How much will a smart grid cost? It’s a question that has gained importance in light of massive cost overruns for one highly touted U.S. project.
The U.S. grid, like almost all national grids, requires expansion and upgrading to serve growing electricity demand, accommodate increased renewable generation sources, improve prevention of and response to outages and security threats, and maximize the efficient transmission of electricity. The cost of improving the grid to meet these goals is high — somewhere in the neighborhood of $65 billion to $165 billion over the next decade or two. The cost of doing nothing is higher.
Take, for example, reliability, which tends to decrease as demand on the grid increases and variable renewable generation increases. A June 2001 Electric Power Research Institute (EPRI) report, "The Cost of Power Disturbances to Industrial & Digital Economy Companies" estimated that the annual direct cost of power outages and power quality disturbances for all sectors (not just those in the survey) was between $120 billion and $188 billion. In its 2003 report, "Grid 2030," the Department of Energy (DOE) noted that "it is estimated that power outages and power quality disturbances cost the economy from $25 [billion] to $180 billion annually."
A more recent 2006 study by Lawrence Berkeley National Laboratory researchers, "Cost of Power Interruptions to Electricity Consumers in the United States," found that, "based on publicly available data and subject to the limitations discussed... the economic cost of power interruptions to U.S. electricity consumers is $79 billion annually." Their caveat: "Our analysis of the uncertainty in this estimate suggests that the costs could be as high as $135 billion or as low as $22 billion based on the particular sensitivity assumptions we employed."
As end users discover new uses for electricity — from iPads to plug-in hybrid electric vehicles to the manufacturing of solar modules — the cost of grid disruptions is likely to move higher. And those are just the direct monetary costs of a less-than-optimal grid.
Minimizing those costs by building a more robust and "smarter" grid seems like a good idea to many people. But even setting aside the gnarly political, regulatory, and jurisdictional issues that make grid projects a nightmare in the U.S. in particular, there’s another big hairy concern: paying for an improved grid.
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