The challenge with building a business case for smart grids

The “Smart grid” appears to be synonymous with the end of an era of seemingly stagnant technological evolution in the field of electricity generation, transmission, distribution and utilization. The imperatives of pollution control and climate change, as well as the need to secure energy supplies are external drivers working for the end of this stagnation. Information and communication technologies, backed by solution vendors often entering the utility field, are providing the necessary technological and commercial impetus. It is, nonetheless, difficult not to avoid the key questions: Can society as a whole gain from a smarter grid? If so, in what sort of timescales? And are there solid business cases for the smart grid? For whom? The smart grid is again (just like liberalization 10-15 years ago) something happening from the top down. Consumers have legitimate rights to be skeptical about the whole concept. The rolling of smart grid investment programmes - currently rhyming with smart metering for the most part - will invariably increase the bill for the consumer, while it is nowhere certain that he or she will be able to reap any tangible benefits. This paper outlines some of the key questions relating to the potential costs and benefits of smart grid investment proposals as they are tackled by the members of the IEEE Power & Energy Society Power System Economics Subcommittee. In addition to costs and benefits, we address their allocation as well as some of the utility regulation challenges set forth by smart grids.