Politics and Law

WASHINGTON--The Department of Energy will be pushing out $4.5 billion for smart-grid investments as part of the federal government's economic stimulus plan, but unless smart-grid standards are developed quickly, the government risks wasting its money on soon-obsolete technologies that could be incompatible with one another, regulators and industry representatives warned Congress Tuesday.

Integrating information technology into the nation's electric grids could enable consumers to monitor and reduce their electric usage and help electric companies locate and respond to power outages, among other benefits, said Fred Butler, a commissioner on the New Jersey Board of Public Utilities.

However, Butler told the Senate Energy and Natural Resources Committee, "if we do not do this correctly, we come in danger of not coming even close to meeting those aspirations."

Congress may want to consider withholding money for smart-grid demonstration projects or the matching grants promised in the stimulus package until fuller standards are put in place, one witness at the hearing said. The Congress may also want to consider taking action to expand the federal government's authority to enforce smart-grid standards, others said.

Committee Chair Jeff Bingaman (D-N.M.) said government agencies and the private sector "should be proceeding with (smart grid) demonstration projects but at the same time need to be accelerating the standards process."

Bingaman said he was unsure at this point whether his committee would consider granting the Federal Energy Regulatory Commission more enforcement authority over smart-grid standards.

Successfully integrating interoperable smart-grid technology into the electric grid will require standards on a number of issues, including security, reliability, data sharing, and privacy. Standards could be developed for a number of other facets of the smart grid as well, such as charging standards for electric hybrid vehicles and open architecture standards.

President Barack Obama signs the American Recovery and Reinvestment Act in Denver.

(Credit: Screen capture by Martin LaMonica/CNET Networks)

There are so many standards to consider, said Patrick Gallagher, deputy director of the National Institute of Standards and Technology (NIST), that his organization's primary responsibility is simply prioritizing the order in which standards should be developed.

"What's desperately needed is an overall roadmap by which we can decide which standards affect regulatory concerns or technical challenges and need to be addressed right away," he said.

The NIST is currently developing such a roadmap, Gallagher said, and hopes to have initial drafts of its priorities by this summer. The NIST's priorities will not impede private industry from taking the lead in developing standards--so long as they are flexible and technology neutral--Gallagher said. He nevertheless expressed concern that the private sector's interest in moving forward as quickly as possible could make it difficult for all companies and organizations to reach a consensus on standards.

FERC Commissioner Suedeen Kelly said the standards development process should not delay the smart-grid demonstration projects the stimulus funds are intended for.

"The demonstration project and the funding of it is a real opportunity to advance (smart-grid development)," she said. "What we anticipate seeing is a real demonstration of the benefits...(Currently), it's unclear how the interfaces will work with consumers."

However, Evan Gaddis, the president and CEO of the National Electrical Manufacturers Association, said that the matching funds in the stimulus package should be withheld until standards are in place--standards that his association and other industry groups can develop quickly.

"I realize like everybody else we've got to get jobs going," he said, "If you tell us start writing these standards, we will get them written quickly. If we get grid standards in place before we start building, we will save money.

A fool with a plan can beat a genius with no plan--or so the saying goes, according to T. Boone Pickens, the billionaire oilman turned clean-energy advocate.

To provide a plan to boost the nation's use of clean energy, Senate Majority Leader Harry Reid (D-Nev.) announced Monday he will introduce major legislation this week to reform electric transmission line development. Reid made the announcement at a Washington conference where he, Pickens, former President Bill Clinton, former Vice President Al Gore, and others met to discuss guiding principles to reform the United States' energy policy. The forum was titled the "National Clean Energy Project: Building the New Economy."

The Obama administration has said it would like 25 percent of the nation's energy to come from renewable sources by 2025, and the billions of dollars provided in the recently signed stimulus package offer the means to get there, Reid said. His bill, he said, will provide more guidance for that funding to be used appropriately.

The deployment of renewable energy across the country has faced setbacks because of the challenges facing the construction of electric transmission lines, such as who will fund them and where to site the lines. The bill aims to give the federal government more authority over those questions.

It's a proposal that has been met with some resistance, Reid said at the conference, hosted by the Center for American Progress Action Fund.

"If this is going to succeed, we're going to have to accept that's how we've always done things," he said, citing the federal government's central role in developing railroads and a national highway system. "Everyone should get off the kick this program won't work if the government's involved in it."

The legislation will call for the president to designate renewable energy zones with significant clean-energy-generating potential. Once that occurs, the bill will call for massive planning efforts to site transmission lines around those zones--a process that the federal government will take over if it stalls.

WASHINGTON--Now that the federal government has authorized spending billions of dollars for transmission line construction and renewable-energy efforts, it may expand its authority over how interstate transmission lines are built.

President Obama on Tuesday signed the so-called stimulus bill into law, providing what Obama's climate czar Carol Browner called on Tuesday "an amazing down payment" on smart grid technology, renewable-energy production, and other efforts to create energy efficiency.

