A first ever-analysis of the budding shift to smart electric grids by America's utilities suggests that a system revolution is finally getting under way – particularly in California and Texas.
Three of the nation's top five utilities for smart grid growth are located in California, while the other two come from Texas, propelling these state forward as centers of grid innovation. So reveals the inaugural UtiliQ ranking of the nation's 25 most "intelligent" utilities by IDC Energy Insights and Intelligent Utility magazine.
"The California and Texas utilities are at the top of the list primarily because those states have either mandated or incented their utilities to make investments in renewable energy, smart metering and energy efficiency," Rick Nicholson, vice president of IDC Energy Insights, told SolveClimate.
San Diego-based Fortune 500 Sempra Energy finished first.
In 2008, the company installed 4,500 smart devices on San Diego homes and businesses, making it one of the first utilities in America to meter up its customers. The move was a first step in a half a billion dollar effort to convert 1.4 million aging meters by the end of 2011.
This month, Sempra subsidiary San Diego Gas & Electric was picked as a part of a $99.8 million federal grant to help make the city's grid plug-in ready for the cars of the future.
According to IDC Energy Insights, all 25 utilities in its ranking have made moves into the smart grid space. All could be lead players in the transition toward a new energy economy.
But that optimism shouldn't detract from the main point of the analysis: that today's smart grid hype must be separated from reality. Utilities are anticipated to be the drivers behind mass smart-grid adoption. And the truth is, none of the nation's "intelligent" utilities is even close to being all the way there. Many still lack a long-term smart-grid roadmap.
In other words, it's still anyone's game.
Take Xcel Energy, Colorado's largest utility. Number 14 in IDC Energy Insights' 2009 list, it could rapidly rise through the ranks with its seminal project to turn Boulder, Colo., into the world's first fully integrated smart-grid city by year's end.
Winners and losers aside, what's clear is that transforming the power network into a smart grid is inevitable in a carbon-regulated and cleaner energy economy. Case in point: Denmark. The nation gets 32 percent of its power from wind, and it's about two decades ahead of the U.S. in terms of a smarter grid system. In fact, America is about a decade behind most of Europe.
America's current grid is a dirty energy suck. It was built with one purpose in mind: to send cheap electricity from the utilities into the nation's homes. The unfortunate result is that enormous amounts of energy goes to waste each day.
Smart grids are seen as a vital cure. They allow for the inclusion of digital communications, renewable energy and energy efficiency technologies into the power network. The primary goal is energy savings, especially during expensive periods of peak demand.
The most promising tidbit is that it's all technologically possible.
The digital communications let consumers see how much energy they're consuming in real time through visual feedback displayed on smart meters. That includes which appliances are gobbling up the most juice. The idea is to make users price sensitive and change their usage patterns, even unplugging when prices are high. The research shows that exposing this information works. When customers have real-time data of their energy use, consumption can fall by as much as 10 percent.
Smart grids add up to big savings in customers' energy bills. For utilities, they translate into less of a need for building new (and expensive) polluting power plants.
The IDC Energy Insights ranking was based on five quantifiable "intelligence metrics."
• Productivity: An intelligent utility is an efficient utility (measured by revenue per employee).
• Renewable energy: An intelligent utility has a commitment to renewable energy as part of its resource portfolio (measured by renewable energy sales, renewable energy customers and renewable capacity).
• Smart initiatives: An intelligent utility makes investments in developing smarter grids (measured by smart meter deployments and other smart grid projects).
• Demand response/energy efficiency (DR/EE): An intelligent utility allows consumers to manage their energy usage and costs (measured by the availability of energy efficiency, demand response and load management programs).
• IT investment: An intelligent utility invests in information technology to enable business process improvement (measured by IT spending as a percent of revenue and on a per employee basis).
The three companies with utility intelligence quotients (IQs) of over 140 — Sempra Energy, Austin Energy and Edison International — are at near genius level compared with the rest of the industry, IDC Energy Insights says. As smart grid fever catches on, and it will, they anticipate more "geniuses" to emerge.
The American Recovery and Reinvestment Act should help. The bill earmarked $4.5 billion in direct funding for smart grid development. GridWise Alliance, a 90-member coalition of companies and organizations, called the funds "a tremendous start." The DOE announced the first Financial Assistance Funding Opportunity Announcements (FOAs) for a $3.4 billion chunk of that money in June. The grant program will fund up to 50 percent of the cost of qualifying projects.
According to IDC Energy Insights, those stimulus dollars, along with other key government policies, are essential for rapid deployment of smarter grids.
"We believe that a smart grid revolution is indeed underway in the U.S. Much of the timing will depend on how quickly the DOE awards the smart grid stimulus funds to utilities. It will also depend on other key policy initiatives like the proposed carbon cap-and-trade program and Federal combined renewable and efficiency standard.
IDC Energy Insights recently developed a forecast of smart grid technology spending showing that it will be a $17.5 billion market in North America by 2013," said Nicholson.
At least one other crucial hurdle will have to be crossed to get there: the lack of national standards for smart grid technology. These are still being written by the National Institute for Standards and Technology, meaning early adopters may risk having to change some of their technology. The NIST hopes to have rules for interoperability of systems sketched out by the end of the year.
Even without standards is tow, though, there's a big unsung perk in freeing up the stimulus dollars today: new jobs. Many smart-grid jobs are "shovel ready," and should begin flowing as soon as the billions are unleashed.
According to an analysis by energy consultant and GridWise member KEMA, a $16 billion smart grid investment would result in the direct creation of approximately 280,000 new positions across various sectors. More than 150,000 would be created by the end of 2009 alone.
"A smart grid will enable a transformed electric supply sector and related job creation; incentivize a strong domestic market for U.S. smart grid technology firms; and create high value permanent positions in the energy economy," said Katherine Hamilton, President of the GridWise Alliance.