Utilities Face Cost and Implementation Challenges with Smart-Grid Upgrades

by | Nov 16, 2009

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smarty grid2In the wake of the Department of Energy’s $3.4 billion in grants for various smart-grid projects, local governments and utilities are trying to sort out the pros and cons of a smart-grid system, while trying to determine how to implement — and pay for– the required electrical grid upgrades, particularly when capital is tight.

The utility industry is facing several challenges in 2009, ranging from increased regulation and demand by customers for more payment options to aging infrastructure and uncertainty about smart-grid benefits, according to a new survey from WAUSAU Financial Systems and Sierra Energy Group/Energy Central.

New research on the payment processing trends in the utility industry finds that 65 percent of respondents say the current economic environment is making processing customer payments more difficult, and 85 percent of the utilities are using outdated, legacy systems.

Another finding reveals that two-thirds of utilities believe they don’t have the capability to meet new demands including new regulations such as those associated with renewable energy, cap and trade, and smart grids.

As an example, smart grids will change billing demands, such as two-way billing and demand response reconciliation but utilities haven’t addressed these new billing requirements yet because smart-grid development is just underway now, according to the study. In addition, utilities are faced with other challenges including a lack of cash flow and access to capital.

Michael Singer, author of the Executive Clan Editor’s blog at Internet Evolution thinks he has a solution to part of the problem. The utility’s answer to better monitoring peak demand times and helping customers choose the best times to run their appliances is enterprise-class business process management (BPM) software, which has been widely used in the telecom and IT industries, he says.

Singer says this technology could enable better two-way communications with consumers, deliver more insight into the state of network operations and accommodate renewable energy, which will become key to utilities joining the smart grid. The key players who will benefit include Oracle, IBM and Hewlett-Packard, he says.

Meanwhile, West Virginia is moving ahead with plans to develop a smart grid despite the $1.9 billion price tag to move to a smart electrical grid, reports The State Journal. Authors of the “West Virginia Smart Grid Implementation Plan” say the benefits outweigh the costs when benefits to consumers and society are considered.

One plan participant said in the article that typically public service commissions only consider the cost and benefit to the utility, which in this analysis would be $1.9 billion in costs versus $1.3 billion in benefits.

However, according to the report, the cost of full implementation over 20 years will be about $1.9 billion versus the “reliability” benefit of $12.6 billion spread across consumers, utilities and society, reports The State Journal.

Another participant in Virginia’s planning process said in the article that outages and power quality events cost the state more than $1 billion a year in business, which will be eliminated by smart-grid technologies because they route power around a problem or minimize an outage.

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