Electric Utility Investments: All About Smart Grids

by Bob Shively, Enerdynamics President and Lead Facilitator

Not too long ago, the bulk of electric utility investment was all about new generating plants. But it appears those days are over with the need for new traditional coal, nuclear, and even gas plants rapidly being supplanted by renewables and distributed energy resources. Growth in new distributed technologies is expected from almost all utility executives as indicated by the following result from the Utility Dive State of the Electric Utility 2019 survey:    

Expected outlook for distributed energy resources
Source:  Utility Dive, State of the Electric Utility Survey 2019

The result is that utility companies are rapidly changing their capital spending to focus on transmission and distribution grid modernization, also known as the Smart Grid.  Let’s review what the components of grid modernization are, and then look at how utilities are spending money on it.

What are Smart Grid technologies?

The U.S. Department of Energy describes the Smart Grid as: “an intelligent electricity grid—one that uses digital communications technology, information systems, and automation to detect and react to local changes in usage, improve system operating efficiency, and, in turn reduce operating costs while maintaining high system reliability.” Other definitions add the concept of enhancing the grid to integrate distributed energy resources (DERs) such as demand response, distributed generation, and distributed storage as grid assets. Components include:

Grid modernization technologies

Source: ScottMadden's Energy Industry Update Webinar, November 2, 2018

How much are utilities spending?

Investment in these technologies is growing rapidly. An estimate by Newton Evans forecasts that utilities will spend $8.3 billion on smart grid technologies in 2020 rising to $13.8 billion in 2024. Interestingly, this spending will exceed traditional information technology spending for items such as administrative and operations IT by 80% in 2024.

Forecast 2024 Spending on Smart Grid Investment in U.S.

 Smart grid investments

Source: Newton Evans, 2017 as cited in the Smart Grid System 2018 Report to Congress

What will customers get for the billions spent?

Utilities expect to grow their ability to manage existing functions as well as provide new services to customers. New or enhanced utility system capabilities will include:

  • Rapid notification of outages, fault location identification, fault isolation, and system restoration resulting in shorter outages
  • Voltage and reactive power management resulting in fewer customer service issues and the ability to integrate rooftop solar and electric vehicle charging with minimal power disturbances
  • Enhanced system monitoring and control providing distribution operators with situational awareness of all portions of the grid and tools to respond to potential problems before they occur
  • Dispatch and control of grid devices such as circuit breakers, field switches, and power electronics resulting in better control of grid conditions reducing outages, power quality issues, and enabling integration of DERs
  • Dispatch and control of DERs allowing them to be used as grid assets
  • Data analysis capabilities that will improve asset management and reduce maintenance costs[1]

Customers are expected to see:

  • Fewer outages and power quality issues
  • The ability to easily interconnect DERs to the grid
  • Fewer asset maintenance costs included in rates
  • New service offerings resulting in reduced bills or new revenue opportunities

While it all sounds good, billions of dollars in spending are proposed, and these will find their way into consumers’ utility rates. One of the biggest issues will be the back and forth in the regulatory process as regulators and utilities determine what is or is not justified spending. We can expect discussion of the Smart Grid to continue for many years.

Learn more about how Smart Grids are changing the utility industry with one of Enerdynamics' live seminars: Distributed Energy Resources and Microgrids and The Advanced Grid. For more details contact 866-765-5432 ext. 700 or info@enerdynamics.com.


[1] The list of capabilities is adapted from the Smart Grid System 2018 Report to Congress

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