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EPRI Ups Estimates of Smart Grid’s Investment Benefits

Revised investment benefit numbers, which could be as high as $2.3 trillion for the United States, reflect a more expansive view of what the smart grid includes—and if the definition were even wider, the long-term benefits would be even greater.

In March 2011, the Electric Power Research Institute (EPRI) issued a new comprehensive report revising and updating its earlier estimates of the potential costs and benefits of the smart grid in the United States. The report, "Estimating the Costs and Benefits of the Smart Grid: A Preliminary Estimate of the Investment Requirements and the Resultant Benefits of a Fully Functioning Smart Grid," is a partial update to an earlier EPRI report, which appeared in 2004, on the costs and benefits of a modernized power delivery system. Though the new analysis is not definitive, it represents a framework for discussing possible levels of future investment to create a grid system that would automatically optimize the interactions of all its constituent elements.

The new report finds that the estimated net investment needed to realize the envisioned power delivery system of the future is between $338 and $476 billion. Previous EPRI assessments had put the estimated costs at about $165 billion.

Though the higher cost estimates may seem startling and unsettling at first glance, they reflect the newer, more advanced vision for the smart grid that has come to be generally accepted in recent years. The concept of the base requirements for the smart grid is significantly more expansive today than it was seven years ago.

As envisaged in the current report, the smart grid still depends heavily on large central-station generation but also includes many energy-storage facilities and sources of renewable energy distributed throughout the system. It has greatly enhanced sensory and control capabilities, configured to accommodate not only distributed power resources but also electric vehicles. Consumers of electricity participate in energy management, and appliances communicate autonomously with the grid. The power delivery network—though an extremely complex system containing millions of communication nodes—is, of course, thoroughly hardened against cyber security threats.

The new estimates translate into annual investment levels of between $17 and $24 billion over the next 20 years. The costs cover a wide variety of enhancements to bring the power delivery system to the performance levels required for a smart grid. They include the infrastructure to integrate distributed energy resources and achieve full customer connectivity but exclude the cost of generation, the cost of transmission expansion to add renewables and to meet load growth and a category of customer costs for smart-grid-ready appliances and devices.

On the basis of that definition, benefit-to-cost ratios are found to range from 2.8 to 6.0. Thus, the smart gird definition used as the basis for the study could have been even wider, and yet benefits of building a smart grid still would exceed costs by a healthy margin.

By enhancing efficiency, for example, the smart grid could reduce 2030 overall CO2 emissions from the electric sector by 58 percent, relative to 2005 emissions. To the extent power delivery is made more robust and reliable, the costs associated with brownouts and blackouts will also be reduced. EPRI studies have estimated the cost of power disturbances across all U.S. business sectors at between $104 billion and $164 billion a year, not counting another $15 to $24 billion in costs associated with diminished power quality.

From the customer's point-of-view, the greatest single benefit of the smart grid will be lower electricity costs. With total benefits estimated at $1.3 to $2.3 trillion, lower electricity prices account for $330 to $475 billion in savings.


  • Clark W. GellingsClark W. Gellings, a fellow at the Electric Power Research Institute, has had a long career in technical management at EPRI, serving in seven vice-presidential positions. He is a life fellow of IEEE and an honorary and distinguished member of CIGRE, the International Council on Large Electric Systems. He is a past-president of CIGRE’s U.S. National Committee.

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About the Smart Grid Newsletter

A monthly publication, the IEEE Smart Grid Newsletter features practical and timely technical information and forward-looking commentary on smart grid developments and deployments around the world. Designed to foster greater understanding and collaboration between diverse stakeholders, the newsletter brings together experts, thought-leaders, and decision-makers to exchange information and discuss issues affecting the evolution of the smart grid.


Clark W. GellingsClark W. Gellings, a fellow at the Electric Power Research Institute, has had a long career in technical management at EPRI, serving in seven ... Read more


Marcus TochiaMarcus Torchia is research manager of intelligent grid strategies at IDC Energy Insights. He has 15 years of experience helping ... Read more


Jean-Philippe FaureJean-Philippe Faure is chairman of the IEEE 1901 Working Group, a member of both the IEEE Standards Association Standards Board and IEEE ... Read more


George ArnoldGeorge W. Arnold is national coordinator for smart grid interoperability at the National Institute of Standards and Technology. He joined ... Read more


Wanda RederWanda K. Reder is chair of IEEE Smart Grid, immediate past-president for IEEE Power & Energy Society (PES), and has served on the IEEE ... Read more