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Smart-Grid Strategy: Quantifying Benefits

Modeling the value of various technologies and applications.

Fortnightly Magazine - July 2009

(AMI), which allows for the collection of energy usage information on a sub-hourly basis and the retrieval of that data by both consumers and energy companies. 1 Smart meters, a key element of AMI, enable a wide range of end-use products to be offered to customers. The American Reinvestment and Recovery Plan set a national goal of installing 40 million smart meters in homes with its energy investments. The state of California already is moving ahead with full-scale deployment of AMI, and several other states, including Georgia and Texas, likely will follow suit.

Discerning realistic time frames for the deployment of SG technologies is a crucial step in developing a company’s SG strategy. 2 It will take time and investment to propagate SG technologies across the approximately 3,000 distribution systems in the United States. 3 Already, significant progress has been made with more than 40 different SG pilot programs in place. Some utilities, such as Xcel and Austin Energy, are leading the industry with carefully crafted SG pilots. Many of these pilots are designed to explore not only the direct benefits of AMI and smart transmission and distribution, but also the impacts of new technologies and customer programs that this upgraded infrastructure backbone will enable.

Modeling Smart-Grid Benefits

In assessing the benefits of the SG, an analytical model separates the potential benefits into two major streams: established technologies and benefits; and leading-edge technologies and benefits. SG applications that already are feasible and have benefits that likely will be realized in the short term include AMI, demand response (DR), and SG-enabled energy efficiency (EE). AMI is the backbone of the SG due to its role as an enabling technology and current level of adoption across the grid. With AMI in place, time-based pricing, automated controls, in-home displays, and other information-based technologies will be possible. Time-based pricing, such as dynamic pricing, allows utilities to charge customers prices based on the cost of electricity, which fluctuates greatly by day and even by hour. Armed with detailed information on the cost of electricity, usage can be shifted to times of the day when prices are lower.

The second stream of SG benefits, those dependent on leading-edge technologies, will require technology improvements and supportive policies before they can be brought successfully to market. These technologies include distributed energy resources (DER) and plug-in hybrid electric vehicles (PHEVs). DER can be defined as small, modular, energy generation and storage technologies that provide electric capacity or energy closer to their point of use than centralized sources. 4 DER technology has existed for years, and related products already have entered the market to a small extent. Large-scale market penetration, however, will not be possible until technology barriers are overcome and policies are in place to support them. The SG will accelerate greatly the development of DER by improving their functionality and economies via time-differentiated prices, and by allowing customers to store and dispatch excess power.

PHEVs also promise a major source of potential economic benefit. Without SG-enabled technologies, PHEVs will charge using simple charge timing protocols, adding demand to the grid