Public utility commissions have increasingly scrutinized smart grid business cases in recent years. Many utilities have struggled to justify the consumer benefits of infrastructure upgrades that reach into the hundreds of millions or even billions of dollars.
And then Superstorm Sandy hit.
Now the business of smart grid is largely seen as a necessity in areas where damage to the utility system left some people in the dark for weeks.
Public Service Electric and Gas Company (NYSE: PEG) has just released its $4 billion Energy Strong plan to strengthen and modernize its gas and electricity infrastructure. The New Jersey utility saw about 1.7 million of its 2.2 million electric customers go without power during and after Superstorm Sandy. About $2.8 billion of the proposed plan goes toward improvements for the electrical grid, with another $1.2 billion for gas delivery.
"PSE&G is proposing one of the most comprehensive grid modernization programs ever,” said Ben Kellison, senior smart grid analyst for GTM Research. “Just the $200 million for fault location, isolation, and service restoration teams represents a massive deployment more than eight times the size of Ameren Missouri's similar program for its 1.1 million customers."
Some of the plan is old-fashioned hardening, including proposed floodwalls for some assets, targeted undergrounding and replacing old wooden utility poles with heavier-duty poles. The mitigation plan to raise, rebuild or install floodwalls around infrastructure in flood areas will cost nearly $1.7 billion.
But cutting-edge technology still gets a substantial chunk of the money, accounting for about $650 million over the ten-year program.
- PSE&G estimates that it will spend about $200 million on fault location, isolation, and service restoration (FLISR). Kellison notes that’s about four times what Southern California Edison is spending from 2011 to 2014 on FLISR.
- The utility will also install a new distribution management system (DMS) for $50 million and a $73 million high-speed fiber-optic network to connect information coming off distribution feeders to the DMS.
- Another $250 million will go to substation automation and remote control and monitoring of every distribution circuit.
- PSE&G proposes an advanced distribution management system for $15 million, which would integrate SCADA and GIS with the DMS and outage management system (OMS).
- Upgrades to the enhanced storm management systems, including mobile systems that could be used across first-responder networks, will cost $50 million.
- Reconfiguring the current electrical system using more smart switches and smart fuses and adding redundancy is expected to cost $200 million.
Much of the cost seems in line with what other utilities have paid for similar systems, said Kellison. He added that PSE&G already has some FLISR on about 60 feeders and a DMS/SCADA system that covers a portion of its territory. The utility has used vendors SEL and OSI in the past, so Kellison said they could have the inside track for any future proposals.
Although the costs don’t seem out of line with some other utility grid modernization costs, the issue of who pays will be contentious as this passes through the board of public utilities in New Jersey. PSE&G noted in a press release that 70 percent of its customers support the Energy Strong proposal. But when the utility first announced the project in February, CEO Ralph Izzo said that the investment was designed without any rate increase.
Fast-forward a few months and PSE&G has proposed to recover the revenue requirements through an “Energy Strong Adjustment Charge” on gas and electric bills. The investment could raise bills by about 6 percent to 8 percent, according to a report in NJ Spotlight. The utility maintained that the increase would be offset by natural gas prices and the elimination of other customer surcharges. For many utilities, the problem of explaining that rates might still go up, but not as much as they would if the investment is not made, is a hard case to make and even more difficult to fit onto a doorhanger or bus station ad.
Although the plan is specific to New Jersey, Long Island could potentially feel reverberations. As PSE&G takes over operations for LIPA, it’s too early to know what smart grid technologies will be deployed on Long Island, but PSE&G’s roadmap for New Jersey could be a sneak peak into the types of systems that could be leveraged to modernize Long Island’s grid, which also felt the full force of Sandy.