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Estimating the Costs and Benefits of the Smart Grid a Preliminary Estimate of the Investment Requirements and the Resultant Benefits of a Fully Functioning Smart Grid Estimating the Costs and Benefits of the Smart Grid A Preliminary Estimate of the Investment Requirements and the Resultant Benefits of a Fully Functioning Smart Grid 2011 TECHNICAL REPORT Electric Power Research Institute 3420 Hillview Avenue, Palo Alto, California 94304-1338 • PO Box 10412, Palo Alto, California 94303-0813 USA 800.313.3774 • 650.855.2121 • [email protected] • www.epri.com Estimating the Costs and Benefits of the Smart Grid A Preliminary Estimate of the Investment Requirements and the Resultant Benefits of a Fully Functioning Smart Grid EPRI Project Manager C. Gellings 3420 Hillview Avenue Palo Alto, CA 94304-1338 USA PO Box 10412 Palo Alto, CA 94303-0813 USA 800.313.3774 650.855.2121 [email protected] 1022519 www.epri.com Final Report, March 2011 DISCLAIMER OF WARRANTIES AND LIMITATION OF LIABILITIES THIS DOCUMENT WAS PREPARED BY THE ORGANIZATION(S) NAMED BELOW AS AN ACCOUNT OF WORK SPONSORED OR COSPONSORED BY THE ELECTRIC POWER RESEARCH INSTITUTE, INC. (EPRI). NEITHER EPRI, ANY MEMBER OF EPRI, ANY COSPONSOR, THE ORGANIZATION(S) BELOW, NOR ANY PERSON ACTING ON BEHALF OF ANY OF THEM: (A) MAKES ANY WARRANTY OR REPRESENTATION WHATSOEVER, EXPRESS OR IMPLIED, (I) WITH RESPECT TO THE USE OF ANY INFORMATION, APPARATUS, METHOD, PROCESS, OR SIMILAR ITEM DISCLOSED IN THIS DOCUMENT, INCLUDING MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, OR (II) THAT SUCH USE DOES NOT INFRINGE ON OR INTERFERE WITH PRIVATELY OWNED RIGHTS, INCLUDING ANY PARTY'S INTELLECTUAL PROPERTY, OR (III) THAT THIS DOCUMENT IS SUITABLE TO ANY PARTICULAR USER'S CIRCUMSTANCE; OR (B) ASSUMES RESPONSIBILITY FOR ANY DAMAGES OR OTHER LIABILITY WHATSOEVER (INCLUDING ANY CONSEQUENTIAL DAMAGES, EVEN IF EPRI OR ANY EPRI REPRESENTATIVE HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES) RESULTING FROM YOUR SELECTION OR USE OF THIS DOCUMENT OR ANY INFORMATION, APPARATUS, METHOD, PROCESS, OR SIMILAR ITEM DISCLOSED IN THIS DOCUMENT. Reference herein to any specific commercial product, process, or service by its trade name, trademark, manufacturer, or otherwise, does not necessarily constitute or imply its endorsement, recommendation, or favoring by EPRI. The following organization(s), under contract to EPRI, prepared this report: Electric Power Research Institute (EPRI) NOTE For further information about EPRI, call the EPRI Customer Assistance Center at 800.313.3774 or e-mail [email protected]. Electric Power Research Institute, EPRI, and TOGETHER…SHAPING THE FUTURE OF ELECTRICITY are registered service marks of the Electric Power Research Institute, Inc. Copyright © 2011 Electric Power Research Institute, Inc. All rights reserved. Acknowledgments The following organization prepared this report: Electric Power Research Institute (EPRI) 3420 Hillview Ave Palo Alto, CA 94304 Principal Investigator C. Gellings This report describes research sponsored by EPRI. The project manager would like to acknowledge the contributions of the following EPRI staff members: Gale Horst – Project Manager, for contributions regarding Customer Costs Mark McGranaghan – Vice President – Power Delivery and Utilization, for contributions regarding Distribution Paul Myrda – Technical Executive, for contributions regarding Transmission and Substations Costs Brian Seal – Senior Project Manager, for contributions regarding Home Area Network (HAN) & Automated Metering Infrastructure (AMI) Omar Siddiqui – Director, for contributions regarding Customer Costs This publication is a corporate document that should be cited in the literature in the following manner: Estimating the Costs and Benefits of the Smart Grid: A Preliminary Estimate of the Investment Requirements and the Resultant Benefits of a Fully Functioning Smart Grid. EPRI, Palo Alto, CA: 2011. 1022519. g iii h Donald Von Dollen – Senior Program Manager, for contributions regarding Overall Communication & IT Integration Costs Mark Duvall – Director, for contributions regarding Overall Treatment Costs of Electric Vehicle & Plug-In Hybrid Electric Vehicle Costs Andrew Phillips – Director, for contributions regarding Overall Transmission & Substation Costs Daniel Rastler – Senior Project Manager, for contributions regarding Storage Costs Bernard Neenan – Technical Executive, for contributions related to the overall cost framework The project manager would also like to acknowledge the thoughtful contributions of the following reviewers: Stuart Brindley and Mark Lauby – North American Electric Reliability Corporation Tommy Childress and Ruben Salazar – Landis+Gyr Lynn Coles, Henry Kenchington, and Eric Lightner – U.S. Department of Energy David Curtis – Hydro One, Inc. Paul DiMartini – Cisco Systems Frank Doherty – Consolidated Edison