President Barack Obama announced today the largest single energy grid modernization investment in U.S. history, likened to the thrust of the information superhighway and the NASA Apollo Project, while speaking at Florida Power and Light’s recently opened DeSoto Next Generation Solar Energy Center in Arcadia, FL. This smart grid funding will support a diverse array of technologies in order to build a more intelligent, efficient and reliable electricity delivery system across the country. Ultimately, this initiative will enhance energy-saving options for consumers, increase efficiency, and enable the growth of renewable energy sources such as biomass, wind, geothermal and solar, while opening the door for the U.S. to meet a possible renewable energy portfolio standard, which may require as much as 20 percent of energy consumption to be derived from renewable sources by 2020.

The $3.4 billion in smart grid-related grant awards are part of the American Reinvestment and Recovery Act, and will be matched by industry funding of $4.7 billion; thus, collectively generating a total public-private investment of over $8 billion. Applicants including one-hundred private companies, utilities, manufacturers, cities and other partners expect that the projects will create tens of thousands of green jobs, and consumers in 49 states will benefit from these investments in the form of energy-savings and energy security. Many awardees have not historically been advocates of clean energy and grid modernization and have slipped into the status quo of fossil fuels; however, the stimulus offered the opportunity to change and contribute to the Administration’s hope of building an innovative clean energy infrastructure to replace former manufacturing which has been outsourced.

Overall, the major funding categories include the following: Empowering Consumers to Save Energy and Cut Utility Bills- $1 billion, Making Electricity Distribution and Transmission More Efficient- $400 million, Integrating and Crosscutting Across Different “Smart” Components of a Smart Grid- $2 billion, and Building a Smart Grid Manufacturing Industry- $25 million. The complete review of the grant awards are listed by category and state on the Department of Energy (DOE) website, which also depicts the awardees geographically on a national map. The second largest Arizona electricity provider, Salt River Project (SRP), headquartered in the Phoenix, AZ area, was awarded nearly $57 million in Recovery Act smart grid funding, and will be fully matching this stimulus allotment in order to install 540,000 smart meters over the next few years so that customers can monitor their energy usage in real-time, all of which will increase emphasis on green building and Leadership in Energy and Environmental Design (LEED) certification. 

A study by the Electric Power Research Institute estimates that the implementation of smart grid technologies could reduce electricity usage by more than 4 percent by 2030. This would be equivalent to a savings of $20.4 billion for businesses and consumers around the country. Other smart grid elements such as information technology enhancements, sensors along transmission lines and at power sources, and advanced secure underground superconductor cable systems will allow the nation’s outdated and insecure power grid system to accommodate and adjust for high loads of intermittent renewable energy such as wind and solar power.

Another specific goal of smart meter stimulus funding is to reduce peak electricity demand by 1400 megawatts, which would lessen the need for larger power plants and could save utilities more than $1.5 billion in capital costs and help lower electric bills, according to DOE statistics. Peak-time electricity is the most expensive energy, and it requires the incorporation of standby power generation plants, where the economic and environmental savings, especially in the case of fossil fuels, even for a minor reduction are highly significant. Moreover, in some cases, several of the power plants dedicated for meeting peak energy demand actually only operate for a few hundred hours a year, which boosts the premium on power generated by a factor of 5-10 over the average price per kilowatt-hour paid by the majority of consumers.

President Obama’s smart grid funding allocation announcement came as legislative hearings got underway today in the Senate on the Clean Energy Jobs and American Power Act, also referred to as the latest cap-and-trade bill, and the full schedule of speakers and subsequent webcasts are available at this Congressional site. The bill is designed to reduce nationwide greenhouse gas emissions (GHG) by 20 percent by 2020 and 83 percent by 2050 through a carbon emissions credit exchange system where companies under their assigned cap could sell the remaining balance on the market. Approximately one-third of the credits would be offered to the electric utility sector through 2026 in an effort to lessen negative financial effects. If the Clean Energy Jobs Act is signed into law, the smart grid stimulus funding will enable an increasing transition from GHG-intensive coal and natural gas plants to clean, renewable energy sources by modernizing the electric grid for enhanced power transmission control up to continental distances. Ultimately, the bill would not be implemented until 2011 when the economy is forecasted by the Obama Administration to have fully recovered so that the increased energy costs will be less burdensome.

However, on October 23, the EPA issued an economic report on this Senate climate change legislation, stating that the legislation’s cost for consumers is slightly less than the non-partisan Congressional Budget Office estimate for the related ACES House legislation passed in late June. The EPA forecasts that the Senate legislation would cost the average household 22 to 30 cents per day, or $80 to $111 annually. The full EPA study is available for review at this reference site. One must consider the cost-benefit analysis of this discussion, since the bill is expected to significantly improve the job market and reduce the trade deficit over the next decade. In terms of public opinion, 60 percent of Americans support a cap-and-trade proposal to reduce pollution, while only thirty-seven percent oppose a plan, according to a recent CNN/Opinion Research Corp. survey. Thus, energy reform will likely harbor more widespread support than health care reform, which delayed the consideration of this legislation much longer than expected. 

Smart grid stimulus funding may also help make cap-and-trade a reality.
 

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