Electric utilities ‘stay the course’ with projected spending plans for smart grid


Charles Newton,
CEO, Newton-Evans
Ellicott City, MD, U.S.A. — (METERING.COM) — July 13, 2009 – In spite of the weakened economic conditions globally, electric power utilities around the world are continuing to make significant financial commitments in smart grid building blocks and related automation programs.

In a new survey of 118 electric power grid officials from 36 countries by Newton-Evans it was found that the majority are poised to continue many of their long term capital investment programs as had been originally planned back in January of 2008. However, in several instances, the projects have been deferred from their initial planned start-up dates.

A significant majority of the respondents indicated that capital spending for control systems, substation automation, smart grid related programs, and advanced metering rollouts are largely on track albeit with some pushback in timing. However, several planned investments for transmission and distribution grid infrastructure components have been deferred for this year, but are expected to rebound perhaps as early as the fourth quarter of 2010.

On the upside were planned increases for most smart grid building blocks. Projects related to advanced metering infrastructure (AMI) initiatives and for substation automation and new or upgraded grid control and monitoring systems and protection and control equipment appear to be “pre-approved” at this time for 2010. Some utilities will benefit for some of these smart grid related projects under government stimulus funding provisions, while others will proceed using their own sources of capital.

The total amount of capital spending on equipment for transmission and distribution of electricity by electric power utilities around the world is currently estimated to be in the range of $85 billion to $100 billion. The 2009 outlook overall is trending toward the lower end of that range. If industrial demand for electricity picks up even moderately by mid-2010, the outlay for capex investment will likely see a solid increase by late-2010 and such an increase in demand would result in additional billions of dollars for smart grid and infrastructure investments into 2011 and beyond.  

According to the research firm’s lead analyst and CEO, Charles Newton, “In its latest July release, the U.S. Department of Energy’s EIA unit foresees only a 0.8 percent rise in electricity demand in the U.S. for 2010,  following a likely 2 percent decrease in demand anticipated for 2009. When coupled with the International Energy Agency’s forecast of a 3.5 percent drop in global demand for electricity in 2009, this information supports the more cautious investment outlook we are seeing here and abroad. Two regional exceptions include some Asia-Pacific countries and substantial portions of the Middle East. These regions continue to grow their electric power infrastructure more rapidly than other regions.”

There are five key reasons for the continued relatively strong investment in transmission and distribution of electricity. These include regulatory pressure and mandates for service reliability improvements; smart grid initiatives aimed at modernizing the power grid infrastructure and enabling energy efficiencies; obsolescence of existing grid infrastructure equipment; long-term investment view being necessary to accommodate future growth in electricity consumption; and the development of government funded stimulus programs such as the U.S. ARRA provisions for funding some electric power investments in smart grid technology.  

Frequently, utility capital projects are complex and multi-year in nature, so project deferrals are often out of the question, even when the overall economic outlook is poor.