Smart Grid Stimulus SGEF Flash Poll

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Smart Grid Stimulus SGEF Flash Poll

  1. 1. Smart Grid Executive Forum™ Flash Poll Results November 12, 2009
  2. 2. Smart Grid Executive Forum (SGEF) An Overview • SGEF is a private forum of global utility executives, engineers, consultants and system vendors currently actively engaged in the deployment of utility smart grid systems. • The only other qualification for membership is a commitment to participate from time to time in the discussions and group news commentary. • Membership as of 11/12/09 was 1,070 individuals each individually screened for qualifications based on the group charter. • Members hail from over 40 countries and 5 continents. • The McDonnell Group Inc. facilitates SGEF through LinkedIn as a private, strictly non-promotional and non-commercial group designed to deliver shared benefits for all its members. • Membership is limited to qualified participants only. No recruiting, financial analysts, bankers, venture capitalists, event promotions, calls for papers, or sales solicitations are allowed.
  3. 3. A Few Words of Caution on Flash Poll • In addition to support for group think discussions on topics of interest and news commentary, many SGEF members suggested that the group participate in periodic flash polls on hot topics of interest. • This poll is informal, non-scientific and should not be viewed as representative of the industry as a whole or of any specific body of the utility or smart grid marketplace. • For these reasons, the following results are only reflective of the answers obtained from the SGEF participants and not to be interpreted as potentially representative of even the entire SGEF community. • Neither The McDonnell Group, Inc. nor the Smart Grid Executive Forum -- owned and facilitated by the The McDonnell Group, Inc. -- provide any warranty whatsoever regarding the results of this poll either expressed or implied.
  4. 4. To what extent do you agree/disagree with the following statement? “During 2009 the Smart Grid stimulus program -- led by the U.S. Federal Government with initial grants announced 10/27/09 -- has accelerated overall investment in smart grid technology across the U.S. utility industry. “ Strongly Disagree 100% Disagree Neither Agree/Disagree 90% Agree Strongly Agree 80% Summary Observations: 72% •Many members commented that 70% the early effects of the program actually slowed planned 60% investments as utilities stalled already planned projects. 50% •Overall sentiments were positive as the majority of comments shared an optimistic perspective. 40% •Some respondents commented about the importance of allowing 30% the free markets to drive energy industry investments longer term. 20% 10% 0% Source: November 2009 SGEF Flash Poll (N= 141)
  5. 5. Sample of Comments Q1 Although the long term impact of the funding should prove positive and may expedite investments in 2010, in 2009, we saw many ongoing projects put on hold to see if they would receive funding. This effectively had the reversed impact and slowed down investments in 2009. But it slowed programs that were already being considered by utilities prior to the stimulus announcement. This had an undesired impact on smaller businesses. But only investment by organizations receiving stimulus funds even though not apparent yet, moving much faster than without the Stimulus Funding has accelerated but not sure people are investing in the right places - very haphazard generated interest and awareness primarily, few measurable solutions I believe it has created a lull as companies have waited for the announcement. I believe the level of investment has increased in 2009 but any substantial industry impacts will not be seen before 2010 I think the investment is just starting, but the government grants will certainly accelerate investment Initial grants on 10/27/09? Grants announced yesterday would not have any concrete impact today, 10/28/09 Investment pace delayed during the formal grant review process It choked-off all work until the announcement. I will ultimately accelerate work for the winners. It seriously slowed down investment while everyone waited for the results. Now, it will certainly accelerate the investment for those receiving funds. the big question is what will happen with the organizations not receiving funds. We believe they will continue to invest, but not at the rates they anticipated.
  6. 6. Sample of Comments Q1 (con’t) It stimulated interest and RFP's but no real investment till the grants are awarded. It WILL be significant but HAS slowed investment. Looked like a Utility bailout program to me. Only subtly such as a little more experimentation. The funds won't be released or spent until 2010. Perhaps disproportionately on AMI Stimulus caused a temporary pause, but net result will be an increase and acceleration. Our company had plans to proceed with deployment either way Stopped all 2009 RFPs and did not go to the leaders in Smart Grid The Fed program caused a delay in projects that would have proceeded on their own, and distorted some projects the quest for "free money." The Stimulus process actually stifled growth and commitment earlier in 2009. The stimulus program stopped all efforts for 9 months. too early to see a lot of investment in smart grid technology (other than AMI) unfortunately, emphasis is on "shovel ready" technology and applications rather than leading edge smart grid Without the stimulus plan - and cost+ structure of the utility industry = reliance on public money - there is no way any utility would pull off investments/Smart Grid related expenses with consequent chargeback to public
