Electronomics: How the Smart Grid Will Power Wealth, Pt. III

Author Jesse Berst, the head of GlobalSmartEnergy, will soon publish a book, tentatively titled "Electronomics: How the Smart Grid Will Power American Prosperity," where he argues that updating the grid will rebound the economy. This is the third part of a three-part advanced excerpt.

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Part III: The Stimulus Will Build Our Green Future, Today and Tomorrow

The day after the Super Bowl usually involves an instant replay of the game (Great catch, Santonio Holmes! Great run, James Harrison!); a review of the half-time entertainment (Righteous rocking, Boss!); and a recounting of the best TV commercials (A dancing scarecrow from GE?).

Yes, the brainless scarecrow from "The Wizard of Oz" spent 30 seconds singing and dancing its way along the transmission lines of America's beaten up and broken down electricity infrastructure with the hope of convincing us that capital investment can transform this tangle of 19th century wires into a 21st century smart grid.

It's the same hope that the forward-thinking Obama Administration has, and it explains why the current economic stimulus plan put forward by The White House contains funding for the upgrade of thousands of miles of electricity network as well as smart-grid technology innovation designed to improve efficiencies, lower costs, eliminate outages and prevent construction of significant new power plants.

Job-Creating Potential

But the most immediate and pressing reason the President is trumpeting the smart grid is its job-creating potential – both short-term and long-term.

A recent analysis by the Grid Wise Alliance reveals that $16 billion in smart-grid disbursements over the next four years would serve as the catalyst for projects worth $64 billion. These projects would create nearly 300,000 direct and high-value jobs between 2009 and 2012; and 150,000 of these positions would be established before the end of 2009. In addition, the Grid Wise report indicates that 140,000 indirect jobs would be generated between 2013 and 2018 as a result of smart-grid investment.

These numbers are impressive but, to be honest, nobody really knows the true job-creating upside that smart-grid infrastructure improvements can deliver.

Some economists, for example, believe that investment in the electricity network can offer a super-Keynesian jolt that goes beyond traditional New Deal highway repair jobs. Once the road is paved, goes this argument, the pavers go home; but once the wires are fixed, entirely new technology companies and industries will swing into action and spawn wave after wave of surprising and unprecedented Internet-like innovation.

Transcending the Internet Revolution

That notion is well-worth pondering.

Think back to the mid-1990s, to the very early days of the Internet Revolution. Who could have predicted that Amazon or Google would surface and soar? Who really knew how much the Web would transform our personal and professional lives? And, looking into the mists of 1980s history, can you imagine where we'd be today if there hadn't been government funding for DARPA (the Defense Advanced Projects Agency), which developed the precursor to the Internet?

Fast forward to today and beyond: Has anyone fully sketched out how utilities across America will help power a new generation of plug-in hybrid electric vehicles? And do we fully grasp the next software explosion, which will help make global energy consumption an efficient exercise in intelligence?

Probably not.

And that's why it's important to realize that smart-grid stimulus expenditures will create a broad and sustainable foundation or platform upon which other valuable things can be built – just the way the Interstate Highway System of the 1950s led to hundreds of billions of private-sector investments in the transportation, energy, housing and leisure and entertainment sectors.

The proposed stimulus investments in smart grid will help heal and grow the economy in other ways, too.

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Building a Competitive Advantage

Right now, 60 percent of the U.S. GDP is directly dependent on electricity; soon, this figure will rise to 66 percent, and eventually it will hit 75 percent. When three-quarters of our economy is inextricably tied to electricity, the regions of the country with cleaner, cheaper and more efficient and reliable electricity will have a distinct and definitive economic advantage; and these areas will be the ones that attract companies from all over the world seeking high-quality "digital-grade" electricity.

The smart-grid stimulus plan has gotten this far in the legislative process because an increasing number of politicians in Washington are beginning to recognize that with those companies will come with legions of good-paying jobs and bring lots of sustained growth.

There's also a growing realization that since electricity can be generated with a variety of renewable and non-renewable energy sources, smart-grid upgrades and innovations can help boost the economy by cutting our dependence on foreign oil.

Despite this promise and potential, however, a number of critics are currently sniping at smart-grid stimulus investment. One line of attack is that it will take nearly $200 billion over 10 years to fully rejuvenate and re-invent the electricity infrastructure in the United States, and since the stimulus package that's now on the table doesn't come close to reaching that spending level, we shouldn't try at all.

Investing for the Short- and Long-Term

My view is that this is an irrelevant data set. The commercial Internet is approximately a decade old, and if anyone had told the founders of Amazon or Google in 1999 how much investment capital they and their digital competitors would need to grow the Web to maturity, they would have laughed and kept on building their sites and technologies – one bit and byte at a time.

We are desperate for job creation right now, and smart-grid infrastructure and innovation investment will certainly deliver this. But, as the President has said, we must also build out for the long haul needs of the nation.

That means the federal government must ensure that the smart grid stimulus does nothing to get in the way of open standards, transparent pricing that includes all externalities, and correct policy that provides incentives so this transformation can fulfill its potential and reach or exceed Internet proportions.

Laying the Technology Groundwork

Even if it's just a beginning, a first step, Washington's smart-grid stimulus must also lay the groundwork for three foundational technologies: a communications backbone that everything will run on; smart meters and other smart devices to monitor, measure and control electricity through the open standards mentioned above; and advanced control systems, the software that puts the power of computers to work by regulating, safeguarding and optimizing the whole network.

We can build and install these pieces now – and then start stitching them together into the advanced, automated system we must have if we are to stay globally competitive with the rest of the world, a world that is already ahead of us when it comes to smart grid innovation and implementation.

Smart-grid stimulus investment isn't a "Field of Dreams," if-you-build-it-they will-come proposition; but once the government injects money and signals that it is truly serious about electricity infrastructure, the impact will be powerful and profound. Utilities will start transforming themselves, Silicon Valley will get into the act, and Detroit will be forced to finally reckon with plug-in hybrid electric vehicles.

In other words, we are entering a totally new phase here. By pumping stimulus dollars into smart grid infrastructure and innovation, we are moving from vision and idealism to actually doing something that will boost many sectors of the economy as well as the quality of life in communities all across the country. From my perspective, it's a short- and long-term investment well worth making.

This piece is from an independent writer and is not connected with Greentech Media News. The views expressed here are those of the author and are not endorsed by Greentech Media. Jesse Berst is head of GlobalSmartEnergy (GSE), an internationally recognized consulting firm, and author of the forthcoming book, "Electronomics: How the Smart Grid Will Power American Prosperity."