This report presents a comprehensive framework for estimating the benefits and costs of Smart Grid projects and a step-by-step approach for making these estimates. The framework identifies the basic categories of benefits, the beneficiaries of these benefits, and the Smart Grid functionalities that lead to different benefits and proposes ways to estimate these benefits, including their monetization. The report covers cost-effectiveness evaluation, uncertainty, and issues in estimating baseline conditions against which a project would be compared. The report also suggests metrics suitable for describing principal characteristics of a modern Smart Grid to which a project can contribute.
The methods developed in this study will help improve future estimates—both retrospective and prospective—of the benefits of Smart Grid investments. These benefits, including those to consumers, society in general, and utilities, can then be weighed against the investments. Such methods would be useful in total resource cost tests and in societal versions of such tests. As such, the report will be of interest not only to electric utilities, but also to a broad constituency of stakeholders.
The purpose of this report is to present a methodological framework that will provide a standardized approach for estimating the benefits and costs of Smart Grid demonstration projects. The framework also has broader application to larger projects, such as those funded under the ARRA. Moreover, with additional development, it will provide the means for extrapolating the results of pilots and trials to at-scale investments in Smart Grid technologies. The framework was developed by a panel whose members provided a broad range of expertise.
This first section of the report presents background information on the motivation for the report and its purpose. Section 2 introduces the methodological framework, focusing on the definition of benefits and a sequential, logical process for estimating them. Beginning with the Smart Grid technologies and functions of a project, it maps these functions to the benefits they produce. Section 3 provides a hypothetical example to illustrate the approach. Section 4 describes each of the 10 steps in the approach. Section 5 covers issues related to estimating benefits of the Smart Grid. Section 6 summarizes the next steps.
Application, Value and Use
Significant aspects of the methodology were used by the U.S. Department of Energy (DOE) to develop its methods for estimating the benefits and costs of its renewable and distributed systems integration demonstration projects as well as its Smart Grid Investment Grant projects and demonstration projects funded under the American Recovery and Reinvestment Act (ARRA).
Disclaimer: DOE’s use of parts of the methodology described in this report does not constitute an endorsement of this report. As experience is gained from these projects, the methodology is expected to be refined.
The goal of this report, which was cofunded by the Electric Power Research Institute (EPRI) and DOE, is to present a comprehensive set of methods for estimating the benefits and costs of Smart Grid projects.
Disclaimer: By publishing this report, EPRI seeks to contribute to the development of methods that will establish the benefits associated with investments in Smart Grid technologies. EPRI does not endorse the contents of this report or make any representations as to the accuracy and appropriateness of its contents.