Smart grid can generate $110 million in annual benefits for typical utility, study finds


William Moroney,
President &CEO
Washington, DC, U.S.A. — (METERING.COM) — November 6, 2009 – A typical electric utility can expect smart grid technology to generate at least $110 million per year through a wide range of benefits, from increased rate of return to lowered carbon emission to new jobs creation, according to a new analysis from the Utilities Telecom Council (UTC).

The study, “Smart Grid Economics:  Making the Business Case for Smart Network Technology,” prepared for the UTC by consulting firm The Shpigler Group, calculated the economic impacts of a comprehensive smart grid deployment for a typical utility that installs one million electric meters.

Through the creation of a sophisticated financial model, the analysis showed that for a comprehensive smart grid deployment involving a full set of programs in three key areas, i.e. advanced metering and outage management, distribution automation, and distributed energy resources, the typical electric utility may expect to require capital investment of $828 million over a three”year period.

The Internal Rate of Return for the program is calculated at 13.8 percent without accounting for the value customers may place on the increased reliability of the electric grid; when factoring in these customer benefits, IRR exceeds 35 percent. The system benefits calculated by the end of a ten”year forecast period are likely to exceed $110 million per year.

In addition the system reliability is increased from 99.48 percent to 99.75 percent, reducing outage minutes by 16.8 million customer minute, nearly 300,000 tons of carbon emissions are eliminated on an annual basis, and over 9,000 direct and indirect job-years are created.

“This study further underscores that the billions of dollars in the smart grid stimulus grant program announced last week by President Obama will spur much-needed new jobs while reducing the environmental impacts of non-renewable energy use,” William Moroney, UTC president and CEO said.  “But the analysis also provides hard evidence that deploying smart grid technology makes good business sense for the nation’s electricity providers and will provide real, long-term benefits to the American consumer.”

Utilities have been looking at opportunities within the smart grid arena for some time, says the report. With the confluence of events and trends occurring at this time – including aging workforce and infrastructure, financial constraints, environmental concerns and rising fuel costs – an increasing number of utilities are poised to begin serious investigation of the opportunity at hand. However, in order to pursue smart grid investment, each of the key stakeholders involved – consumers, the electric utility, and society at large – must see that the effort offers value.

“While every utility deployment scenario is different, we believe that the set of results highlighted (throughout this report) offer a view into the potential business case of a smart grid effort,” says the UTC in the report. “Our financial modeling exercise shows that positive values can be found in different environments, assuming that the utility bases its system approach on its own requirements.”