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Can Obama Win by Promoting Smart Grid Successes?

President Obama’s campaign is irreversibly linked to the 2009 stimulus plan. That nearly $1 trillion economic package included about $3.4 billion for the smart grid. Has the public investment in efficient electricity consumption worked?

The primary issue, of course, is that the electricity generation and delivery system has been regulated, and taken for granted. Consumers, who have never really been involved in deciding when and how they use power, are now being told they have this chance. Many remain uninvolved. But utilities are actively trying to engage them so that all sides can use power more efficiently.

“You need to have smart pricing,” says Paul Lau, assistant general manager of power supply and grid operations at SMUD, which is Sacramento, California’s public utility. “Once consumers find out how they use energy, they will ask what they can do to improve their energy efficiency.”

Lau, who spoke at this year’s EnergyBiz Leadership Forum, says that his utility had plans for a smart grid before the Obama administration focused on it. When the stimulus was announced, SMUD snagged $127 million. The installation of smart meters that have the ability to send price signals to customers are critical, he adds, noting that the utility can read meters hourly, as opposed to once a month.

That gives utilities vital data that tells them how residential and business customers use energy. Understanding how the product is consumed will permit new innovations. In other words, the goal is to get customers to shift their energy usage away from peak periods and to times when demand is down. Such efficiency will then allow room on the grid for everything from electric cars to green energy.

If the transmission lines are to function well they must be able to manage the incoming data in real time. That will permit grid operators to know which types of generation to dispatch and whether to redirect electricity flows if the lines are congested.

“Now that we have the data, we can start looking at reducing energy consumption without impacting their lives,” says Lau, who adds that SMUD is gradually rolling out “time-of-use rates” that gives customers a chance to cut their bills.

Market Acceptance

While the smart grid is making advances, it still has a ways to go. Industrial and commercial concerns have more to gain than homeowners, who have less financial incentive to monitor their daily energy consumption. At the same time, some regulators are being cautious and are asking utilities to demonstrate the benefits before they can pass through all of their costs to ratepayers.

If the attributes start to mount, the rollout will gain momentum. The movement to go green is a big part of that and if the smart grid is fully utilized, it could cut peak consumption by 10 percent, says the Brattle Group. Utilities want to better manage their networks and to avoid outages. They also want to slow down their capital outlays for new plants and equipment.

Consider Centerpoint Energy, which embarked on smart metering in 2009. Initially, it was to satisfy the Texas legislature that required a massive roll-out within five years. Around the same time, the U.S. Department of Energy had announced the stimulus plan and as such, Centerpoint applied for and received $200 million. Three years later, the program is almost complete.

“This is so much more than meters,” says Jeffrey Myerson, a director for Centerpoint, at the EnergyBiz forum. It’s also about computer networks and software systems that must be seamlessly integrated. “Even though this is the first time we had done this, it has all worked amazingly well.”

In Texas, consumers can easily change retail electricity providers. That forces utilities to always disconnect and reconnect customers, as well as perform “off-cycle” meter reads. As for Centerpoint, the advent of smart grid technology permits it to do this all electronically -- between 8,000 to 15,000 times a day.

SMUD and Centerpoint are just two of the beneficiaries of the smart grid program and the stimulus plan. More than 100 such public grants have been provided so far to private interests that were also able to contribute more than $4 billion of their own money. Utilities that have received that money say that without a cost-sharing formula, their projects would take much longer to get past the trial phase.

“We see the biggest and most attractive cases are upstream,” says Mark Griffin, North American energy leader for Tata Consultancy, at the forum. Put differently, understanding consumption patterns is just as beneficial to utilities that must control fuel costs and monitor environmental conditions.

The smart grid is not without its detractors, some of whom are critical of the public financing involved. Its advocates, however, are convinced that the government's investment will pay off once the technologies gain market acceptance. If so, the president can take credit for helping to foster this facet of the green economy.

EnergyBiz Insider is the Winner of the 2011 Online Column category awarded by Media Industry News, MIN. Ken Silverstein has also been named one of the Top Economics Journalists by Wall Street Economists.

Twitter: @Ken_Silverstein


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