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Product Abstract

Guidebook for Cost/Benefit Analysis of Smart Grid Demonstration Projects

Product ID:1021423
Date Published:25-May-2011
Sector Name:Power Delivery & Utilization - Distribution & Utilization
Document Type:Technical Results

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This report presents a step-by-step process for estimating the costs and benefits associated with smart grid demonstration projects. The entire guidebook is meant to function as a standalone user’s manual for the analysis process, from the initial step of describing the project to the final step of communicating the results to all stakeholders. This volume of the guidebook presents detailed instructions for describing the project objectives, the research plan, and the technologies deployed; associating the technologies with enabled functions; and mapping these functions to impacts. The report builds on the Electric Power Research Institute (EPRI) report Methodological Approach for Estimating the Benefits and Costs of Smart Grid Demonstration Projects (1020342).


Integrating smart technology into the electricity distribution system is complex because there are so many new technologies that could be deployed in different applications and because multiple technologies can be part of a single project. Not enough is known about their performance to determine which technologies (or portfolio of technologies) will be optimal across the spectrum of possible applications. Thorough documentation of actual field performance will help resolve questions about how individual technologies and portfolios of technologies are likely to perform under different operating conditions and levels of investment.

The valuation process is also complex because many smart grid investments produce indirect impacts. Their benefits are derived from how they enable us “. . . to integrate, interface with and intelligently control innovations such as wind turbines, plug-in hybrid vehicles and solar arrays.” Thus, a large part of the value of smart grid investments is derived from other technologies whose use they enable. Assessing the value of smart grid investments must include these functions that it enables, as well as the value that it provides directly.


The guidebook presents a step-by-step framework that provides a standardized approach for estimating the benefits and costs of smart grid demonstration projects. This volume contains detailed discussion of the first 17 steps, from initial project definition to establishing measurement and verification protocols. Further, it applies these steps to a specific smart grid technology to illustrate how the methodology can be applied.


As smart grid technology evolves from the research and development environment to production testing and deployment, reliable methods will be needed to assess the benefits of the new technology and weigh these benefits against the cost of deployment. Having a consistent, credible, and transparent approach will facilitate deployment of smart grid investments where they will yield the greatest value for customers, utilities, and society.

Application, Value and Use

Engineers, planners, project managers, and other professionals can perform cost/benefit analysis for smart grid demonstrations by following the steps listed in this guidebook. Any project stakeholder involved in the process of defining specific values related to smart grid technology implementation will find value in its methodology. The process will allow for accurate analysis of the costs and benefits of various smart grid designs and will ultimately aid the stakeholder in steering smart grid deployment in a way that will provide the greatest value to the intended beneficiaries.

EPRI Perspective

The goal of the guidebook is to present a comprehensive set of guidelines and specific instructions for estimating the benefits and costs of smart grid projects. It is unique in its level of technical specificity and in the range of technologies it is intended to cover. The guidebook is intended to complement previous publications that deal with the concepts of cost/benefit analysis as applied to the smart grid. Finally, it is intended to help utilities produce evaluations that meet reporting requirements for DOE-funded smart grid projects, as well as provide the types of information that regulatory commissions are likely to require in order to approve the investments for cost recovery through regulated rates.
2011 Program 177   PDU Demonstrations
  • Cost/Benefit Analysis
  • Smart grid
  • Functionality
  • Demonstration projects
  • Smart Grid benefits
  • Smart Grid costs

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