15 Sep 2011

Infrastructure upgrades, time-of-use pricing offer most efficient ramp-up for Smart Grid apps

Written by Jim Pierobon

Those two hurdles are on the agenda of just about every utility, vendor and consultant vying to enable the Smart Grid’s potential in the U.S. and to capitalize on its ability to help consumers save energy and understand how much they waste it. But regulators are the gatekeepers and will have the final say.

Therein lies the conundrum shared by many in the presentations, press conferences and talks over dinner, in the hallways and receptions at this year’s GridWeek in Washington, DC which ended today.Click here for the challenge in a nutshell from former Colorado commission chairman — now consultant — Ronald Binz.

For every optimist there are two skeptics, or realists. It is no wonder why. The dour economy, the stubbornly high U.S. jobless rate, personal incomes down to 1993 levels. These are the major reasons cited. Together they leave virtually zero flexibility for unenlightened regulators to adjust or raise rates even slightly to pay for much-needed infrastructure upgrades or introduce time-of-day pricing. The political backlash for approving either could be lethal to elected officials.

Illinois Gov. Pat Quinn isn't ready yet to let utilities start billing ratepayers for smart grid upgrades. Credit: Politico.com

Take the veto early this week by Illinois Governor Pat Quinn of a bill sought by Commonwealth Edison to remove the regulatory lag and uncertainty in recovering costs of smart-grid implementation in its northern Illinois service territory, including Chicago. The legislation would have raised rates for the “average” customer about $3 a month.

Only problem is, Commonwealth Edison, and Ameren, the other big investor-owned utility in Illinois, reportedly never spelled out what they needed in order to build a smarter grid. Nor did they effectively explain what  consumers would be paying for, according to even-handed reports in the Chicago Tribune.

Apparently there is a plan for smart grid investments to enable Illinois consumers to see how much power they are using in real time and for ComEd to pinpoint outages and make repairs more quickly. But those aspirations were drowned out by what has been, and continues to be, a very rough PR climate for ComEd, a unit of Exelon Corp.

Even without such fireworks, the smart grid as advocates would like to know it is probably 10-20 years out. Sure there are exceptions. Where electricity prices already are set by the time of day such as in California, consumers welcome tools to save on their power bills. Even customers of San Diego Gas & Electric currently only have just basic smart meter functionality, that is between the utility and the meter. The next threshold — between the meter and appliances in the home — is still on the horizon.

Robin Lunt, Assistant General Counsel of the National Association Regulatory Utility Commissioners, NARUC, prodded GridWeek conference attendees to harness how a smarter grid can benefit consumers quickly, not at some point in the future. She sees them as “flecks of gold” (versus a “golden nugget”) that can be aggregated to sell benefits when the tipping point nears.

“Time is what’s missing,” Lunt said. “We need to see what works and what doesn’t.”

The dramatic cost-over runs by Xcel Energy — three times its original estimate — to build its so-called “Smart City” have not been forgotten. At least utilities are learning this can get mighty expensive.

There was a palpable undercurrent at this year’s GridWeek that utilities were reluctant to step up and tout their progress because they don’t have proof yet. Many of their programs were funded by American Recovery and Reinvestment Act (aka “Stimulus) funds that will likely take at least another year, or more, to begin showing benefits for consumers.

Along with the jobs being created by vendors, what was absent from virtually all of the discussions are the environmental benefits of a smarter grid: the new power plants that could be avoided; the dirty coal-fired power plants that could be closed. Yes those are a much tougher sell in Washington and state capitals this year and perhaps for years to come, but that case deserves to be made.

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