This report presents a step-by-step process for estimating the costs and benefits associated with Smart Grid demonstration projects. In its entirety, the 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 revision of the Guidebook updates and supersedes the material in the original Volume 1, published in 2011, but goes further by adding detailed discussion of monetization of benefits. The steps included in this combined volume present detailed instructions beginning with the overall design of the demonstration project, leading to execution of the research plan and analysis of data produced. The basic methodology is built on the framework described in the Methodological Approach for Estimating the Benefits and Costs of Smart Grid Demonstration Projects, published by EPRI in January of 2010.
Results and Findings
As Smart Grid technologies evolve from the research and development environment to production testing and deployment, reliable methods will be needed to value the benefits of the new technology and weigh these benefits against the cost of deployment. Having a consistent, credible, and transparent approach will help promote the deployment of Smart Grid investments where they will yield the greatest value for customers, utilities, and society.
Challenges and Objectives
Integrating smart technology into the electricity distribution system is complex. There are many new devices and systems that can be deployed in a variety of different applications. 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 some Smart Grid investments is derived from other technologies whose use they enable. Assessing the value of Smart Grid investment must address the functions it enables, as well as the value that it provides directly.
Applications, Values, and Use
Engineers, planners, project managers, and other professionals can perform cost/benefit analysis for Smart Grid demonstrations by following the steps listed in the complete 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 to provide the greatest value to beneficiaries.
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. It is intended to complement previous publications that deal with the concepts of cost/benefit analysis as applied to 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.
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 twenty-one steps, from initial project definition to monetization of benefits. Further, it applies these steps to a specific Smart Grid technology to illustrate how the methodology can be applied.
 EPRI, Palo Alto, CA: 2010. 1020342.
 Litos Strategic Communication, “The Smart Grid: An Introduction,” prepared for the U.S. Department of Energy, Contract No. DE-AC26-041818, Subtask 560.01.04, undated, p. 15.