Houston, 24 September 2009 

The hype surrounding the intelligent utility is getting heaped onto consumers and regulators. But the real question is whether the technology will bear fruit or whether it will result in broken promises. 

Grid modernization has long been the goal of utility techies. Such pursuits, though, will vary and can range from installing software so that system operators can detect outages before they would spread to beefing up the meters that reach directly into homes where they can signal consumers to curb usage. The early readings on most smart grid projects is that they have the ability to bring substantial benefits but at prohibitive costs.

Consider Xcel Energy's SmartGridCity in Boulder, Colo.: The project is expected to cost $100 million, $20 million of which Xcel will put up -- a figure that includes people, software and equipment. The utility now has roughly 10,000 customers participating in the project and it eventually hopes to have 25,000.

"When you look at the first proof points in Boulder, you are starting to see increased reliability as a result of increased transparency into the distribution grid," says Ray Gogel, who is president of the CURRENT Group that developed the software used for SmartGridCity and who was with Xcel when it started digitizing its network. "We are now seeing radical change in the reliability of the grid in Boulder."

According to Gogel, no customer complaints have been registered this year with respect to low-voltage lighting issues. Two years ago, by comparison, there were at least 50. That's because the software can analyze the system to determine if transformers are overloaded and if so, it can redirect the electricity flow to avert brownouts. At the same time, high-speed fiber optics will give Xcel the ability to provide more usage information to its customers so that they can curtail energy consumption.

The drive to install the nation's first city-wide advanced grid is based on the assumption that the demand for energy is expected to rise by at least 30 percent over the next 25 years -- all compounded by impending carbon constraints. Other cities are hosting similar projects and include Austin, Texas, Cincinnati, Ohio and Morgantown, W.V.

Allegheny Energy and Augusta Systems are now involved in such a pilot project in Morgantown that purports to minimize power outages and engage consumers. The study, which has been underway for 18 months, has another 12 months to go before the two would officially go live. The main challenge now is the integration of the various components to make it all happen.

"The early results are proving beneficial," says Pat Esposito, chairman of Morgantown-based Augusta. "But there are always bumps in the road."

Paying Off

Making such complex projects work is not as easy as flipping a light switch. Integration is one hurdle. Educating consumers and proving cost effectiveness is another.

By most accounts, enhancing the "middle mile" between the generation source and the home is adding value by increasing reliability and avoiding power outages. But skeptics are plentiful with respect to the "last mile" that extends from the meter into the home. While the technologies to allow two-way communications work, the verdict is still out on whether consumers will engage with their utilities to save energy. The economic case for buying expensive smart meters is therefore more difficult to make.

"In the last mile, there is some increased efficiency," says CURRENT Group's Gogel. "But how much more and at what cost?"

While installing the technologies will be pricey, over time the thinking is that they will pay off. A Federal Energy Regulatory Commission-financed study reports that a moderate amount of demand response could now save about $7.5 billion annually.

For its part, Duke Energy says that the $1 billion it will spend over five years installing 700,000 electric meters and 450,000 gas meters will be worth the price. It says that while it has applied for federal stimulus money, it will also recover those costs by passing them along to customers who, in turn, will have more options and more services. As such, they will be in a better position to reduce their bills.

Already, it has implemented 50,000 smart electric meters and 40,000 smart gas meters in Ohio. In December, it will accelerate this roll out and extend its offerings into Indiana. According to Todd Arnold, senior vice president for Duke's smart grid program, the tests have gone well and customers have had a "positive experience."

"The major learning overall has been connecting the technology and making it work," says Arnold, who is using software designed by Convergys. In the end, "We believe smart grid technologies will help us reduce costs, maximize energy efficiency, and empower our customers to make smart decisions about controlling their energy usage."

Indeed, that's the guiding principle underscoring the intelligent utility. It's generally a two-pronged approach that involves using software that can stabilize the flow of electrons and advanced meters that communicate with homeowners and businesses. If customers use less electricity during peak periods, utilities can avoid buying expensive power on spot markets and customers can save on their energy bills.

"The federal stimulus has brought a lot of a positive attention to the smart grid," says Patrick Esposito II, president of Augusta Systems "People do understand the value."

It's all part of the Obama administration's vision for a next-generation economy built on green technologies. But if this concept is to advance and to attract more investment, the existing "smart" projects must bring undisputed benefits.

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