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Perfect Power Institute: Modernization benefits exceed costs by 3:1


US consumers can realize grid-modernization benefits that exceed costs by 3:1 if they work alongside local governments and innovators, the Perfect Power Institute said in a free study the institute plans to publicize today.  But making that happen will require market reforms that include rewarding utilities for cutting waste and inefficiency, the report said.

“The question is, would we rather pay for a steady stream of waste or an investment to stop it?” the Perfect Power Institute asked rhetorically.  “Think of it as a one-time payment to the plumber to fix the leaky faucet that is driving up your water bill.  If you don't pay to have it fixed now, you will be paying in drips until you do.”

Over 15 years, a US household might pay $400/year in smart grid investments: $80 for clean power, $150 for T&D and $165 for smart meters, home automation and local generation, the report said.  But over that same period, savings would be $1,200: $585 on power bills, including smaller rate increases; $400 on indirect benefits, including fewer economic losses from outages; and $250 on future revenue, such as providing power and ancillary services to the grid.

The report detailed the estimated annual per-household costs of grid modernization: $12 for transmission and area distribution, $25 for local substation automation, and $50 for burying local cables.  It similarly broke down estimated annual per-household savings from smart grid.

Benefits may not be apparent for as long as five years after investments are paid off, the report cautioned.  Benefits also depend on investments producing specific and measurable improvements in reliability, energy efficiency and environmental performance.

The report clearly laid out the basics: the goals and types of grid modernization and the best ways to judge the success of modernization efforts.  It also portrayed the waste in the system, which overall costs roughly $500 billion/year.  Some 70% of all power is wasted in the generation and delivery of power.  About 600 GW of generation is unused.  Burning fossil fuel wastes $70 billion/year.  Losses from power-line damage total $150 billion/year.  Emissions from carbon, nitrogen oxide and sulfur alone impose costs of $70 billion/year.

It profiled grid upgrades in the city of Naperville, Ill, and on the campus of the Illinois Institute of Technology.  Numerous appendixes laid out underlying assumptions and supporting data.

State regulation currently does not account for the costs of outages, the report said, so utilities cannot use the waste caused by outages to justify investment.  Consumers “can benefit from a new regulatory compact” that lets consumers and utilities track waste and share in the savings from its elimination, and that assigns the cost of system expansion to new load, letting utilities focus limited investment on the existing grid.

Money is important, the report concluded, but “no investment of this magnitude can be fully evaluated on its price tag alone.” Grid modernization will keep the US competitive with other industrialized nations and provide significant environmental benefits, it said.

The newly formed Perfect Power Institute “represents the next phase” of reform efforts by the Galvin Electricity Initiative, an organization that began in 2005, those organizations said.

© 2012 Modern Markets Intelligence Inc. IMPORTANT: This article was reproduced from the February 27, 2012 issue of Smart Grid Today with the limited permission of the owner.  To view the full story on Smart Grid Today’s website, please visit

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