  7. 7. To what extent do you agree/disagree with the following statement? “U.S. utility companies are moving as quickly as possible to integrate renewable energy sources in their supply portfolios.” Strongly Disagree 100% Disagree Neither Agree/Disagree 90% Agree Strongly Agree Summary Observations: 80% •Comments from this question 70% revealed a complete lack of any consensus among respondents. 60% •Many commented that utilities were moving only as fast as recovery and regulations dictated. 50% •Some noted their utilities were moving more quickly and that they 40% still sensed a “wait and see” approach at other utility companies. 30% 28% •Several noted the important role 20% that the smart grid plays in integrating renewable resources. 10% 0% Source: November 2009 SGEF Flash Poll (N= 141)
  8. 8. Sample of Comments Q2 Most of them are still in Smart metering phase a few have ventured into RES. These are either rich on cash or have a very environmental (CA) attitude. Of course it varies and the renewables are creating other problems that are affecting integration. Only going to move as quickly as funds are available Only to the extent they have to - If I was a utility company, I would be getting in the business rather than fighting it Pace still about the same, maybe a slightly better Smart grid enables integration at customer level but renewables still need to become more cost effective. Some are, some aren't. There are exceptions. There is a strong cultural predisposition to build traditional central station, fossil and nuclear fueled power plants because they are cheaper (ignoring risk & societal costs), more reliable (dispatchable), and fit the 100 year old US electric grid topology. They are moving ahead with caution as the integration of certain renewables (intermittent resources such as wind and solar) may present interconnection and reliability concerns They're moving as quickly as utilities can, which is different (slower) than as quickly as possible. trying, but not moving While my company is moving in that direction I sense that there are many utilities that are taking a wait and see approach.
  9. 9. Sample of Comments Q2 (con’t) "Quickly as possible" is relative to the constraints within which most utility companies operate ...some are but many do not seem to be for a variety of reasons. The over riding incentive does seem to be public policy driven - in other words, State mandates to reach certain levels of renewable supply. A few are moving quickly. Most are waiting for KWh cost to come down a little more so capital investment has a better return. All utilities have ether an implicit or explicit requirement to maintain costs so renewables are being added but slowly to maintain prices of the grid. I am sure we could do better -- and we must I believe many are, but I still do not sense the commitment across the industry towards renewables. I think they might, but the PUC's are the limiting factor right now, so no matter how active a utility might be, they can be halted with all the regulatory issues. In many cases, the renewables are required by the PUC's. It depends greatly upon the region. In CA, I strongly agree- the CA IOUs are reporting new solar and wind transactions at a rapid pace. In other parts of the country, the utilities are slower to acquire renewable resources. Key word here is as quickly as possible for utilities. Lack of Tariffs, Poor Interconnect Standards and Qualifying Facility Rules are slowing things down.
  10. 10. To what extent do you agree/disagree with the following statement? “US Investor owned utilities have rate structures that create conflicts between their fiduciary obligations to maximize financial returns for shareholders and their ability to support integrated energy system efficiency objectives.” Strongly Disagree 100% Disagree Neither Agree/Disagree 90% Agree Summary Observations: Strongly Agree •The survey respondents seem to 80% agree overall with the statement particularly when comments were factored. 70% 68% •Many participants called out the 60% need for regulators to incentivize energy efficiency and provide an environment where utilities are 50% rewarded for energy service and not just for asset-based returns or energy sales. 40% •Several called out the fact that costs will be going up for consumers 30% regardless so energy efficiency would naturally become more 20% important based on market factors alone. 10% 0% Source: November 2009 SGEF Flash Poll (N= 141)
  11. 11. Conclusions • The consensus view during the first half 2009 that the US ARRA smart grid stimulus may have unintentionally slowed smart grid system investments has given way to a more optimistic and positive industry sentiment according to this flash poll. • Respondents were evenly split on their perspectives around the speed of renewable resource adoption. Some expressed concerns about cost effectiveness and integration issues and others expressed optimism that the smart grid will help drive down costs and increase safe grid access . • Participants acknowledged some inherent challenges with current rate designs that create conflicts between energy efficiency/conservation objectives and investor owned utility fiduciary obligations to maximize returns for shareholders. • Some indicated that technology innovation costs should be allocated with a higher risk return opportunity premium for utilities and lower relative guaranteed return on new technology and innovation investments. • Overall, the inputs seem to indicate a need for “smarter regulation” to accompany the burgeoning industry focus on “smart grid.”
  12. 12. Contacts & Copyrights • For further information on SGEF or to apply for membership, please visit: http://www.linkedin.com/groups?about=&gid=1715027&trk=anet_ug_grppro • Questions about the SGEF or this flash poll can be directed to SGEF manager Don McDonnell at don@themcdonnellgroup.com or 404-583- 0003. • Smart Grid Executive Forum and the SGEF blue and gold logo are trademarks of The McDonnell Group, Inc. (www.themcdonnellgroup.com). • The materials in this presentation are copyrighted for the exclusive informational use of SGEF members and should not be reproduced, copied, or cited without permission. • A reminder that these results are non-scientific and provided for informational purposes only.

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