(August 2011) Economic consultant Michael Rosenzweig challenges Constantine Gonatas’s proposal for ensuring FERC’s demand response rulemaking achieves its objectives. Also, Juliet Shavit...
Saving The Smart Grid
Hype, hysteria, and strategic planning.
prices will go up,” Rouls says. “If they do move forward with smart grid, prices will go up. It’s going to be very interesting to see what brush gets used to paint this picture.”
The longer the myth of cost reduction hangs on, the more mistrustful and downright angry consumers will be when the bubble finally bursts. Selling customers a bill of goods probably isn’t the best way to begin a multi-trillion dollar investment cycle.
Moreover, embedded in the cost-lowering delusion is a presumption of choice, a notion that smart grid is an elective option for the industry. In reality, the industry has been living on infrastructure investments made in the 1960s and ’70s, and eventually all of it will stop working. In the meantime, utilities are always expanding capacity to accommodate customer needs. It makes no sense to install obsolete equipment, so naturally companies are pursuing a modern technology path. In this context, the “smart grid” buzzword has become a distraction.
“We need to upgrade our grid, we need additional generation paths, and yet everybody runs around and says smart grid will lower costs?” Hickman says. “Everybody who knows anything knows it’s only going to slow the acceleration of cost. It’s not about lowering cost. This infrastructure has to be upgraded.”
Still, because rate increases are always a toxic topic, there’s an almost overwhelming temptation to gloss over that harsh reality and focus instead on the feel-good environmental aspects of smart grid, or on the gee-whiz effect of cool, high-tech gadgets.
“The political involvement has painted smart grid as ‘it’s the right thing to do, everyone will win, and then all these things will help consumers take charge of their rates,’” Cornish says. “No one is saying ‘this is going to cost a lot of money and your rates are going up.’ Whenever there’s a discussion of rates, the response tends to be, ‘we’ll put in AMI and demand response and it’ll help keep rates low.’ And that’s just not true.”
That, he says, could lead to a huge public backlash. Consumers will feel they got hustled in a boondoggle and got nothing out of it except a bigger utility bill. The grid might be a little bit more reliable, but it was reliable enough before, and cheaper. The resulting anger will make it that much harder for utilities to communicate about smart grid, and to fund essential upgrades over the course of decades.
It will also represent a monumental missed opportunity to truly engage consumers.
“If rates go up and then we try to salt the general public—‘yeah, but they would have gone up more if we hadn’t implemented smart grid’— that will fall flat on its face. People won’t buy it,” Cornish says. “Somehow we need to get in front of it and explain to them that rates are going to go up, but we’re going to give you tools to be able to manage your energy consumption, to help you address those rate impacts. Frankly we need to be a bit more transparent with them.”