NewEnergyNews: TODAY’S STUDY: WHAT A SMART GRID WILL COST AND DO/

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    Founding Editor Herman K. Trabish

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    Wednesday, June 15, 2011

    TODAY’S STUDY: WHAT A SMART GRID WILL COST AND DO

    "We must all hang together or assuredly we shall all hang separately," Benjamin Franklin told his Continental Congress compatriots as they pondered the implications of signing the Declaration of Independence.

    Today, Franklin might observe that we must all hang transmission lines to carry New Energy together or assuredly we shall all be hung up by local regulatory red tape separately.

    As one of the great scientists of his time, Franklin would also assuredly note recent weather events linking Western Massachusetts, Tuscaloosa, Alabama, Joplin, Missouri, Eastern Arizona and Fukushima, Japan, and say meeting the challenge of climate change by building New Energy and Energy Efficiency is as compelling a revolutionary act in this historical moment as meeting the challenge of political oppression by signing the Declaration was in his time.

    He would no doubt understand that one of the keys to building New Energy and Energy Efficiency, as described in the report highlighted below, is hanging new high-capacity wires and building a new smart infrastructure to operate on them.

    In the U.S., China and Europe, wind has already developed long waiting lists for grid interconnections and installed capacity is increasingly being curtailed because there is no room on the existing transmission system. Solar power plants with enormous potential await construction for lack of transmission to connect them to electricity consumers.

    If the world is to stop the greenhouse gas spew linked by science Benjamin Franklin could readily understand to extreme weather events across this country and around the world, it must hang new wires. The wires will facilitate Energy Efficiency. The savings from efficiency will pay for New Energy infrastructure. With new wires, the New Energy can be used to power grids around the clock everywhere and charge battery-powered vehicles.

    With the vehicles on a clean grid, there would be no obstacle left to a 100% New Energy economy. The result, as calculated in the report below, would be enormous economic benefits. It would also free the world from dependence on fossil fuels controlled by bullies, rejuvenate domestic economies, secure local power sources and decouple the world’s precious and dwindling water supply from its energy production.

    In today’s world, energy and climate are international issues. The populist U.S. inclination to disrespect its global partners will no longer do. Franklin, who loved Paris, understood well how the new nation he was helping to birth would be stepping into a community of nations.

    The spirit of Benjamin Franklin’s admonition to his fellow representatives in the Continental Congress rings even more true for today’s representatives to an international community facing the challenge of global climate change. We can and must all hang together, he might say, or an unacceptable too many of us will fry or drown or starve or choke on filthy air separately.

    Heeding Franklin’s wisdom and building Energy Efficiency and New Energy into a smart transmission system that will pay for itself will avoid such dire consequences and leave plenty of time to go out and fly a kite.


    Estimating the costs and benefits of the Smart Grid; A Preliminary Estimate of the Investment Requirements and the Resultant Benefits of a Fully Functioning Smart Grid
    C. Gellings, et. Al., March 2011 (Electric Power Research Institute)

    Abstract

    The present electric power delivery infrastructure was not designed to meet the increased demands of a restructured electricity marketplace, the energy needs of a digital society, or the increased use and variability of renewable power production. As a result, there is a national imperative to upgrade the current power delivery system to the higher performance levels required to support continued economic growth and to improve productivity to compete internationally. To these ends, the Smart Grid integrates and enhances other necessary elements including traditional upgrades and new grid technologies with renewable generation, storage, increased consumer participation, sensors, communications and computational ability. According to the Energy Independence and Security Act of 2007, the Smart Grid will be designed to ensure high levels of security, quality, reliability, and availability of electric power; improve economic productivity and quality of life; and minimize environmental impact while maximizing safety. Characterized by a two-way flow of electricity and information between utilities and consumers, the Smart Grid will deliver real-time information and enable the near-instantaneous balance of supply (capacity) and demand at the device level.

    The primary goal of this report, which is a partial update to an earlier report (EPRI 1011001), is to initiate a stakeholder discussion regarding the investment needed to create a viable Smart Grid. To meet this goal, the report documents the methodology, key assumptions, and results of a preliminary quantitative estimate of the required investment. At first glance, it may appear the most obvious change from the 2004 report is the significant increase in projected costs associated with building the smart grid. In actuality, the increased costs are a reflection of a newer, more advanced vision for the smart grid. The concept of the base requirements for the smart grid is significantly more expansive today than it was seven years ago, and those changes are reflected in this report.

