March 31, 2010
Ken Silverstein
EnergyBiz Insider
Editor-in-Chief
Utilities and environmental groups are coming together to help modernize the transmission system. It's arduous job, though, requiring conciliation and patience.
Together, they seek to improve the grid's capabilities so as to allow it to carry more green electrons as well as provide customers with the information they need to make better energy choices. With Congress now considering national renewable mandates and at least half the states with similar laws on their books, electric companies must have a way to deliver the expected use of such power.
Environmental laws are also anticipated to get tougher. If carbon limits are set, for example, it would necessitate more energy conservation and an even greater percentage of renewable development. An intelligent utility can send out notification of the most efficient generation to dispatch as well as issue warnings to grid operators that power flows be redirected to avert congestion. And they can tell consumers to curb power usage because prices are about to skyrocket.
"This is a great first step toward transforming our whole energy system to be more secure and reliable, and to deliver cleaner and cheaper electricity to American homes and businesses," says Mark Brownstein, deputy director of Environmental Defense Fund's national energy program. "Done right, a new energy grid can enable broad deployment of renewable energy sources like solar and wind and empower consumers to make more informed decisions about their real-time energy use, paving the way for energy efficiency and off-peak power cost savings."
The green group is partnering with other stakeholders in the so-called Pecan Street Project in Austin, Texas, a comprehensive smart grid enterprise. The parties will suggest regulatory reforms and a business model to allow those new technologies to flourish.
Altogether, the federal government is pouring in $3.4 billion in stimulus funds to start things off. In October 2009, it awarded 100 grants to private interests that were also able to contribute more than $4 billion of their own money. Utilities that have received those grants say that without a cost-sharing formula, their projects would take much longer get past the trial phase.
Once proven, momentum will build. Pike Research says that utilities could invest another $21 billion in grid modernization over the next five years. Right now, about 5 percent of the145 million existing meters are "smart." But power companies are expecting that share to increase by a third over the next several years as 52 million modern meters are rolled out, says a Federal Energy Regulatory Commission report.
Common Concerns
The biggest cuts will go to CenterPoint Energy in Houston and Baltimore Gas & Electric. The former will get $200 million of a nearly $700 million project while the latter will receive $200 million to cover a $450 million deal. CenterPoint will install 2.2 million new meters and BG&E will implement software to enable dynamic pricing and to alert grid operators when their network is crammed.
"We also did get $168 million of stimulus funds, and I'm hopeful that cooler heads are going to prevail, and the United States government will not record that as taxable revenue for us, and we'll actually be able to get all $168 million," says Joe Rigby, Pepco's chief executive, who spoke at the EnergyBiz Leadership Forum.
If the smart grid were truly a national program, then down the line it could cut peak energy usage by 10 percent, says the Brattle Group. That, in turn, would also take a bite out of overall emissions and enable utilities to avoid some capital expenditures.
Without a doubt, market acceptance has been slow. Industrial and commercial concerns have more to gain than homeowners, who have less financial incentive to monitor their daily energy consumption. Utilities, though, want to maximize the efficiency of their grids so as to avoid any outages -- and the smart grid can do just that. Their job now is to convince regulators to permit them to pass through the costs to ratepayers.
While electric companies are more focused on increasing capacity, environmental interests are more concerned with making room for green energy and particularly as utilities grow more comfortable with such alternatives. Regardless of motivation, the two have found a common cause.
The Sierra Club, for example, says that the development of the smart grid is a national priority. But it also realizes that it must match its words with actions: Constructing an intelligent utility must be viewed in the context of infrastructure expansion.
To that end, the organization says that California's Renewable Energy Transmission Initiative and the Western Governors Association's Western Renewable Energy Zone are combining the two concepts. Both are working with all stakeholders to avoid potential snafus while also incorporating "renewable energy zones."
Such planning seeks to put projects in places that are rich with sustainable resources and where wildlife disturbances can be kept to a minimum. Resistance remains, although the Sierra Club says that it eases if the lines are designated to move wind or solar power.
"Business as usual transmission planning has been fraught with conflict, delays, and inefficiencies," says Carl Zichella, director of Western Renewable Programs for the Sierra Club, who testified before the House Committee on Natural Resources. "Involving key stakeholders early on in transmission planning encourages the making of better decisions that can be more easily accepted by the public, shortening approval timelines and initiating project construction more rapidly."
It's about building out the intelligent utility, whether it is reserving space for sustainable fuel sources or adding software to encourage energy conservation. It's the one effort whereby utilities and environmentalists share a mutual interest but one that will nevertheless take time and money to realize.
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