Where should we put our money on Smartgrids? If you have 1 €, where would you invest in the whole array of SG technologies and applications to have the best return?
That is the question I ask all utility colleagues on any panel or conference and it is the question I am trying to (help) answer with my research. The answer for the moment is not clear to anybody I ask.
Take energy efficiency as an example (it’s what many answer as part of smartgrids), the payback time for different measures is well known and industries are investing progressively to implement the most appropriate. For example, starting with efficient lighting or the purchase of drives and efficient motors with paybacks below 1-2 years.
On Smartgrid, from a general perspective, there are some estimations, such as the most recent from EPRI that estimated a 2.8-6.0:1 benefit-to-cost ratio. In this whitepaper, most benefits are related to reliability and security, for example reducing outage costs. The technologies that give the best NPV are mainly storage and demand response, but facilitating renewables is also to mention, as it is very much related to both and is core for reducing emissions. Another report, from the Perfect Power Institute from the Galvin Electricity Initiative (Investing in grid modernization; March 2012), presents a 3:1 benefit-to-cost ratio, where the return is mainly from efficiency (48%) and reliability (30%) savings, coming mainly from investment in Home automation (25%) and clean energy (31%).
There are other examples, focusing on Spain, where there is not such an ageing infrastructure and the transmission can already be considered a smartgrid. Accenture published a report for the “Club de excelencia en sostenibilidad” called Spain 20.20, where the benefit-to-cost ratio for the period was 1.3:1 (89% of benefit are energy savings). BCG has also recently published a report for Futured, where they consider the benefit-to-cost ratio to be higher; between 2:1 and 3.5:1.
Of course the response to the business case and cost-benefit depends very much on the region, and specially the regulation, as the main investment is on a regulated business. But most papers on the topic show investing in SG is profitable without subsidies and where to invest is the question the power industry must be trying to answer every day.
What is your answer? Where would you put your money? Could we even crowdfinance the smartgrid?