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    Executive Summary

    This report documents the methodology, key assumptions, and results of a quantitative evaluation of the investment needed (costs) for an envisioned Smart Grid, and it represents a partial update to an earlier EPRI report (EPRI TR-1011001). It also offers a preliminary estimate of benefits of implementing a Smart Grid. This report is a framework for discussing possible levels of investment to achieve a fully functioning Smart Grid. It is not a definitive analysis of all attributes or costs of enhancing the power delivery system.

    What is the Smart Grid?

    The Smart Grid as defined here is based upon the descriptions found in the Energy Independence and Security Act of 2007. The term “Smart Grid” refers to a modernization of the electricity delivery system so that it monitors, protects, and automatically optimizes the operation of its interconnected elements – from the central and distributed generator through the high-voltage transmission network and the distribution system, to industrial users and building automation systems, to energy storage installations, and to end-use consumers and their thermostats, electric vehicles, appliances, and other household devices.

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    Background

    The present electric power delivery infrastructure was not designed to meet the needs of a restructured electricity marketplace, the increasing demands of a digital society, or the increased use of renewable power production. In addition, investments in expansion and maintenance are constantly being challenged, and the existing infrastructure has become vulnerable to various security threats….As shown, it is primarily comprised of large central-station generation connected by a high voltage network or Grid to local electric distribution systems which, in turn, serve homes, business and industry. In today’s power system, electricity flows predominantly in one direction using mechanical controls.

    Figure 1-2 illustrates the elements which will be part of a fully functional Smart Grid. The Smart Grid still depends on the support of large central-station generation, but it includes a substantial number of installations of electric energy storage and of renewable energy generation facilities, both at the bulk power system level and distributed throughout. In addition, the Smart Grid has greatly enhanced sensory and control capability configured to accommodate these distributed resources as well as electric vehicles, direct consumer participation in energy management and efficient communicating appliances. This Smart Grid is hardened against cyber security while assuring long-term operations of an extremely complex system of millions of nodes.

    As a result, there is a national imperative to modernize and enhance the power delivery system. The Smart Grid is envisioned to provide the enhancements to ensure high levels of security, quality, reliability, and availability (SQRA) of electric power; to improve economic productivity and quality of life; and to minimize environmental impact while maximizing safety and sustainability. The Smart Grid will be characterized by pervasively collaborative distributed intelligence, including flexible wide band gap communication, dynamic sharing of all intelligent electronic devices and distributed command and control. Achieving this vision will require careful policy formulation, accelerated infrastructure investment, and greater commitment to public/private research, development, and demonstration (RD&D) to overcome barriers and vulnerabilities.

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    Previous Studies

    Previous EPRI studies have estimated both the costs and benefits of a Smart Grid. According to an earlier study, “The Power Delivery System of the Future,” the Smart Grid would require $165 billion in net investment (over and above investment for load growth and that needed to maintain reliability), and lead to a benefit-to-cost ratio of 4:1 (EPRI 1011001).

    The Smart Grid, combined with a portfolio of generation and end-use options, could reduce 2030 overall CO2 emissions from the electric sector by 58% relative to 2005 emissions (EPRI 1020389). A Smart Grid would be capable of providing a significant contribution to the national goals of energy and carbon savings. One EPRI report (EPRI 1016905) estimated the emissions reduction impact of a Smart Grid at 60 to 211 million metric tons of CO2 per year in 2030.

    Other EPRI studies have estimated the cost of power disturbances across all business sectors in the U.S. at between $104 billion and $164 billion a year as a result of outages and another $15 billion to $24 billion due to power quality (PQ) phenomena (EPRI 1006274). The cost of a massive blackout is estimated to be about $10 billion per event as described in EPRI’s “Final Report on the August 14, 2003 Blackout in the United States and Canada.”

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    Purpose and Scope

    The purpose of this study is to inform the public debate on the investment needed to create a fully functioning Smart Grid. For each key portion of the overall task, the project team selected methods based on the availability of credible information and the need to conduct a cost-effective and time-efficient study. The resulting estimates of costs remain highly uncertain and open to debate. This report is viewed as a starting point for discussion of possible levels of investment to bring the current power delivery system to the higher performance levels required for a Smart Grid.

