Back in February, during the State of the Union Address, President Obama devoted much time to discussing infrastructure upgrades, self-healing grids and grid modernization efforts. So, when leafing through yesterday's proposed 2014 fiscal year budget, it was no surprise to see that it contains all the correct statements and sentiments regarding creating a smarter grid. However, when we look at the proposed relative allocation of budget to support grid modernization efforts, a different picture emerges.

On the whole, the Department of Energy (DOE) and clean technologies do very well in the budget -- indeed, the proposal has over $28 billion of discretionary funds earmarked for the department, an 8 percent increase over the actual 2012 budget. This is a good follow-through on the strategy outlined in the president’s first term to position the U.S. as a leader in clean energy. The proposal to pay for much of this budget increase by reducing the $4 billion in “unnecessary subsidies to the oil, gas and coal industries” is also a sound approach. However, where the budget falls short is the relative allocation of dollars to specific grid modernization initiatives compared to other energy-related initiatives.

The substantial allocations for alternative vehicle technologies, an Energy Security Trust, small nuclear modular reactors and renewable energy sources are all great news in an otherwise tough budget. However, in the majority of cases, these areas received far more funding than smart grid initiatives. A key piece of building out a national clean energy strategy is the promotion and incentivization of investment in grid modernization efforts. This is, in fact, foundational. We expected to see a much higher allocation of dollars in this area and believe it would make Obama’s clean energy strategy much more robust and defensible. In the past, Obama’s clean technology budget initiatives have not always paid off (think high-profile bankruptcies). A stronger case could have been made this year that if the U.S. is going to be a global clean technology leader, modernizing the grid is in fact a critical place to start. While pulling out what is strictly smart grid spend can be tricky, here is our take on Obama’s proposed 2014 budget.

Smart Grid Budget Breakdown

  • A $200 million performance-based fund will be available for smart grid and efficiency-related programs for next year, modeled after a successful administration approach in education reform that is designed to promote forward-leaning policies at the state level. This one-time funding for a “Race to the Top” performance-based award system supports state governments that implement effective policies. Key opportunities for states include: modernizing utility regulations to encourage cost-effective investments in efficiency, including combined heat and power and demand response resources, and in clean distributed generation; enhancing customer access to data; investments that improve the reliability, security  and resilience of the grid; and enhancing the sharing of information regarding grid conditions.
  • $153 million is allocated for R&D and other activities that will further transition to a smart grid (funds are for the Office of Electricity Delivery and Energy Reliability). This investment seeks to develop real-time situational awareness to improve grid operations, build system-level understanding needed for innovative approaches to technology and regional planning, support advanced visualization analysis and decision support for grid operators leading to predictive response, and enhance security of the grid.
  • $80 million is set aside for a coordinated initiative to develop the technologies and tools to more intelligently, flexibly, and cost-effectively integrate distributed generation, electric vehicles, and residential and commercial buildings loads behind the meter.
  • $20 million is to be used for a new Electricity Systems Hub, which will explore the interface between transmission and distribution systems in the context of a modernized grid.

David Groarke is a Senior Analyst at GTM Research. You can follow him on Twitter @groarke. You can also learn more about his (and his colleagues') smart grid market research at