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Rebounding from Sandy, for economic development

I had a post-Hurricane Sandy conversation recently with Massoud Amin, an IEEE senior member and professor of electrical and computer engineering at the University of Minnesota, where he also serves as director of the Technological Leadership Institute. Amin has researched and written about smart grid concepts and solutions for two decades. Some of his work is available on the TLI's website

Intelligent Utility: Have you seen evidence that smart grid technology helped in weathering or restoring electric service during or after Hurricane Sandy? Many people I talk to say that the so-called smart grid is too immature from a systems integration standpoint at this stage.  What's your view?

Massoud Amin: I have read reports that say that it was too early as the smart grid deployments began during the past couple of years are a small part of the end-to-end system.  The industry hasn't moved fast enough to upgrade the system to make the system smarter, and I read reports that smart meters were providing feedback in places that have deployed smart meters.  But these are just smart meters, which is a very small part of the overall smart grid effort. Also, phasor measurement units at the Tennessee Valley Authority (TVA) and at American Electric Power may have helped faster reaction times than otherwise. We are just at the beginning of the total smart grid effort, when you think about how long it will take to meet the costs and realize the benefits.

Intelligent Utility: You've crunched some numbers on those costs and benefits. Can you share them?

Massoud Amin: The value proposition moving forward looks like this: current outages, including Sandy and such disturbances, cost the economy somewhere between $80 billion to $188 billion each year. A smarter, stronger grid would reduce the low-end estimate of $80 billion a year by $49 billion, in my estimates. 

That smarter grid would increase the system's efficiency by about 4.5 percent. That's worth another $20.4 billion. Together, improving just those two aspects—reducing outages, improving efficiency-brings about $70 billion in benefits. A smarter grid would also reduce CO2 emissions by 12 to 18 percent. 

The cost estimates range somewhere between $338 billion and $476 billion for a smarter grid, and about $82 billion for a stronger grid. So when you recast it as a 20-year project, it's going to cost us somewhere between $25 billion to $30 billion a year for 20 years. 

Where are we now? The stimulus plan put $3.4 billion toward the smart grid, which kicked in in 2010. Industry put another $4.3 billion in as well. Today, more than 100 projects are going forward; many of them are focused, of course, on smart meters, which are just the most visible to the customer. But a lot more needs to be done for the benefit of smart grids to kick in.

Intelligent Utility: What's your sense of the limits of a fully evolved, mature smart grid when it comes to these extreme weather events?

Massoud Amin: The question often is posed as a false dichotomy: Do we need a stronger, hardened grid, or do we need a smarter and more resilient grid? Actually, we need both. You need to strengthen and increase intelligence. We can do better in terms of physical protection for poles, for instance, to strengthen the physical infrastructure of distribution and transmission systems. 

You have to choose judiciously, based on risk, the areas that need upgrades. A few years ago EPRI did a study of how much would it cost to put the electric power network in North Carolina underground: somewhere between $30 billion and $40 billion, which would double rates to consumers. So you don't harden the entire system, you judiciously harden parts of it based on risk, and the cost in North Carolina's case drops $3 billion, $4 billion. That can be done. 

Intelligent Utility: If you expand the toolkit, assess specific risks and determine where your system weaknesses are, hardening becomes cost-effective? 

Massoud Amin:  Precisely. Some characteristics are common across entire regions, in terms of generation and transmission capacity, in terms of different levels of shock absorption needed. You look at demand: what are the customer-focused needs in that area? And you look at the geography and the actual environment in which you're operating. So you need a framework for our nation to advance progress, but it boils down to local issues and the best local solution based on risk and cost-benefit analysis. 

Don't forget, this investment means job creation. And it's cheaper to pay for now than down the road. Interest rates are at an all-time low. Investment in a stronger, smarter grid means that for every dollar we invest, it's going to have a return of $2.8 to $6 to the broader economy. To reach these numbers we used a very narrow definition of "smart grid." If you widen that definition, the benefits increase.

Intelligent Utility: I see Hurricane Sandy as an opportunity, a teachable moment, a clear stage for the value proposition you're articulating. Do you see power sector leaders using Sandy's impact to make the case for the smart grid value proposition?

Massoud Amin:  I hope they do, but this will be a challenge. I hope that New York and New Jersey can start that process and upgrade their system. As Governor Cuomo has highlighted, they have an energy plan for New York, and a smarter grid fits nicely into it. One important constraint is the regulatory oversight of grid modernization and security. Jurisdiction over the grid is split: the bulk electric system is under federal regulation, but the distribution grid is under the purview of state-level public utility commissions. And those local regulations essentially kill the motivation for any utility or utility group to lead a regional or nationwide effort. So we need a policy framework to provide incentives for collaboration in grid modernization—making the system smarter and stronger—and for research and development. 

(Editor's note: Please join us tomorrow for the concluding segment of this interview in which Amin discusses dynamic risk, the economic constraints of obsolete infrastructure and the cost of upgrading the electric grid.) 

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Thank Phil for the Post!

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