Cost to Implement Smart Grid in the US

What Got Left Out?  What's the Real Overall Cost For Consumers?

EPRI made a big splash last week with a press release announcing the "costs to implement a fully functional smart grid in the U.S. range from $338 billion to $476 billion, but can result in benefits between $1.3 trillion and $2 trillion."  The study "indicates that an investment of between $17 and $24 billion per year will be required over the next 20 years."  The release also stated, "When broken down, these costs correspond to average annual increases of 8.4 percent to 11.8 percent in the monthly bill of residential customers, of 9.1 percent to 12.8 percent for commercial customers and 0.01 percent to 1.6 percent for industrial customers."

Does that mean "annual increases" in that range, or roughly 200 percent more over 20 years for residential customers in their monthly bills?  That would represent roughly tripling monthly residential bills over 20 years, would it not?  A $200 monthly bill would become $600t?  Is a 200 percent increase over 20 years a realistic bite for consumers to swallow?  And that doesn't even account for inflation, which will return if the economy recovers from it's current doldrums.

EPRI is a fine organization serving the industry and I usually am very interested in what EPRI has to say.  In this case, I'm wondering why--as they stated in the release--they left some very important costs out of their calculations to arrive at these, I believe, somewhat "rosy" cost projections.  As the release states, the projections did not include: "the costs of generation, transmission expansion to add renewables to meet load growth and a category of customer costs for smart grid-ready appliances and devices."  The cost "to achieve full customer connectivity" was included.

While these numbers seem reasonable estimates to me, the list of things not included--or at least not mentioned in the EPRI release--is pretty significant.  It includes the cost of reducing U.S. dependency on coal-fired generation, which usually is mentioned under "smart grid" as a tool for mitigating man-made carbon dioxide in the atmosphere.  It does not seem to include the cost of "renewable generation", which is considerably higher that other types of generating facilities and also is intermittent, meaning it has to have some kind of back-up, conventional generation or as-yet-not-invented or perfected, energy storage systems, etc.

The utility industry is approximately a $300 billion per year industry in the U.S., larger than agriculture (including farming and fishing), larger than air travel, larger than motion pictures.  However, it is not a bottomless money pit, especially considering consumption is down as a result of the "Great Recession" and that aged facilities also must be updated/replaced.  I think a reasonable question to ask is where is all this money going to come from?  Obviously it will come from consumers, who ultimately pay all bills, including those of the federal government when it is making "smart grid" grants.  If residential customers are asked to pay roughly 10 percent more per kilowatt hour for what is included in EPRI's analysis, what will be cost of the things left out of the analysis?  What are "benefits" are included in the $1.3-$2 trillion?  What benefits are being included?  Inquiring minds would like to know.

Press releases have to be watched not only for what they say, but what they leave out.  An investment of $17 to $24 billion per year, represents--very roughly--6.6 percent of current utility gross revenue per year.  What gets squeezed out if regulators don't allow utilities to charge customers for all of that?  Are consumers, already in somewhat of a revolt against higher taxes and government expenditures, going to sit still for all this?  I think this release and these projections have to be taken with a salt shaker (not just a grain or two).  I'm all for smart grid, in moderation, but I wonder if things aren't being rushed in a still tenuous economy and if we aren't pushing a burden onto consumers already overburdened by the current state of affairs.  I've seen estimates other than EPRI's that are quite a bit higher when everything is included.  To mangle an old quote: "A trillion here and a trillion there, pretty soon you're talking about real money."
Your thoughts?