Evaluating the Business Case for Smart Grid Investments Jerry Jackson, Ph.D., Leader and Research Director Smart Grid Research Consortium, 37 N. Orange Ave, Suite 500 Orlando, FL Smart Grid Research Consortium Conference & Workshop Rosen Shingle Creek, Orlando, Florida October 20-21, 2011

2 Welcome Conference coordinator Amy Heineman Hotel amenities A “different” smart grid conference

3 Conference Sponsors Smart Grid Research Consortium Thursday, October 20, 2011 Silver Sponsor Bronze Sponsors Media Partners

4 Conference Topic Areas SG technology and applications overviews issues/developments SG coop and municipal experiences Do’s and don’ts and suggestions from industry experts Several “outside the box” presentations Objective is to provide an enjoyable, informative and interactive experience for all attendees

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6 SGRC Background Smart Grid Research Consortium oMembers include coops, municipal and other public utilities oInitiated at Texas A&M University in 2010 oEstablished as an independent research consortium January 2011 Consortium approach: Individual members provide limited financial support to share in the results of a larger-scale research and applications project. Objective: To provide utility member support in evaluating smart grid investment and strategies

7 How Best to Support Coop/Public Utility Smart Grid Investment Analysis? Given: Σ Benfits > Σ Costs for some subset of SG technologies/programs for most utilities Question: Which technologies/programs and what implementation strategy? Difficulties oSG impacts all utility operations oInteractions, synergies oContinuing technology development, cyber security, etc oInvestment timing matters oUtilities are different oNo commonly accepted cost/benefit framework

8 The Consortium Answer Smart Grid Investment Model TM oQuantitative cost/benefit framework oIncludes all important technologies/programs from back- office to substation/feeders/inpremise oModels utility-detailed monthly customer class end-use hourly loads (e.g., residential AC) oApplies Exel interface

9 Our Experience Identified Important Elements in Conducting SG Investment Analysis Paper: “Score Your Smart Grid IQ (Investment Quotient)” Six categories oAMI/DA Investment/Planning Scope oCustomer Engagement Investment/Planning Scope oOther Financial Items oUtility Customer Detail oInvestment Analysis Quantitative Framework oEase of Use/User Interface/ Results Presentation Score sums to maximum of 100

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12 Message Behind the SG IQ “Comprehensive quantitative smart grid investment analysis and planning is required to identify appropriate utility-specific functionality and a roadmap to achieve that functionality with minimum cost.” The analysis framework should include: oAll important related technologies and programs oAll recognized costs and benefits oUtility-specific detail and unique characteristics oRecognition as a long-run IT/planning resource requirement oEasy-to-use, intuitive interface Recommendation: Each utility should consider assigning interface/maintenance responsibility to at least one “go-to” individual. oContinue financial evaluation after project implementation oContinuously evaluate strategy options

13 More Generally, Conceptualizing all of the elements involved in the SG transformation as a financial modeling process helps to: oSee the big picture with respect to the SG transformation oConsider impacts on current and future infrastructure that might be otherwise overlooked oConsider important financial aspects of a smart grid strategy that may have been overlooked oProvide a critical-thinking framework for assessing and evaluating industry changes propelled by SG technologies & Programs