Questions remain, however, as to whether the Energy Department and other government agencies will be able to overcome a complex regulatory maze to spend the funds quickly and appropriately, particularly for transmission lines.

"Our energy sector is very complicated," Karen Harbert, president of the U.S. Chamber of Commerce's Institute for 21st Century Energy, said at the Chamber on Tuesday. "It's become too easy for any project of any hue to get wrapped up in 'green' tape."

That "green tape" could mean granting permits, allocating costs appropriately for interstate transmission lines, or siting--the process of determining where exactly the lines will go.

Congress intends to address these problems in upcoming legislation, said Chris Miller, a senior energy adviser for Senate Majority Leader Harry Reid (D-Nev.), at a smart-grid discussion at Google's Washington office on Tuesday. The legislation would expand the federal government's authority over a process that is typically led by the states.

"You will see legislation, and you will see it fairly soon," Miller said.

Reid has been working for a couple of years, he said, on ways to get renewable energies to the marketplace and will reintroduce an expanded version of a bill he introduced last session. The legislation is likely to be introduced this March or April.

If the government truly wants to meet Obama's goals for energy efficiency--such as doubling the amount of renewable energy in the next three years--the Department of Energy will have to reorganize immediately, said Andy Karsner, the Energy Department's former associate secretary for energy efficiency and renewable energy. The department's failure to distribute the loan guarantees promised in the Energy Policy Act of 2005 demonstrate the department's failures, he and other panelists at the Google event said.

The department is mired in the "organic growth of legacy policy," Karsner said, and needs to exert more authority over interstate transmission issues.

Just as decades ago Congress withheld highway construction funds from states that did not adopt 21 as the legal drinking age, the government should be able to enforce conditions on states to set up a functional, efficient electric transmission system, Karsner said.

"It's a necessity, and only the federal government can provide for that necessity," he said.

John Podesta, an Obama adviser and president of the Center for American Progress, said the administration was enthusiastic about the promise of renewable energy as it developed the stimulus package but was weighed down by "a sense of frustration that policy still needed to be developed."

House Democrats on Thursday revealed details of a massive legislative effort they said would inject new life into a flagging U.S. economy, thanks to a combination of $825 billion in tax cuts and new government spending.

The sprawling, 258-page draft bill includes $32 billion in electric power upgrades, sometimes known as "smart grid" technology, $6 billion for expanded broadband Internet access, and $20 billion for health care information technology.

"The economy is in a crisis not seen since the Great Depression," said letter published Thursday by Rep. David Obey, a Wisconsin Democrat who heads the House Appropriations Committee. "Credit is frozen, consumer purchasing power is in decline, in the last four months the country has lost 2 million jobs and we are expected to lose another 3 (million) to 5 million in the next year."

The House leadership has said it would like to hold a floor vote on the package by January 28 and send it to President-elect Barack Obama by mid-February. One potential obstacle is negotiations with the Senate, which is likely to have its own priorities.

The energy-related sections of what is tentatively called the American Recovery and Reinvestment Act of 2009 include $11 billion for research and development related to the "Smart Grid Investment Program;" $8 billion in loans guarantees for renewable energy generation; $2 billion for loan guarantees to high-capacity battery makers; and $200 million for a grant program for electric vehicles.

Some other portions, excerpted from the summary prepared by Rep. Obey's office:

* Energy Efficiency and Renewable Energy Research: $2 billion for energy efficiency and renewable energy research, development, demonstration, and deployment activities to foster energy independence, reduce carbon emissions, and cut utility bills. Funds are awarded on a competitive basis to universities, companies, and national laboratories.
* Home Weatherization: $6.2 billion to help low-income families reduce their energy costs by weatherizing their homes and make our country more energy efficient.
* Cleaning Fossil Energy: $2.4 billion for carbon capture and sequestration technology demonstration projects. This funding will provide valuable information necessary to reduce the amount of carbon dioxide emitted into the atmosphere from industrial facilities and fossil fuel power plants.
* Alternative Buses and Trucks: $400 million to help state and local governments purchase efficient alternative fuel vehicles to reduce fuel costs and carbon emissions.

In terms of wireless and broadband, the legislation would require the National Telecommunications and Information Administration (part of the Commerce Department) to create a grant program for "nonrecurring" costs of broadband deployment in rural, suburban, and urban areas--meaning, basically, anywhere in the country. NTIA is supposed to prioritize "unserved" and "underserved" areas, two terms that have no actual meaning until the Federal Communications Commission eventually comes up with one.

State governments may apply for grants by submitting reports listing which of their areas have unserved wireless voice, underserved "advanced wireless broadband," unserved basic broadband, and underserved "advanced broadband service." NTIA will dole out separate funds for wireless deployment and broadband deployment.