    In addition to welcoming and encouraging comments on this report, EPRI invites the participation of energy companies, universities, government and regulatory agencies, technology companies, associations, public advocacy organizations, and other interested parties throughout the world in refining the vision for the Smart Grid. Only through collaborat ion can the resources and commitment be marshaled to achieve the vision.

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    Summary of Results

    Over and above the investment to meet electric load growth, Table 1-1 shows that the estimated net investment needed to realize the envisioned power delivery system (PDS) of the future is between $338 and $476 billion. The total value estimate range of between $1,294 and $2,028 billion; and when compared to the Future PDS cost estimate results in a benefit-to-cost ratio range of 2.8 to 6.0. Thus, based on the underlying assumptions, this comparison shows that the benefits of the envisioned Future PDS significantly outweigh the costs. At first glance, it may appear the most obvious change from the 2004 report (EPRI 1011001) is the significant increase in projected costs associated with building the smart grid. In actuality, the increased costs are a reflection of a newer, more advanced vision for the smart grid. The concept of the base requirements for the smart grid is significantly more expansive today than it was seven years ago, and those changes are reflected in this report. The project team has made every effort to capture a reasonable send-state of the Smart Grid in this report, rather than creating a snap shot that will change in another six or seven years.

    This indicates an investment level of between $17 and $24 billion per year will be required over the next 20 years. The costs cover a wide variety of enhancements to bring the power delivery system to the performance levels required for a Smart Grid. The costs include the infrastructure to integrate distributed energy resources (DER) and to achieve full customer connectivity, but exclude the cost of generation, the cost of transmission expansion to add renewables and to meet load growth, and a category of customer costs for smart-grid ready appliances and devices. Table 1-2 lists major components of the total cost. As highlighted in the body of the report, the wide range in these estimates reflects the uncertainty the industry currently faces in estimating these costs and the possible reductions which may or may not occur over time.

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    Smart Grid Costs

    Included in the estimates of the investment needed to realize the Smart Grid, there are estimated expenditures needed to meet load growth and to enable largescale renewable power production. As part of these expenditures, the components of the expanded power system will need to be compatible with the Smart Grid.

    Table 1-3 summarizes one attempt to portray the consumer implications of the EPRI estimate of Smart Grid costs. In this table, the Smart Grid costs are allocated to classes by energy (which are often what a regulatory body would mandate in the case of a regulated utility) and then calculated in several ways: (1) total Smart Grid cost divided by the number of customers for each class (a one-time payment proxy); (2) total cost per customer per year by class for 10 years for a 10-year amortization of the Smart Grid cost (in nominal, not present value, terms); and (3) the monthly equivalent of the annual amortized cost. Finally, for the last value, the EPRI team calculated the corresponding percentage increase in the average customer monthly bill. In practice, more complex cost allocation methods might well be applied that would shift cost among the class. This calculation assumes that the Smart Grid costs are equalized over customers across the country. However, the Smart Grid cost per costumer is likely to vary considerably, and therefore, the total estimated Smart Grid cost may be more concentrated in some areas, which would raise their cost per customer in those areas and reduce it elsewhere. These costs are modest when compared to the benefits the Smart Grid will yield. However, the challenge for all of those in the electricity sector will be communicating that the Smart Grid is indeed a good investment.

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    Smart Grid Benefits

    The benefits of the Smart Grid are numerous and stem from a variety of functional elements which include cost reduction, enhanced reliability, improved power quality, increased national productivity and enhanced electricity service, among others…In general terms, the Smart Grid will assure that consumers are provided with reliable, high quality digital-grade power, increased electricity-related services and an improved environment. The Smart Grid will allow the benefits resulting from the rapid growth of renewable power generation and storage as well as the increased use of electric vehicles to become available to consumers. Without the development of the Smart Grid, the full value of a lot of individual technologies like Electric Vehicles, Electric Energy Storage, Demand Response, Distributed Resources, and large central station Renewables such as wind and solar will not be fully realized.

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    …[T]he benefits of the Smart Grid include:

    􀂃 Allows Direct Participation by Consumers. The smart grid consumer is informed, modifying the way they use and purchase electricity. They have choices, incentives, and disincentives.

    􀂃 Accommodates all Generation and Storage Options. The Smart Grid accommodates all generation and storage options.

    􀂃 Enables New Products, Services, and Markets. The Smart Grid enables a market system that provides cost-benefit tradeoffs to consumers by creating opportunities to bid for competing services.

