Making the Case for Smart Grid to Shave Peak Power

Smart grid technology could shave 15 percent to 20 percent off a utility or region’s peak power demand, according to estimates from the World Energy Council, IBM and others. That adds up to that many fewer fossil-fuel fired power plants a utility or region will have to build over the next few decades or so, which is good for the utility, the customers and the planet.

But how do you measure the value of a power plant never built -- and how do you justify the uncertain returns on the hard costs of deploying the smart grid to make that happen (or, not happen)?

Those are questions that the smart grid industry -- and, importantly, state and federal regulators -- will have to answer if we’re to achieve the peak-shaving potential that the smart grid promises.

“What’s the value of that avoided cost?” John Chevrette, president of management consulting division at big utility technology services firm Black & Veatch, said during a Wednesday press breakfast in San Francisco. “It’s a very debatable point in the industry.”

Chevrette and other Black & Veatch execs were in town to discuss a new report on the global energy outlook and to cover the challenges facing the water and energy industries they serve.

In broad terms, the biggest news in the energy business is the super-cheap price of natural gas, and the expectations of cheap gas for years to come, of course. That’s a challenge to wind and solar power development, but a relief to an industry that can’t build new coal-fired power plants and finds nuclear plants way too expensive and unpopular to build, he noted.

In fact, Black & Veatch predicts that 61,000 megawatts of coal power plants are set to retire between now and 2020, he said. (The U.S. Energy Information Administration says 27 gigawatts, or 27,000 megawatts, will retire over the next five years.) Replacing that will be some solar and wind, but mostly natural gas, Chevrette said, given that nuclear power’s would-be renaissance has stalled amidst economic turmoil and blowback from Japan’s Fukushima disaster -- but there’s still a lot of lost power to make up for.

“The relief valve, in many respects, for these pressures, comes down to the customers,” he said. Pushing energy efficiency, demand response and other programs to get utility customers to use less power will be a critical part of making up for that shortfall.

There’s plenty of real-world evidence of smart grid technologies cutting peak power and improving overall energy efficiency -- and more often as not, it’s been done specifically to avoid building new power plants. More