April 1, 2010

Smart Grid: On the Money

Gail Reitenbach, PhD

Governments Pouring Money into Smart Grids

The U.S. government isn’t the only one lending a hand to "smart" national grid projects. According to a Jan. 27 report by Zpryme, China is already outspending the U.S. in terms of federal dollars devoted to smart grid projects. Here’s its ranking of 2010 investments (in US$ millions):

1. China: $7,323

2. U.S.: $7,092

3. Japan: $849

4. South Korea: $824

5. Spain: $807

6. Germany: $397

7. Australia: $360

8. UK: $290

9. France: $265

10. Brazil: $204

Granted, China is starting with a blank slate in many respects, whereas the U.S. has a head start. The flip side of that dynamic: The very presence of any existing transmission and distribution infrastructure creates a larger hurdle for grid improvements because it can create a false sense that the status quo is just fine.

Meanwhile, U.S. companies are taking note of where R&D and project implementation opportunities lie — beyond U.S. borders. Zpryme notes that "Just recently, GE aligned itself with Yangzhou, China to construct a smart grid demonstration center. Similar steps forward are being echoed from industry-leading players such as Cisco, Accenture, Hewlett-Packard, ABB, Westinghouse, and Oracle — which are buying into a generous stake of China’s smart grid market. What’s more, Business Week recently reported that IBM expects at least $400 million in smart-grid revenues in China over the next four years. Fitting testimony as IBM remains the only corporation that provides hardware, software and consulting for smart grid infrastructure projects in China."

Demonstrated Benefits of Smart Grid Costs

For details about costs and benefits of one of the most comprehensive smart grid rollouts, in Italy, see this February interview with Livio Gallo, director of Enel’s Infrastructure and Networks Division: http://tinyurl.com/yhejhk5. Enel invested €2 billion (roughly US$2.7 billion) in its six-year deployment of 32 million electronic meters. Among the benefits to date: a 62% reduction in minutes of service interruption per customer and a 61% reduction in distributor meter management costs per customer.

A November 2009 BusinessWeek story reported that the Italian utility is saving $750 million per year as a result of the project. Furthermore, "improved data on consumers’ electricity habits permit Enel to run its power plants more efficiently."

Needless to say, this story is far from the final word on smart grid costs. Stay tuned.

—Gail Reitenbach, PhD is POWER's managing editor.