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The global smart grid market value is poised to approach $220 billion by 2020, and the U.S. Smart Grid Investment Grant (SGIG) program has served as a major catalyst to worldwide smart grid development. In fact, many leading utilities from Europe and Asia are already seeking smart grid implementation guidance from progressive U.S. utilities such as Duke Energy, Pacific Gas & Electric and Southern California Edison.

Part of the American Recovery and Reinvestment Act of 2009 (ARRA), the SGIG program is a $3.4 billion initiative that seeks to accelerate the transformation of the nation’s electric grid by deploying smart grid technologies and systems. The $3.4 billion in federal ARRA funds are matched on at least one-to-one with private-sector resources. The total investment in SGIG projects is, therefore, approximately $8 billion.

The SGIG projects were started in early 2010, and all projects are expected to complete equipment installation in 2013-2014. Data analysis and reporting is expected to be completed by the end of 2015. This is congruent with the original planned timeline for spending and data analysis/reporting.

As of Dec. 31, 2012, 59% ($4.7 billion out of $8 billion) of all expected SGIG funds have been spent. Advanced metering infrastructure (AMI) has accounted for 65.8% of all expenditures to date, followed by distribution systems (24.0%), transmission systems (6.0%) and customer systems (4.2%). From a total expected-spend perspective, SGIG AMI and customer system deployments are 73% complete, distribution system deployments are 45% complete, and transmission system deployments are 28%
complete.

In terms of units, 11.8 million (of 13.7 million total installed but not necessarily yet operable) smart meters have been installed, with just under 16 million expected to be installed by program-end. This total is based on the project plans of the SGIG recipients installing smart meters. Therefore, roughly 75% of expected smart meter installations under the program have been completed.

Although this percentage lags a bit behind percentage of dollars spent to date, it is still on pace with program goals considering time elapsed since program inception compared with the total time span of the project, approximately four years.

Syncrophasors spotlight
One example of how the program will accelerate progress toward a nationwide smart grid is synchrophasors. Their widespread installation could leap the U.S. grid far ahead of the current game. Now, monitoring technology is slow. Using phasor measurement units (PMUs), utilities could record information from a line at the rate of 30 to 120 times per second - about 100 times faster than with today's technology.

Before SGIG, the roadmap indicated a 10-plus-year synchrophasor deployment effort. SGIG investments are expected to cut that timeline in at least half. The acceleration of PMUs from this project will mean about 1,000 deployed in nearly all U.S. regions by 2014, feeding high-speed data about grid conditions into control rooms across the grid.

ARRA has strengthened both distribution and transmission sides of smart grid development over the past two years. That investment in long-term capital assets can enable a much quicker conversion to a smart and more resilient power grid. By program end, an additional 10% of the population will be served by smart meters, an incremental 5% of distribution circuits will be upgraded with automation technology and nearly 100% of bulk transmission will be monitored by PMUs.

Outlook
A 2004 Electric Power Research Institute (EPRI) report estimated it would cost $165 billion to develop smart grid infrastructure through 2020. In 2011, EPRI updated this
estimate to between $338 and $476 billion. A 2008 Brattle Group report estimated that expanding transmission and distribution with smart grid capabilities would cost $880
billion.

By funding $3.4 billion in the investment-matching program, thereby incentivizing another $4 billion of investment, the ARRA SGIG program is helping spur and accelerate innovation and investment in building a smarter electric grid. However, the entire $8 billion to be invested entails only about 1-2% of the total investment required.

The SGIG program’s influence is more of a start-up catalyst, intended to boost and accelerate initial capital investment and create some momentum. It will still take investment of hundreds of billions of dollars over the next several decades to fully modernize the grid. The realization of the vision - shared by many players in the electrical grid value chain - of a highly intelligent grid will clearly require a sustained commitment and careful coordination and collaboration by industry, government, states and other stakeholders.

Initiatives will be needed to tackle the policy, market and institutional barriers that currently inhibit investments by the private sector. SGIG and parallel portfolio programs initiated to complement SGIG have been launched for exactly this purpose. The U.S. Department of Energy must, however, continue to exhibit leadership and create impetus, and focus on stewardship of a strategy that emphasizes partnership, information sharing and outreach.

Mark Ishac is managing director of Zpryme. He leads all operations of the company’s Smart Grid Insights Practice, including management of its research team and client interactions. His personal research focuses on smart grid market entry and branding strategy. This article is adapted from Zpryme’s “U.S. Smart Grid Investment Grant Analysis” report. For more information on the report, click here.



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