GRID:

Obama admin launches campaign to help states, utilities deploy smart grid projects

Obama administration officials, joined by electric power industry executives and state regulators, will unveil a new campaign today to push deployment of smart grid and clean energy technologies.

Energy Secretary Steven Chu, Agriculture Secretary Tom Vilsack and John Holdren, director of the White House Office of Science and Technology Policy, head the administration officials at today's conference.

Unlike in 2009, when the American Recovery and Reinvestment Act funded $4.5 billion in smart grid and clean energy grants nationwide, matched by $5.5 billion in private funding, the new program is not backed by a federal checkbook. A new commitment of $250 million in loans from the Agriculture Department's Rural Utility Service, is the only significant new funding in the campaign, according to people familiar with the plan.

The administration's "Plan for a 21st Century Electric Grid" is based instead on documenting the results of 141 smart grid technology projects funded by the Recovery Act and using these case studies from "first-mover" states to gain support from utilities, state regulators and consumers in other states that have not adopted smart grid programs, participants in the plan's development said.

In one outcome of the plan, power companies in Texas and California -- where statewide smart grid projects are under way -- and several smart meter manufacturers have formed a nonprofit organization named Grid 21 to sponsor contests for consumers who conserve the most electricity through smart grid devices. A second contest will reward developers of smart grid applications for consumers, according to participants in the project.

Oncor, a Dallas-based utility, CenterPoint Energy in Houston, and San Diego Gas & Electric in California will lead the Biggest Energy Saver Campaign, Oncor officials confirmed. Smart grid systems manufacturers Itron and Landis+Gyr are also founders of the initiative, joined by IBM, officials said.

At today's briefing, OSTP will release a report,"A Policy Framework for the 21st Century Grid." The report makes a case for smart grid technologies as a catalyst for a range of policy goals, including enlisting consumers in electricity conservation; reducing the demand for new power plants; creating an electric vehicle recharging infrastructure; supporting U.S. competitiveness in a growing global market; and modernizing and securing an aging power grid, according to people familiar with the report.

"How do we jump-start this?" said Oncor CEO Bob Shapard, who participated in the preparation of the plan and will be a speaker at today's White House conference. "We're trying to demonstrate what can be done.

'Head wind' from regulators and consumers

"You have regulators who are skeptical, and consumers saying, 'I don't want to pay for this.' The push-back from regulators and consumers is the challenge," Shapard said. "We're running into so much head wind, we need to show to regulators and consumers what the benefits can be."

The head winds come from many directions. Public and political consensus around the threat of climate change is not in sight, foreclosing attempts to impose a price on carbon emissions -- a policy that could make smart grid energy savings technologies more important to consumers.

Initial installations of smart meters in California and Texas triggered consumer complaints about errors in monthly utility bills. Subsequent audits of smart meter performance attesting to their reliability have not dispelled consumer uneasiness, some experts say.

Utilities in most states are investing in smart grid technologies that make grid operations more secure and speed outage recovery after storms, but consumers do not tend to see these steps as benefiting them, analysts say.

A shift to time-of-day electricity pricing would enable consumers to see the sharp increases in wholesale electricity prices that occur when demand is high. That could create more incentive to use smart grid technology to conserve electricity at times of peak demand. But concerns about a potential consumer backlash stand in the way. Experts say that while smart grid technologies will offer critical protection against cyber attacks, the expansion of two-way information flow between utilities and customers creates many more potential points of attack.

Another headwind is an underlying rationale of the smart grid: to enable consumers to use less power. That runs straight into the self-interest of many utilities that generate power, so strategies are needed to turn conservation into a good business case for them, administration officials note.

Shapard said the economic case for smart grid technologies is already clear. "We are spending $250 per customer to install advanced meters in Texas," he said. If smart meters help consumers reduce electricity consumption by as much as 10 percent, the costs of a nationwide installation would be recovered in a year or less, he said.

Selling the payback from saving energy

"We've really got to demonstrate the value proposition," said Shapard, who is also chairman of the Gridwise Alliance, an industry group that advocates for smart grid policies.

He and others who participated in developing the administration's smart grid initiative say its most valuable product will be the reports on the Recovery Act smart grid projects, some of which are continuing into 2014 and 2015. Successes and failures will be closely watched.

The DOE-funded projects cover the smart grid agenda.

The Pacific Northwest Smart Grid Demonstration, with a budget of $178 million split evenly between Recovery Act grants and local contributions by 11 utilities and other partners, funds a variety of projects, including charging plug-in electric vehicles, improving wind forecasting and creating a novel market "signal" meant to reflect a higher value for low-carbon electricity.

The National Rural Electric Cooperative Association (NRECA) has a $33.9 million DOE grant for a demonstration project covering 27 cooperatives in 11 states. It will include studies of water heater and air conditioning load control using advanced meters, smart grid strategies to speed disaster recovery and time-based rates.

The eEnergy Vermont Project supports installation of smart meters for most Vermont customers, with a statewide telecommunications network permitting in-home energy use displays and "smart" appliances that can be regulated to conserve power in peak demand periods.

Some 'guideposts' for the states

Adrian Tuck, CEO of smart grid systems vendor Tendril, based in Boulder, Colo., said, "for the electric system as a whole, the key issue is really peak demand, which continues to grow. The smart grid gives us new tools that allow consumers to avoid having a new power plant built just to meet peak demand a few hours out of the year.

"One of the things that the administration can do is help rationalize the efforts in the states, making sure that best practices and early lessons are shared and disseminated," he said. "The Department of Energy-funded projects are important proof points in the industry. We fully expect that the results of these projects will help other regulators understand the best ways to engage consumers, save energy and shift investment toward vital demand-side resources that we need."

Ohio Public Utility Commissioner Paul Centolella, another speaker on the agenda for today's conference, said, "DOE is playing an important role in supporting smart grid projects that are likely to have economic and reliability benefits that extend beyond the immediate program participants. What will be important is what we can learn from the smart grid projects ... and how we apply what is learned."

"Many regulatory agencies and utilities are waiting to see what happens in California, Texas and other areas of the country that are leveraging advances in technology to improve the electric grid," said Lee Krevat, director of the smart grid initiative for Sempra Energy's San Diego Gas & Electric.

"In the long run, the prices of distributed generation, storage, plug-in electric vehicles and other advanced technology will decline, increasing the value proposition for customers. Utilities will ultimately need to integrate these new technologies into the grid, which will require innovation in how the grid is managed to maintain reliability and security and protect customer privacy," he said.

The administration was credited for seeking views of utilities with active smart grid initiatives and of non-utility information technology firms that want to compete for access to utility customers with new smart grid applications.

"Making energy information more readily available could save consumers billions of dollars and unlock a new wave of innovation in the energy sector," said Michael Terrell, who leads Google's energy policy efforts. "This latest action by the administration reaffirms that modernizing the electricity grid begins with unlocking information and empowering consumers."

New York State Public Service Commission member Maureen Harris was co-chairwoman of the project's smart grid working group from the National Association of Regulatory Utility Commissioners, which represents state regulators in policy debates with Washington.

"At first, I would say we were skeptical that the administration would listen to the states. To our pleasant surprise, they did listen," she said. Harris agreed that the results of the smart grid demonstrations will be vital. "Getting the results of what did and didn't work -- that will be incredibly pivotal for the states."

No state commission will rubber-stamp the results from another state's demonstration project, she said. "Each state commission still has to go through the review process. We need to piece out which factors [in another state's project] are similar to ours. But we can take a project one of our utilities is proposing and measure against success stories. ... Now we at least will have some guideposts."