Smart grid funding gap estimated at $5-10 billion pa


Paris, France — (METERING.COM) — July 26, 2010 – The public smart grid funding gap is estimated at between $5.07 billion to $10.67 billion per year globally, according to the International Energy Agency (IEA) in its latest review of expenditure on clean energy research, development and demonstration.

Current public RD&D investments on smart grids are estimated at $530 million. However, the annual investment needed is between $5.6 billion and $11.2 billion in order to meet the 2050 climate goal of a 50 percent reduction in energy-related CO2 emissions by 2050 (from 2005 levels).

The review (“Global Gaps in Clean Energy RD&D. Update and Recommendations for International Collaboration”) notes, however, that the smart grid is a dynamic research area and that several countries are increasing their spending levels. Currently spending and investment of smart grid RD&D is led by three countries, Japan, Italy and the United States, but other countries making significant investments include Germany, Korea and Australia.

The funding gap in the latest estimate is very similar to that estimated by the IEA in its initial review published in December 2009 (“Global Gaps in Clean Energy Research, Development, and Demonstration”). At that time the current annual spending was estimated at $420 million and the required spending between $5.56 billion and $11.1 billion.

The review notes that the private sector, including transmission and distribution system operators, electricity retailers, equipment suppliers, information technology companies, alternative service providers and aggregators, is known to be investing significantly in smart grid RD&D. However, while more information on amounts of private RD&D investment could reduce the size of the gap, no data are available on regional corporate investment.

The review comments that increased spending on smart grids-related technologies, coupled with its interdisciplinary nature, create a need for a common framework to define smart grids RD&D priority areas, technologies and opportunities for collaboration. The IEA, which has ten implementing agreements performing RD&D related to some aspect of smart grids, including demand side management, electricity networks, energy storage, high temperature superconductors, hybrid and electric vehicles and renewable integration, will coordinate these and other relevant work through its forthcoming smart grid technology roadmap.

In its December 2009 report, the IEA identified smart grid RD&D priorities as including:

  • Component and system integration methodologies to aid in the decrease of time for system design
  • Development of system operation and management and control methodologies
  • Development of enabling technologies (e.g., super conducting devices, storage technology, power conversion technology, communication technology)
  • End use interaction and communication
  • System security
  • System demonstration projects.

The IEA’s 2010 review estimates that the total annual clean energy RD&D expenditure required to meet the 2050 goal – in areas in addition to smart grids including advanced vehicles, bioenergy, carbon capture and storage, energy efficiency, high efficiency coal, nuclear fission and solar and wind energy – at between $50 billion to $100 billion. The actual annual expenditure is $10 billion.