It is understandable why some utilities might be hesitant to embrace smart grid technology. It’s expensive (Repower America says implementation will cost upwards of $400 billion) and at the same time will reduce their ability to sell their core product (energy).

Getting the utilities and regulatory agencies on board requires ample amounts of carrots (financial incentives) and sticks (limiting carbon emissions), according to energy efficiency experts Portland Energy Conservation Inc (PECI).

PECI’s new report “Wiring the Smart Grid for Energy Efficiency goes into deeply depressing detail about the many formidable challenges to implementing the smart grid. Among the toughest to tackle are that buildings are ill-equipped to participate in demand response systems, and the near total lack of interoperability today between grid equipment and building energy management tools. There’s also a lack of university and professional training programs to fill the gaping hole in HVAC engineers who can maximize energy efficiency programs.

But all is not lost, because the potential energy savings will motivate building owners to embrace smart grid technologies. PECI cites a DOE study which says that up to 20 percent of HVAC energy is wasted because of inefficiency, which should be enough to get many building operators’ attention. Rockwell Automation says industrial customers could save $6 billion per year, or about 10 percent of their annual cost by implementing smart grid.

PECI makes two policy recommendations to enable the smart grid to flourish:

1. Smart grid policy should have specific linkages to carbon reduction goals

It only makes sense to coordinate energy efficiency through smart grid with emissions reductions. If the goals are out of sync (for example, requiring energy reductions that would far supersede the emissions goal) would introduce confusion into the market place.

2. Government funding for smart grid should be linked to state adoption of decoupling and other incentives structures

This one would be more controversial since getting congress to act on something that benefits less than half (23) of the states would be nearly politically impossible

Per the report:

At a minimum, only states that require utility decoupling should be eligible to receive federal financial assistance for smart grid implementation. The problem is that decoupling energy consumption from utility profits only prevents a utility from losing money from energy efficiency programs, it does not allow them to profit from these programs. Incentivizing adoption of energy saving programs and practices alleviates this sticking point and should been encouraged.

This would also be seen as an attempt by the federal government to set state utility regulations. Deregulation has had mixed success in the states, with some such as California seeing rising rates and reliability decrease. States need to develop financial incentives for energy efficiency that do not reduce utilities’ ability to generate a profit.

PECI highlights one such example:

This year, utility regulators in North Carolina and Ohio approved unprecedented rate cases that allow Duke Energy to earn the same rate of return for reducing demand as it does for increasing supply. In return, Duke is obligated to cut energy consumption 22 percent by 2025 in Ohio.

Appearing courtesy of Matter Network.

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