue to increase.

For the winners in the ARRA Wheel of Fortune, the work is just beginning. This includes project set-up and management, dealing with the myriad of regulations, negotiating with vendors and executing the sometimes intricate projects on a fairly tight (36-month) time frame. As with many projects, writing the proposal was probably the easy part (even though it did not feel that way approaching the deadline); the execution is trickier, especially for technologies that are new or being combined in a new fashion. Several areas of preparation are critical between now and when the funding hits:

  • Lining up the required matching funds
  • Preparation for government reporting
  • Negotiations with vendors and suppliers for needed hardware and software
  • Establishment of an internal and/or external team ready to manage the projects
  • Alignment of the winning projects with other capital programs
  • Alignment with the organization’s technology and IT roadmaps
  • Arrangements with supporting consultants and experts

It is important to keep in mind that, in the hopes of obtaining monies, many vendors and consultants worked with numerous firms to develop the grant applications. Similarly, organizations tasked their best and brightest to create the grant applications -- many of whom have other full-time jobs with critical responsibilities. Now where are the talented team members that will be needed to complete what was promised in the grant application? Will they be available?

For those who are not selected in this round but who have projects and proposals (and have raised internal or external expectations), similar kinds of questions must be answered. The projects that were proposed obviously have merit even if they did not top the ARRA reviewer’s final list. The proposal may have involved an extension or acceleration of current capital projects. Or the work anticipated may be part of a utility’s longer-term plan. There are still critical considerations. These include:

  • Funding the projects absent ARRA monies
  • Aligning the projects with the company’s technology roadmap
  • Re-purposing the proposal for alternative funding
  • Decision on re-filing (should ARRA monies be available in the future)
  • Properly managing expectations of management, regulators and the public

For those who stayed on the sidelines in this funding round, there will be a set of raised expectations from the various stakeholders. Whether or not the decision is made to seek funding -- should it be available in the second and third rounds -- it is essential to consider the implications of a world in which smart grid becomes the norm. The fact of not applying for funds does not remove the growing pressure to have a smart grid. Therefore, there are unavoidable challenges for this group as well, including:

  • Managing expectations of management, regulators and the public
  • Building and executing a viable technology roadmap
  • Developing a system to monitor the developments and progress made by current grant winners
  • Reviewing business cases for updated information on costs and pricing
  • Understanding the push to smart grid applications

The smart grid monies will go a long way to stimulating progress in intelligent infrastructure -- win or lose in the ARRA process, being prepared is the key.

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During the 1990's the high-tech and information sectors of the economy could access "stimulus funding" (spedial loans at ultra-low interest rates). Many companies with questionable business plans received such funding. It gave to a high-tech boom, followed by a high-tech malinvestment boom followed by the high-tech bust and dot-com meltdown.

The green sector stimulus package could be like the "cash-for-clunkers" program that may soon expire. The auto sector will undergo a short-term recovery. The green sector stimulus package will develop many new competing renewable energy technologies to market. Over the long-term, the government will have to discontinue the stimulus package program and hopefully before it repeats the scenario of the high-tech sector of the 1990's.

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Harry,

"questionable business plans" are the crux of the problem you cite about bust cycles in industrial sectors following government stimulus funding. The trouble with any stimulus funding from governments is that it focuses more on technological goals and not business goals.

I am a design engineer in the high-tech industry and I see first hand what it takes for a new business based on some technological breakthrough or new product designs to become successful. Pursuing new technologies to be successful commercially is much more than simply developing new methods and techniques - it's also about the designer's ability to recognize practical technical and commercial constraints, and understand real market opportunities to guide a designer's choices.

The energy industry is particularly problematic for taking risks in new business development because it is riddled with government regulation and has many legacy large corporate interests that are threatened by any disruptive emerging businesses. The nuclear generation business is a great example where private investors find it often too risky to put money into new plants.

In many industries private investment in R&D of new technology and products has always been fraught with risk taking. For every commercially successful new product design, there is often dozens of failed attempts. In our energy generation industries, and especially considering how difficult it is to plan on new successful business opportunities, the high risks of investing in new technology development is virtually guaranteed to see future failures. I think the government recognizes this, and their view is if they don't throw public money at new ventures in the form of stimulus funding, very few others in the private sector will. It's a lot like playing lotteries where there is never any guarantee of winning when you buy a ticket, but you are guaranteed to lose out if you don't buy any at all.

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