Utilities take wait-and-see approach to smart grid investment, survey finds
Executives cite uncertainty over federal energy policy and worry about their ability to recover investment costs.
Despite unprecedented spending to spur investment in smart grid energy technologies -- $3.4 billion in the 2009 American Recovery and Reinvestment Act -- utilities have not embraced the effort.
A recent survey by Oracle found only one in five utilities in North America is moving forward with systemwide smart grid deployment. The company supports technology platforms that enable smart grid components to work effectively and has a business interest in understanding corporate attitudes. It conducted interviews with 150 C-level executives in January, 55 percent in the United States and 45 percent in Canada.
The survey showed executives expect wide-scale adoption of smart grid components during the next decade and they believe consumers will benefit. Yet most -- about 80 percent -- are not actually moving forward in deploying such technologies across their jurisdictions.
The most significant concerns centered on costs, said Brad Williams, vice president for product strategy at Oracle Utilities. Many smart grid technologies have shorter life cycles than older technologies, he noted. Because electricity rate increases have to be approved by regulators, companies lack financial flexibility for recovering those costs.
In addition, executives are worried about the cost of implementing environmental mandates contained in cap-and-trade legislation under consideration in Congress. At the same time, many states are requiring utilities to make renewable sources, such as wind and solar power, a larger percentage of their energy portfolios, which also creates financial uncertainty.
Fears of consumer backlash are another factor as well. In November 2009, consumers in Bakersfield, Calif., sued Pacific Gas and Electric, claiming the utility overcharged them after installing smart meters. The company maintained that the installation of new meters coincided with a previously approved rate hike as well as a heat wave, which increased demand for electricity and caused a spike in consumer bills. PG&E's experience spooked utilities elsewhere, Williams said.
The development and adoption of clear technology standards and protocols for smart grid devices and systems will help, he added.
The National Institute of Standards and Technology is leading that effort. The institute recently issued a draft of cybersecurity strategy and requirements on its smart grid standards project.