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Evaluating the Business Case forSmart Grid Investments

Jerry Jackson, Ph.D., Leader and Research DirectorSmart Grid Research Consortium, 37 N. Orange Ave, Suite 500

Orlando, FL 32801 Jjackson@smartgridresearchconsortium.org 979-204-7821

Smart Grid Research Consortium Conference & Workshop

Rosen Shingle Creek, Orlando, FloridaOctober 20-21, 2011

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Welcome

• Conference coordinator Amy Heineman • Hotel amenities• A “different” smart grid conference

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Conference Sponsors

Smart Grid Research Consortium www.smartgridresearchconsortium.org Thursday, October 20, 2011

Silver Sponsor

Bronze Sponsors

Media Partners

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Conference Topic Areas

• SG technology and applications overviews issues/developments• SG coop and municipal experiences• Do’s and don’ts and suggestions from industry experts• Several “outside the box” presentations

Objective is to provide an enjoyable, informative and interactive experience for all attendees

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SGRC Background

• Smart Grid Research Consortiumo Members include coops, municipal and other public utilitieso Initiated at Texas A&M University in 2010o Established as an independent research consortium January 2011

• Consortium approach: Individual members provide limited financial support to share in the results of a larger-scale research and applications project.

• Objective: To provide utility member support in evaluating smart grid investment and strategies

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How Best to Support Coop/Public Utility Smart Grid Investment Analysis?

• Given: ΣBenfits > ΣCosts for some subset of SG technologies/programs for most utilities

• Question: Which technologies/programs and what implementation strategy?

• Difficultieso SG impacts all utility operationso Interactions, synergieso Continuing technology development, cyber security, etco Investment timing matterso Utilities are different o No commonly accepted cost/benefit framework

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The Consortium Answer

• Smart Grid Investment Model TM

o Quantitative cost/benefit frameworko Includes all important technologies/programs from back-

office to substation/feeders/inpremiseo Models utility-detailed monthly customer class end-use

hourly loads (e.g., residential AC)o Applies Exel interface

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Our Experience Identified Important Elements in Conducting SG Investment Analysis

• Paper: “Score Your Smart Grid IQ (Investment Quotient)”

• Six categorieso AMI/DA Investment/Planning Scopeo Customer Engagement Investment/Planning Scopeo Other Financial Itemso Utility Customer Detailo Investment Analysis Quantitative Frameworko Ease of Use/User Interface/ Results Presentation

• Score sums to maximum of 100

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Example

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Example

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Message Behind the SG IQ

• “Comprehensive quantitative smart grid investment analysis and planning is required to identify appropriate utility-specific functionality and a roadmap to achieve that functionality with minimum cost.”

• The analysis framework should include:o All important related technologies and programso All recognized costs and benefits o Utility-specific detail and unique characteristicso Recognition as a long-run IT/planning resource requiremento Easy-to-use, intuitive interface

• Recommendation: Each utility should consider assigning interface/maintenance responsibility to at least one “go-to” individual.

o Continue financial evaluation after project implementationo Continuously evaluate strategy options

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More Generally,

• Conceptualizing all of the elements involved in the SG transformation as a financial modeling process helps to:o See the big picture with respect to the SG transformationo Consider impacts on current and future infrastructure that

might be otherwise overlookedo Consider important financial aspects of a smart grid

strategy that may have been overlooked o Provide a critical-thinking framework for assessing and

evaluating industry changes propelled by SG technologies & Programs