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Smart-Grid Stimulus

Utilities hurry up and wait to apply for grant money.

Fortnightly Magazine - June 2009

The American Recovery and Restructuring Act (ARRA, or the Recovery Act), signed into law in February, provides $4.5 billion in stimulus funding for programs aimed at “electricity delivery and energy reliability activities to modernize the electric grid.” This funding commitment, and swirl of industry and lawmaker activities since, has helped lift the smart-grid agenda out of the shadows of utility engineering departments and into the public’s broader view. A testament to this is found in CNN’s reporting on March 21, 2009 about the concern over smart-grid cyberse-curity. 1 The smart-grid concept has caught on as an issue of national importance.

Many utilities are scrambling to define how their smart-grid projects might qualify for smart-grid demonstration or matching grant funding. The Department of Energy (DOE) published guidance in mid-April for prospective grantees, but a great deal of uncertainty remains about how to develop a meaningful funding opportunity, how to decipher the pros and cons of submitting an application early, and how to reconcile utility smart-grid funding plans with existing utility initiatives. There also is tremendous pressure within DOE to identify funding allocations and priorities, get the grant-making guidance published, start the review of applications, and make awards.

Regardless of the uncertainty, time may be of the essence for utilities intent on capitalizing on funding opportunities; utilities will need to advance a clear proposition and business case for how they will use federal funds and why these uses comport with the dual imperatives of the legislation to advance the interests of improving the electricity delivery system while stimulating economic activity. How will the smart-grid business case be uniquely shaped by these imperatives and what’s at risk in acting hastily?

The rush of activities has many potential downsides. Some expect DOE to face hundreds, if not thousands, of potential grant applications from a wide range of energy market participants ( e.g., technology companies, utilities, research entities, among others). A practical challenge thus emerges about how to weed through this deluge of funding requests and order and prioritize the opportunities. DOE will be under pressure to be responsive in the interest of getting funding out the door regardless of the quality and nature of the funding requests. Equally challenging is that utilities are rushing now to get grant applications developed in the absence of clear guidance, and what gets submitted may deviate substantially from DOE’s priorities when finalized.

This two-sided problem—a lack of information for those developing grant applications and the pressure DOE is under to make awards quickly—might lead to unintended consequences. Certain companies, technologies and research and demonstration agendas may reap substantial rewards over others, and what is funded may have little to do with creating employment and stimulating the economy, which is one of the primary purposes of the Recovery Act; the funding also might do little to advance the development of the smart grid generally. Haste and misguidance could change

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