Governments fund pilots to test smart grid potential

China reportedly will put smart grids in its new five-year plan, pumping a world-leading $7.3 billion of stimulus funding into the technology in 2010.

The US follows with $7.09 billion, Japan ($849 million), South Korea ($824 million), Spain ($807 million), Germany ($397 million), Australia ($360 million, UK ($290 million), France ($265 million), and Brazil ($204 million), according to Zpryme Research and Consulting.

While much of the technology is already in existence, it is being put to use in new ways. For example Denmark, a leader in wind power, has a vehicle-to-grid project on Bornholm Island to store extra energy generated when it is windy in the batteries of parked electric cars, and then feed that electricity back into the grid on calm days. The island also hopes to become a showcase for the Eco Grid EU project.

In Italy Enel Spa’s Telegestore project claims the largest installations of smart meters, two way devices between the home or business and the utility company, to date, with some 32 million customers remotely managed.

Pilot projects demonstrate feasibility

Pilot projects are in the works on Korea’s Jeju Island in an extensive, Won 64.5 billion, government-industry alliance, including a tentative deal with the US state of Illinois to jointly develop and test technologies. The project is expected to be completed by 2013. According to the Korea Times, South Korea will spend about Won 27.5 trillion won ($24 billion) by 2030 building smart electric grids, with Won 25.7 trillion of that amount coming from the private sector and the rest from government.

Meanwhile, New Mexico has attracted $30 million in funding over four years from Japan’s New Energy and Industrial Technology Development Organization (NEDO), along with participation of 19 Japanese companies, the State of New Mexico government, Los Alamos National Laboratory, and the US Department of Energy’s Sandia National Laboratories. The money will go toward building microgrid and smart house demonstration projects.

Kazuyuki Takada, a representative in NEDO’s office in Washington, DC, said the microgrid in Albuquerque and the smart house in Los Alamos will be operational in 2012. Standardisation efforts now underway by various standards groups, in addition to regulatory issues, need to be solved to make the smart grid real. “That is why a variety of countries or areas are doing these pilots,” he said. “I hope people in Europe and elsewhere will learn from our demonstration projects.”

Some early hiccups

Like any new technology deployment, there already are hiccups. Homeowners in northern California and Texas complained of overcharging with new smart meters.

And in perhaps the biggest black eye in the US to date, the state of Maryland, which had been awarded part of the $3.4 billion in US stimulus funds directed toward smart grids, backtracked. Baltimore Gas and Electric (BG&E) was among the biggest funding winners, getting $200 million to deploy a smart meter network and advanced customer control system for 1.1 million residential customers, to enable dynamic electricity pricing. However, Maryland’s regulator, the Public Service Commission turned down BG&E’s smart grid proposal because of up-front costs to consumers.

The problem was, “Consumers would have had to eat the entire cost of implementing the smart meters”, said Larry Fisher, research director of market analysts NextGen. “But a lot of the benefit is to the utility, which can control its costs.”

Clint Wheelock, managing director of market research company, Pike Research agreed saying, “Maryland’s case is one of the uglier episodes in the industry.” He said that in the case of northern California, there were allegations the meters were not installed correctly, or were being read incorrectly. And in Texas, smart meter installation coincided with an electric rate increase, causing confusion.

Big market potential

A recent report from Pike Research estimates cumulative global spending on smart grid technologies between 2008 and 2015 will hit $200 billion. The report says installed electrical grids are based on decades-old technology and have suffered from low levels of investment for many years. But that is changing as governments and industry leaders come together with newfound urgency to drive an overhaul of grid infrastructure.

“Smart meters are currently the highest-profile component of the smart grid, but they are really just the tip of the iceberg,” said Wheelock. “Our analysis shows that utilities will find the best return on investment, and therefore will devote the majority of their capital budgets, to grid infrastructure projects, including transmission upgrades, substation automation, and distribution automation.”

Pike forecasts that these grid automation initiatives will capture 84 per cent of global smart grid investment between now and 2015, compared to 14 per cent for advanced metering infrastructure (AMI) and 2 per cent for electric vehicle management systems. The report also predicted that smart grids will peak in 2013 after several years of a strong push by governments, and will thereafter be a smaller, but still very substantial, market.

“Most of the electric utility infrastructure deployed in the industrialized world was built between 60 and 80 years ago,” said Fisher, whose research report pegged the smart grid market as approaching $46 billion by 2015. Most of the investment, around $41 billion, be in transmission and distribution, while $4.8 billion will be spent on smart meters.

Fisher said there is a great need for storage within a grid, including new types of batteries, flywheels, pumped hydroelectric, and other technologies. “A lot of money has gone into battery development, most of it related to hybrid and electric vehicles,” he said, adding that larger versions of those for utility-level energy storage are now being studied.

Right now, most of the utility and technology companies involved in smart grids are large. “The big question is how much smart grids will serve as an application for an energy technology platform,” Wheelock said. That might open the door for small companies and innovative startups to supply parts and services to the grid.