Company of New York James Alan Ellis and Ramesh Shankar – Tennessee Valley Authority g iv h John Estey - S&C Electric Ahmad Faruqui and Doug Mitarotonda – Brattle Group, Inc. Joshua Hambrick – National Renewable Energy Laboratory Tim Heidel – Massachusetts Institute of Technology Louis Jahn and Eric Ackerman– Edison Electric Institute Richard Joyce – GE Energy Services William Mintz – Alabama Power Company Mark Nealon – Ameren Ernst Scholtz – ABB Leslie Sibert – Georgia Power Company Thomas Wick – We Energies Ralph Zucker – BC Hydro g v h The present electric power delivery infrastructure was not designed to Abstract meet the increased demands of a restructured electricity marketplace, the energy needs of a digital society, or the increased use and variability of renewable power production. As a result, there is a national imperative to upgrade the current power delivery system to the higher performance levels required to support continued economic growth and to improve productivity to compete internationally. To these ends, the Smart Grid integrates and enhances other necessary elements including traditional upgrades and new grid technologies with renewable generation, storage, increased consumer participation, sensors, communications and computational ability. According to the Energy Independence and Security Act of 2007, the Smart Grid will be designed to ensure high levels of security, quality, reliability, and availability of electric power; improve economic productivity and quality of life; and minimize environmental impact while maximizing safety. Characterized by a two-way flow of electricity and information between utilities and consumers, the Smart Grid will deliver real-time information and enable the near-instantaneous balance of supply (capacity) and demand at the device level. The primary goal of this report, which is a partial update to an earlier report (EPRI 1011001), is to initiate a stakeholder discussion regarding the investment needed to create a viable Smart Grid. To meet this goal, the report documents the methodology, key assumptions, and results of a preliminary quantitative estimate of the required investment. At first glance, it may appear the most obvious change from the 2004 report is the significant increase in projected costs associated with building the smart grid. In actuality, the increased costs are a reflection of a newer, more advanced vision for the smart grid. The concept of the base requirements for the smart grid is significantly more expansive today than it was seven years ago, and those changes are reflected in this report. Keywords Smart grid Smart grid costs and benefits Functionality Power delivery system Transmission Distribution vii Table of Contents Section 1: Executive Summary .................................1-1 What is the Smart Grid? ...................................................1-1 Background.....................................................................1-1 Previous Studies ...............................................................1-3 Purpose and Scope ..........................................................1-3 Summary of Results...........................................................1-4 Smart Grid Costs .............................................................1-4 Smart Grid Benefits ..........................................................1-8 Cyber Security.................................................................1-9 Section 2: Introduction.............................................2-1 Smart Grid Vision ............................................................2-1 What is the Smart Grid? ...................................................2-1 Smart Grid Characteristics: Drivers and Opportunities..........2-1 Smart Grid Benefits.....................................................2-1 Stakeholder Benefits....................................................2-2 Modern Grid Initiative Smart Grid Characteristics ..........2-3 Smart Grid Challenges .....................................................2-4 Procedural Challenges ................................................2-5 Technical Challenges to Achieving the Smart Grid..........2-6 Smart Grid Networking ...............................................2-7 The Smart Grid Conceptual Model.....................................2-8 Additional Challenges ....................................................2-10 Work Force Issues ....................................................2-10 Regulatory Challenges to Achieving the Smart Grid......2-11 Drivers of Smart Grid Investment ......................................2-12 Previous Studies by EPRI..................................................2-14 EPRI Demonstrations .......................................................2-15 Purpose of this Report .....................................................2-15 Why Did the Smart
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