U.S. Credit Rating ‘Threatens Smart Grid Deployment’

by | Apr 19, 2012

The U.S. and the EU plan to coordinate the development of smart grid standards, if financial frugality can be overcome, according to a report by business intelligence firm GBI Research.

The report says the U.S. plans to implement smart grid technology to reduce the national energy demand by 20 percent, improve system efficiency by 40 percent and incorporate 20 percent renewable sources into its total electricity capacity by 2030. However, these impressive aims may not be met if plans fail as a result of the global recession.

In 2011, the U.S. Commerce Department’s National Institute of Standards and Technology and the EU’s Smart Grid Coordination Group agreed to collaborate on smart grid standards development, joining standards between the two continents to ensure that smart grid devices and systems can be used together globally.

However, the economic crisis in the U.S. may negatively affect smart grid development. The US’s sovereign credit rating was reduced by the Standard and Poor’s rating agency last year from ‘AAA’ to ‘AA+’, which will affect government loans from the World Bank and International Monetary Fund. These will demand high levels of interest until economic stability returns to improve the country’s credit rating. Long-term borrowing will therefore prove difficult, and a lack of investments for power infrastructure may lead to delays and even discontinuation.

It is hoped that successful smart grid pilot projects may encourage future investments, however. Various ventures have been initiated in segments such as cabling technologies, sensing and measurement technologies, and customer interface technologies, in order to aid the development of the smart grid. The U.S. was the first to showcase smart grid as a solution for energy issues, and other countries, including Brazil and India, are looking to the U.S. before initiating their own smart grid deployment.

Power system upgrading is a long-term process, and will require significant investment from private and government sectors. If such investment is achieved, GBI Research analysts expect the cumulative number of units installed in the U.S. smart meter market to grow at a CAGR of 18.6 percent, from 13.47 million units in 2010 to 74.38 million units in 2020.

Last year, research firm Zpryme predicted the value of China’s smart grid market will rise from $22.3 billion to $61.4 billion by 2015.

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