U.S. May Raise Cap on Grants for High-Tech Power Grid

By Steven Mufson
Washington Post Staff Writer
Friday, April 24, 2009

The Energy Department might revise its guidelines for $4.5 billion in smart grid grants after major electric utilities complained that the proposed $20 million-per-grant limit was too low to encourage commercial-scale deployment of advanced technologies.

The smart grid spending is supposed to both create jobs and improve the efficiency and reliability of the electricity grid by lowering peak demand, reducing energy consumption, integrating more renewable energy sources and easing the pressure to build new coal-fired power plants. A variety of devices may qualify, including meters, grid management software and other equipment.

Last week the department unveiled proposed guidelines for its smart grid program, which was part of the stimulus bill President Obama signed into law in February. It said that it would provide grants of $500,000 to $20 million to cover up to 50 percent of the cost of any project deploying smart grid technology.

But utilities are saying that if the Obama administration doesn't raise the maximum grant size, it will fail to achieve its twin goals of creating jobs and improving the efficiency and reliability of the electricity grid because it will only stimulate a series of small pilot and demonstration programs.

"The ceiling of $20 million is so low that I fear dollars will just be spread around without accomplishing much," said David W. Mohler, vice president and chief technology officer of Charlotte-based Duke Energy. Duke Energy has already budgeted $1 billion in its five-year plan for smart grid investments, he said, but "if there were $1.5 billion, you'd get more done quicker."

"To get anything to scale . . . is going to take more than $20 million," he added.

Anne E. Hoskins, vice president of federal affairs and policy at PSEG, a New Jersey utility, said her firm has not yet applied for money but was considering a $200 million project.

"If the DOE sticks with what it is, we are certainly not going to back away," Hoskins said. But she added, "We would probably scale down the scope of what we attempt to accomplish."

Matt Rogers, who is overseeing stimulus spending and loan guarantees at the Energy Department, said the department "may end up segmenting" smart grid money so that one part would be aimed primarily at smaller companies and another part with a higher dollar limit would help larger commercial projects.

"Out intent was to fund a diversity of projects and help small companies as well as large," Rogers said. "We're in middle of evaluating a restructuring." The final version of the guidelines will be issued after the comment period ends May 6.

Some smaller companies argue that major utilities have enough capital of their own or can get public service commissions to pass costs through to ratepayers.

Utilities have also raised concerns about compliance costs and the timetable for spending the money. The Obama administration wants the grant money spent in two years, but Hoskins said it might take three to five years to complete some of the projects.

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