Smart grids lack cash incentive spark

Pioneering sensors deliver huge efficiency savings but little so far in way of revenues.

TIANJIN // Electricity "smart grids" could remove the same amount of carbon dioxide from the atmosphere as is produced by all of the cars and homes in the US, but pioneers of the technology fear they may never take off on a large scale. There are about 90 pilot projects worldwide for the concept, which uses sensors to maximise the efficiency of electricity networks and allow the integration of solar and electric vehicles, but they have encountered a fundamental problem: there is no money in it.

"We need smart grids for electric vehicles but the benefits don't always flow to the utility," said Mark Spelman, the head of strategy at Accenture, which published a report on the issue at the World Economic Forum in China yesterday. Society benefits from a cleaner environment, consumers benefit from lower bills and electric vehicle companies gain from the infrastructure, but the utilities that make the investments can sometimes see revenues fall.

"This will delay the evolution of smart grids," said Tom Casey, the chief executive of Current Group, which sells the technology. If deployed worldwide, smart grids could remove 2 gigatons of carbon gas from the earth's atmosphere out of a total 12 gigatons produced annually, a consultant's report recently estimated. Smart grids use sensors on transmission lines to analyse the performance of power generators on the one hand and demand on the other, reducing the amount of power needed to meet consumption.

They also check on the efficiency of generators, acting as an early-warning system for failures, and allow for the integration of devices, whether electric cars or solar panels, from the consumer end of the grid. Ken Hu, the executive vice president of the Chinese technology company Huawei, said IT had a role to play in the development of smart grids and the two industries were eliminating knowledge barriers between them.

The notion of a smart grid encouraged people to think about people-to-machine technology and machine-to-machine technology, rather than just traditional notions of people-to-people communications, said Mr Hu. Because of the lack of financial incentive to invest in the grids, Mr Spelman said there was confusion surrounding the reasons for installing them. In Europe, pilots are driven by the desire to reduce the carbon footprint of the power sector, which consumes 40 per cent of the world's energy, he said.

In the US, they are intended to improve the customer experience. In South Korea they are seen as having export potential, while in China and India they are viewed as a way to fast-track infrastructure. Abu Dhabi is also developing a smart grid and aims to be the first in the Middle East to do so. Abu Dhabi Distribution Company plans to install smart meters in all the homes in the emirate by the end of this year, opening the way for residents and businesses to install solar panels on their roofs.

But analysts say there is a long way to go to achieve true smart grid status, including the installation of the sensors and software required to manage generation, legislation for feed-in tariffs for renewables, and differential pricing for peaks and troughs of demand. The World Economic Forum report concluded the development of these grids should be accelerated, despite the lack of financial incentives for investors.

"If we don't do it we will have spent trillions of dollars on technology which is outdated before it goes in," Mr Casey said.