    􀂃 Provides Power Quality for the Digital Economy. The Smart Grid provides reliable power that is relatively interruption-free.

    􀂃 Optimizes Asset Utilization and Operational Efficiently. The Smart Grid optimizes assets and operates efficiently.

    􀂃 Anticipates and Responds to System Disturbances (Self-heal). The Smart Grid independently identifies and reacts to system disturbances and performs mitigation efforts to correct them.

    􀂃 Operates Resiliently against Attack and Natural Disaster. The Smart Grid resists attacks on both the physical infrastructure (substations, poles, transformers, etc.) and the cyber-structure (markets, systems, software, communications).

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    Cyber Security

    Concern has arisen recently regarding the security of an information technology regime which would be integral with tomorrow’s grid. Electric utilities have been incorporating cyber security features into their operations since the early 2000s.

    In recent years as the Smart Grid became increasingly popular, cyber security concerns have increased significantly. While there have to date been few reliable reports of cyber attacks on power systems, there is a great deal of concern that as the grid becomes smarter and more interactive, disruption of the reliability of U.S. electricity supply will become easier.

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    Cyber security is an essential element of the Smart Grid. It involves the protection needed to ensure the confidentiality and integrity of the digital overlay which is part of the Smart Grid.

    The project team estimates for proper cyber security protection are included in the preceding estimates. An investment of approximately $3,729 million will be needed for the Smart Grid in addition to a related investment in information technology of approximately $32,258 million.

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    Introduction

    Smart Grid Vision

    This section contains a definition of Smart Grid, an outline of benefits, Smart Grid characteristics, and challenges as contained in EPRI’s report to the National Institute of Science and Technology (NIST). The vision is presented as it appeared in EPRI’s report
    to NIST (EPRI, 2009).

    What is the Smart Grid?

    The Smart Grid definition is based upon the description found in the Energy Independence and Security Act of 2007. The term “Smart Grid” refers to a modernization of the electricity delivery system so it monitors, protects and automatically optimizes the operation of its interconnected elements – from the central and distributed generator through the high-voltage network and distribution system, to industrial users and building automation systems, to energy storage installations and to end-use consumers including their thermostats, electric vehicles, appliances and other household devices.

    click to enlarge

    The Smart Grid will be characterized by a two-way flow of electricity and information to create an automated, widely distributed energy delivery network.

    It incorporates into the grid the benefits of distributed computing and communications to deliver real-time information and to enable the near instantaneous balance of supply and demand at the device level.

    Smart Grid Characteristics: Drivers and Opportunities

    The definition of the Smart Grid builds on the work done in EPRI’s IntelliGrid Program (intelligrid.epri.com), in the Modern Grid Initiative (MGI) (NETL, 2007), and in the GridWise Architectural Council (GWAC) (gridwise.org). These considerable efforts have developed and articulated the vision statements, architectural principles, barriers, benefits, technologies and applications, policies, and the frameworks that help define the Smart Grid.

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    Smart Grid Benefits

    Smart Grid benefits can be categorized into 5 types:

    􀂃 Power reliability and power quality. The Smart Grid provides a reliable power supply with fewer and briefer outages, “cleaner” power, and self- healing power systems, through the use of digital information, automated control, and autonomous systems.

    􀂃 Safety and cyber security benefits. The Smart Grid continuously monitors itself to detect unsafe or insecure situations that could detract from its high reliability and safe operation. Higher cyber security is built in to all systems and operations including physical plant monitoring, cyber security, and privacy protection of all users and customers.

    􀂃 Energy efficiency benefits. The Smart Grid is more efficient, providing reduced total energy use, reduced peak demand, reduced energy losses, and the ability to induce end-users to reduce electricity use instead of relying upon new generation.

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    􀂃 Environmental and conservation benefits. The Smart Grid facilitates an improved environment. It helps reduce greenhouse gases (GHG) and other pollutants by reducing generation from inefficient energy sources, supports renewable energy sources, and enables the replacement of gasoline-powered vehicles with plug-in electric vehicles.

    􀂃 Direct financial benefits. The Smart Grid offers direct economic benefits. Operations costs are reduced or avoided. Customers have pricing choices and access to energy information. Entrepreneurs accelerate technology introduction into the generation, distribution, storage, and coordination of energy.

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