On April 16, 2009, the Department of Energy's first draft solicitation for smart grid monies proposed to fund multiple, smaller projects, establishing a $20 MM per-project ceiling for federal matching funds. In response, several investor-owned utilities (IOU) have suggested that these funding levels are inadequate. Public comments from DOE officials last week suggest the Department may attempt to respond to utilities' concerns. We anticipate two potential categories of DOE responses:
- Option #1: Raise the cap on a subset of projects to $60-80 MM to test commercial-scale deployment on utility systems; or
- Option #2: Consolidate funding into 1-2 commercial-scale deployment contracts.
KEY POINTS
- Smart grid spending choices. The February 17, 2009 American Recovery and Reinvestment Act ("stimulus package") allocated $11 billion towards electric power transmission, designating an eye-popping $4.5 billion for smart grid applications. A major question remained: how would the Obama Administration spend the money? Figure 1, below, depicts two potential pathways: (1) a large number of small projects (better for technology companies); or (2) a smaller number of more-cohesive modernization efforts (better for investor-owned utilities). [Figure 2 (inside) breaks down the spending levels within the stimulus package.]
- Politics and jobs. On April 16, 2009, the Department of Energy's first draft solicitation for these smart grid monies proposed to fund multiple, smaller projects, establishing a $20 MM per-project ceiling for federal matching funds. We would suggest this reflects that the Obama Administration has prioritized short-term economic stimulus (spreading the money around could mean more jobs) ahead of long-term national grid goals. Nor do we think investors should discount the great political expectations facing the Administration: giving stimulus dollars to coal-burning utilities might give greener Administration backers heartburn.
