Estimating costs and benefits of smart grid demonstrations


Palo Alto, CA, U.S.A. — (METERING.COM) — March 1, 2010 – A report setting out a methodological approach to estimate the cost and benefits of smart grid based on data from smart grid field demonstration projects has been published by the Electric Power Research Institute (EPRI).

Developed primarily for EPRI’s smart grid demonstration projects the framework provides a way of identifying and defining the various types of benefits in a standardized way.

The report identifies four fundamental categories of benefits. These are economic, reliability and power quality, environmental, and security and safety.

These benefits accrue to three basic groups of beneficiaries – utilities, customers and society at large, so that a benefits matrix can be set up identifying the benefits that accrue to each of these, with the third dimension being the precision of each of these estimates.

A ten-step approach for a cost-benefit analysis is suggested, as follows:

Characterize the project:

  1. Project elements – review the project’s technologies/elements and goals
  2. Functions – identify, from a standardized set, the smart grid functions which each project element could provide and what will be demonstrated
  3. Characteristics – assess the smart grid principal characteristics that are reflected in the project

    Estimate benefits:

  4. Benefits – map each function onto a standardized set of benefit categories
  5. Baseline – define the project baseline and how it is to be estimated
  6. Data – identify and obtain the data needed to estimate the baseline and to calculate each type of benefit
  7. Quantified benefits – calculate quantitative estimates of the benefits
  8. Monetized benefits – use economic conversion factors to estimate the monetary value of the benefits

    Compare costs to benefits:

  9. Costs – estimate the relevant costs
  10. Cost-benefit – compare costs to benefits.

Depending on the type of smart grid application, a project would have different types of benefits. Not all projects have all types of benefits. Furthermore, consistent with the idea that the framework provides flexibility, a project might suggest other types of benefits which it might provide. In these instances, a project should explain these benefits, how they differ from those listed in this report, and the data needed to estimate these benefits.

An expected next step is the development of a computational tool(s) that the Department of Energy (DOE) and all smart grid stakeholders could use to determine the costs and benefits of smart grid deployments.