(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.
a dirty word—with enormous consequences for utilities as well as their customers.
“The smart gird has been over-hyped,” Hickman says emphatically. “It’s not nirvana; it’s the evolution of an analog grid into a digital grid. It’s necessary, it’s required, and we need to get on with it.”
Fickle Winds of Change
The smart grid concept has entered the lexicon in a way few aspects of the utility sector ever do. That’s been a blessing and a curse.
“This term was adopted about four or five years ago, and then it got a major political movement behind it,” says Warren Causey, a vice president at consulting firm Five Point Partners. “That led to an acceleration of deployment, which is good, and to a number of other steps forward over the last few years.”
However, as with all political movements, there’s a pendulum factor. The year 2008, when smart grid really went mainstream, was a moment of dramatic political change. The Obama election, coupled with growing concerns over energy security and environmental issues, pushed smart grid into the public spotlight. The financial crisis played a role, too. The 2009 stimulus package—the American Recovery and Reinvestment Act (ARRA)—promoted smart grid projects among the so-called “shovel-ready” public works projects legislators hoped would help get the economy back on track.
Smart grid was a convenient, expedient term politicians could use. It sounds like progress. The grid was dumb, and we’re making it smart! It was an easy concept to sell—and to oversell.
“Between the smart grid and shifting to alternative energy, it’ll cost between $1.5 and $3 trillion to build out everything that has been postulated,” Causey says. “The ARRA provided about $6 billion—a relative drop in the bucket. Also, there are about 3,500 electric utilities in the country, and only 100 of them got ARRA money. So, you have to look at the overall picture.”
In reality, the smart grid is anything but simple, and doesn’t lend itself to politicians’ sound bites. It’s a multifaceted technological conversion, comprised of enabling technologies such as advanced metering infrastructure and meter data management; integration of new renewable generation and storage methods; consumer applications such as home area networks and smart appliances that further enable demand response; and perhaps most significantly, massive and long-term investment in upgrading distribution technology.
So when the political wind shifted, smart grid presented a lot of fronts for pushback.
“Smart grid is a bloated term,” says Don McDonnell, managing director of the McDonnell Group, an energy technology consulting and media firm. “Every utility has a vested interest in highlighting the different pieces of the puzzle and affirming that they’re part of the industry’s smart grid development, because they don’t want to be out of style. I believe strongly in the overarching vision for the modernization of our industry, but we’re certainly not the best industry at making our case for investment and for innovation.”
Since 2008, the Gartner Group has plotted smart grid technologies on a curve it calls “The Hype Cycle”—a graph that plots expectations over time.
The curve follows five phases.