"Advanced broadband service" is defined as at least 45 megabits per second downstream and 15 megabits per second upstream; "advanced wireless broadband" is 3 mb/sec downstream and 1 mb/sec upstream.

Whether this so-called stimulus will have any positive effect on the economy is uncertain, though, because the U.S. Treasury will pay for it by running up the national debt significantly and future generations of taxpayers will be expected to pay it back.

The bailout's cost so far has ballooned to $8.5 trillion, not counting the $5.2 trillion in Fannie and Freddie guarantees, although the Treasury should eventually recover some or even much of this amount. If deficit spending were a sure way to stimulate the economy, the Treasury could simply borrow, say, $100 trillion -- and the economic malaise of the last few months would evaporate.

A recent article by Greg Mankiw, a professor of economics at Harvard and former adviser to President Bush, surveys recent research and concludes that each dollar of government spending increases economic activity by only 1.4 dollars, while (according to Obama's top economics adviser) a dollar of tax cuts raises the GDP by about $3. And Tyler Cowen of George Mason University suggests that "we are being asked to spend (untold) hundreds of billion dollars" even though the evidence it will have a positive impact "is inconclusive."

WASHINGTON--When politicians are doling out trillions of tax dollars in bailouts and so-called stimulus spending, nobody should be surprised if the line of businesses queuing for cash snakes all the way around the Capitol building. The latest idea: more spending on smart grids.

The idea of a smart grid is an alluring one: A far more intelligent electric power system that takes advantage of technological developments to deliver power in a more optimal, energy-efficient way. A household dishwasher could decide to turn on when prices are low at off-peak times, and plug-in electric cars could feed power back into the grid when necessary.

To make the case that a smart grid is deserving of some serious federal largesse, utility companies and their business partners organized an event here on Thursday that drew hundreds of congressional staffers and random political lurkers (the free sandwiches probably helped). The companies demonstrated "smart" thermostats and smart phone applications to monitor energy usage--and then delivered the punch line: significant checks from the U.S. Treasury are necessary to make all this happen.

Given that electric companies make money from energy consumption, they need some government encouragement to adopt smart grid technologies, they said.

Congressman Jay Inslee (D-Wash.) gave his support Thursday for using stimulus money to invest in smart grid technology.

(Credit: Jay Inslee's congressional Web site)

The federal government should provide "the right incentives to allow the utilities to do the right thing," said Bob Gilligan, vice president of transmission and development for GE Energy.

It is expected, business representatives said, that Congress will soon authorize using taxpayer funds for smart grid technology, if not through the upcoming stimulus package, then in either an energy bill or a separate climate change bill.

Rep. Jay Inslee (D-Wash.), who belongs to the House Select Committee on Energy Independence and Global Warming, the Energy and Commerce Committee, and the Natural Resources Committee, was on hand to endorse the spending allocation.

"We know this is driven principally by private enterprise and private inventors, but Uncle Sam needs to belly up to the bar and be the spark plug for this revolution," Inslee said. "We know the world demands clean energy technology. The world is going to go to the door of the country that will develop these new technologies."

Along with increasing loan guarantee programs and research and development funding for such technologies, the federal government could take steps to incentivize the use of smart grids by decoupling utility revenues from the amount of electricity sold, Inslee said. The development of a smart grid system could also be dovetailed with a renewable energy portfolio standard, he said.

"We should not allow this economic crisis to be wasted," Inslee said. "We intend to use this stimulus package to promote investment in these technologies."

Tax vehicles such as investment tax credits would be cleanest way to spur smart grid use, said Dan Delurey, executive director for the Demand Response and Smart Grid Coalition, a trade association.

"The smart grid does qualify for stimulus," he said. "It's infrastructure, and it's shovel ready. There will be R&D, but there are technologies out there that will be deployed now."

Better business models and policy frameworks are needed, the business representatives said, before the country can embrace renewable energies like wind and solar, which are not especially useful on a calm day or when the sun isn't shining. The energy produced by those sources, they said, needs to be integrated into a smart grid that can use other sources of power when necessary.

Furthermore, smart grids can let customers know when energy from environment-friendly sources is available.

"We have the opportunity to put into the hands of Americans the means to save our economy money and address a grave threat" such as climate change, said Dan Abbasi, senior director for the investment firm MissionPoint Capital Partners. (Abbasi's company has invested in companies including Trilliant Networks, which sells "intelligent network solutions that power the Smart Grid," and stands to make a handsome profit from Uncle Sam's generosity.)

Smart grid implementation could also result in installation jobs in every congressional district in the country, he said.

The benefits of the smart grid are spread to all energy participants, not just utilities, said Trilliant CEO Bill Vogel.

However, "like the Internet, the government needs to have some influence and then back out to get something started correctly," he said of the smart grid.

"Through innovation and standards, it is the gift that keeps on giving," he said.

CNET's Declan McCullagh contributed to this report