Support from Democratic lawmakers in the U.S. could mean the smart grid sector will finally have the traction it needs for widespread adoption amongst global utilities, industry leaders said today.
Democrats from the U.S. House of Representatives yesterday unveiled an $825 billion plan to stimulate the American economy, including $54 billion for renewable energy, energy efficiency and smart grid projects.
Smart grid projects pulled one of the biggest chunks of the cash, with $11 billion being proposed. The numbers are far from final as the money must be approved by the U.S. Senate and President-elect Barack Obama, but it indicates that tides could be turning for one of the lesser-known sectors of cleantech.
“The new administration hasn’t taken office, and already we see a sign that momentum is building for utilities and other stakeholders to adopt the smart grid,” Michael Jung, policy director of Redwood City, Calif.-based Silver Spring Networks, told the Cleantech Group. “Utility regulators are very cautious, so for them to see this leadership coming from the policy front, this is a vote of confide and will encourage them to see it’s not just R&D, it’s the real thing.”
The U.S. electric grid loses roughly 7 percent of energy production through faulty transmission lines, theft and mechanical problems. But utilities don’t have a way to track where energy is lost, when energy is consumed or where outages occur. Lost electricity accounts for about $20 billion in unrealized revenue a year, drives up the cost to produce energy and causes additional power plants to be needed.
Although much attention in cleantech has been focused on new energy generation or ways to lower consumption, smart grid technology looks to improve the system of distribution.
However, that has started to change. Smart grid technology raised an all-time high of $202 million in venture capital in the third quarter of 2008, led by a $120 million round by by GridPoint (see Masdar makes another move in cleantech). The sector averaged less than $30 million a quarter in the previous 10 quarters (see Cleantech investment breaks all-time record).
The U.S. leads the world in utilities adopting smart grid technology. There are about 100 million electric meters in the U.S., and 40 percent to 60 percent are in communities that say they are interested in deploying smart grid technology.
Jung said the U.S. government’s investment into the sector could prompt other countries to adopt the technology, much of which is developed and manufactured by American companies.
“If we figure out how to scale this correctly, there’s no reason we shouldn’t be the leader in the global marketplace,” he said.
Smart grid differs from other cleantech sectors because its adoption must be widespread to have any impact, requiring the industry to agree on platforms. Silver Spring and Fat Spaniel Technologies are among the companies that have promoted an IP-based system on which companies can build platforms and applications to manage the power grid.
“It has to be a ubiquitous kind of thing,” Jung said. “If the smart grid technology only reaches 40 percent of the grid, it wouldn’t provide enough of a benefit, whereas solar and wind can come on in different increments.”
Once the standard system is established, applications of smart grid technology can be added over time, such as metering or distribution optimization, Jung said.
Money from the stimulus package would go to utilities to spend in the sector. Eric Dresselhuys, a vice president at Silver Spring, said the stimulus spending on smart grid technology would help already-supportive utilities such as Pacific Gas & Electric, Florida Power & Light, Oklahoma Gas & Electric and American Electric Power to accelerate their smart grid projects in the works, while the money could draw other utilities to make their first foray into the smart grid.
“One things that got smart grid in the stimulus package is that these are shovel-ready projects. The technology is available and people are ready to go,” he said. “There’s so much momentum around smart grid right now that I hope the stimulus spending happens in a way to give utilities a very quick turnaround on whatever the process is.”
The House version of the proposal calls for the money to be distributed as grants to utilities, but Jung warned such a process could slow the spending by about six months. He encouraged lawmakers to come up with standard requirements so that utilities could start projects and file for reimbursement.
The proposed stimulus package also sets aside $6.7 billion to improve the energy efficiency of federal buildings, $4 billion for research in renewable energy and advanced batteries, $6.2 billion for improving energy efficiency of homes through weatherization, $6.9 billion in renewable energy block grants, and $8 billion in renewable energy loans. Renewable energy providers would be able to choose whether to receive tax credits or grants under the proposal, which could expand the options available to developers to finance projects.
The package also contains $9.5 billion for clean water and $300 million in rebates for consumers buying energy efficient appliances.
Ian Tharp, senior analyst of cleantech and renewable energy with Toronto-based Dundee Capital Markets, noted in a report released today that Canadian-listed geothermal companies with projects in the U.S. are likely to benefit from the stimulus, including U.S. Geothermal, Nevada Geo, Western GeoPower and Sierra Geothermal, because of the proposed extension of the eligibility period for receipt of the renewable energy Production Tax Credit.
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