The US Trailing China in SmartGrid Investment

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There has been rather a lot of coverage in the press this year about the fact China is out spending the US in terms of investment in smart power grids. According to a NY Times article the Chinese government will spend $7.3 billion dollars in the form of stimulus loans, grants and tax credits compared to $7.1 billion by the United States government. As in the US, money will go on upgrading the network from power producer, through transmission to the installation of smart meters in homes to allow consumers to more intelligently use power. Projects will also make the grid more robust, more efficient and ultimately prepare the grid for micro producers to feed power back in to the grid from roof top solar cells or to remotely manage the most efficient recharging of electric cars at lower cost night time rates. Although in excess of $7bn, represent sizable sums for both countries, in proportion to the GDP the sum is much greater for China. Supporters point to the smaller sums being spent in European markets like the UK or France, where only $300m per year is being spent but SmartGrid development is already more advanced in those countries where they have many more smart meters already installed.

The issue in reality though is not about how much one country or another is spending relative to each other but should be about how much they could be saving if they spent more. It has been estimated in a FT article that short term investments in the smart grid could boost efficiency by 5% simply by installing smart meters that help consumers to save money and energy, and improved communications could allow utilities to reduce excess voltage without jeopardizing reliability. Those two measures alone would save tens of billions of dollars annually in the US and cut greenhouse gas emissions equivalent to more than 50m cars. The article makes the point that avoiding the 2003 Northeast blackout alone would have saved the US economy $6bn almost as much as has been included for investment in the stimulus package.

It is possible politicians are scared off giving greater priority to grid investment by the sums involved. The Electric Power Research Institute estimates the cost of upgrading US utilities alone to be $165bn over two decades. This administration in particular seems much more interested in investing in renewable energy with dubious economics than in reducing the need for generating capacity by managing what we have more efficiently. The return on investment is much more compelling for grid investment than for renewable energy but may be that is also part of the problem -  governments expect the power transmission companies to make the running. The fact is corporations respond to perceived opportunities and real incentives. But government doesn’t have to pay for smart grids directly. It could provide incentives in terms of say tax breaks to make a more compelling case for earlier investment. Although everyone stands around on the sidelines saying what a good idea it is but not actually doing much the US will continue to create unnecessary greenhouse gas emissions and fund GWhr’s of generating capacity that they could do without.

–Stuart Burns

Comments (2)

  1. Rohan Pease says:

    Great Article, the Transmission company is finalizing the grant for our smart grid grant. Although the grant will be $32MM, we are required to obtain an additional $32MM in Federal loans, totaling $64MM. I’m not sure itf the $7.1B figure includes our total $64MM or just the amount of the grant, if not then the total amount of spending on Smart Grid projects would be closer to $14B. We plan to use the funds over a 3 yr period.

  2. Rohan Pease says:

    The Tranmission company is finalizing (meant to say the “Transmission Company I work for”)

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