There's a $4.5 billion pot of federal stimulus funding awaiting utilities and companies that can make the right pitches for so-called "smart grid" projects aimed at bringing two-way communications and controls to the nation's electricity grid.

On Tuesday, the California Public Utilities Commission heard from some smart grid technology, standards and security experts on how the Department of Energy might judge those applications.

While the DOE has yet to set formal guidelines for how it will disburse those smart grid funds, utilities and companies are busy laying the groundwork for getting a piece of the action (see Obama Signs Stimulus Package).

The most recent smart grid project likely to seek stimulus finding, a million smart meter deployment in Miami, was just announced Monday (see A Million Smart Meters for Miami).

For that project and scores more around the nation, some basic guidelines are expected to apply for grabbing a piece of that stimulus money, said Mike Gravely, manager of the California Energy Commission's energy systems research office.

Winning projects will need to incorporate existing smart grid infrastructure with new technologies, as well as be designed to interoperate from utility to utility, he said.

"We don't want to block out innovation," he said, "but we don't want to end up with 15 different systems."

More details of how the DOE smart grid grant program will work emerged last week in comments from Vice President Joe Biden (see Green Light post). Of the $4.5 billion, $3.375 billion is set aside for so-called smart grid investment grants and another $615 million will be aimed at smart grid demonstration projects. The remaining money is set for worker training ($100 million), a DOE transmission and demand program ($100 million) and grid interoperability ($10 million)

The $3.375 billion in smart grid investment grants will be doled out in amounts from $500,000 to $20 million, except for a subset aimed at devices called phasor measurement units used to monitor transmission systems, which are set to receive from $100,000 to $5 million each, said Andrew Campbell, an advisor to CPUC commissioner Rachelle Chong who presented on the DOE's behalf Tuesday.

The $615 million aimed at demonstration projects is broken into three key areas – regional smart grid demonstrations, demonstrations of systems using phasor monitoring devices, and utility scale energy storage demonstrations. The latter could include advanced battery systems, ultra-capacitors, flywheels, and compressed air energy systems as well as integrated solar and wind power and grid congestion relief.

Funding is expected to come in $5 million to $60 million chunks, and while no application dates have been circulated yet, the money is to be disbursed by September 2010.

The DOE also highlighted five technologies it was looking for in smart grid projects –integrated communications, sensor and measurement technologies, advanced components, advanced control methods, and improved interfaces and support for human decision-making.

"It appears that the DOE wants to use the recovery money to figure out what works and what doesn't," Campbell said.

With an expected 1,500 applications expected, not every applicant is expected to get their wish. Still, hundreds are likely to be given out, he noted.

The DOE hopes to have the final announcements on grant rules by this summer, and all the money is to be disbursed by September 2010. But with three deadlines for applications, its possible that funding will be exhausted in that first round of applications, Campbell said.

Then there's the issue of how standards are to be incorporated into stimulus-ready smart grid projects – a focus of Energy Secretary Steven Chu and others in the Obama Administration (see Green Light post).

The National Institute of Standards and Technology has been given the task of coming up with rules on how standards should be incorporated into smart grid efforts seeking stimulus funding.

Last week, the NIST released a timeline for making those recommendations, starting with meetings later this month and in May with utility and industry representatives and ending with a "roadmap" laying out priorities for architecture and standards, set for release in September.

Erich Gunther, chairman and CTO for EnerNex Corp. and an architecture council member for the smart grid industry group GridWise Alliance, said that the NIST is likely to "recommend something" in terms of which standards it will seek to see in projects seeking stimulus funding.

But Gunther added that any standards recommendations to emerge aren't likely to be the most controversial ones – such as the call from some smart grid companies that Internet protocol (IP) be part of any project (see Smart Grid: A Matter of Standards).

Rather, he said, NIST is likely to focus first on broad suggestions for how to allow utilities to communicate with each other.

Adding security to smart grid projects is another likely area of focus. The need for security was highlighted earlier this month, after unnamed national security officials told the Wall Street Journal that cyberspies had penetrated parts of the nation's grid system and left behind software meant to disrupt it (see Hacking the Grid: Is Smarter Less Secure?).

But justifying expensive security on a cost-benefit measure could be difficult for those developing projects seeking stimulus funding, said Frances Cleveland, president of Xanthus Consulting International.

"You're not talking about a payback," she said. "You're talking really about avoiding some future security problem, but you don't know what it is." She suggested that state regulatory bodies like the CPUC take those security costs into account when judging various project proposals.

She also noted that disgruntled employees, rather than foreign spies or terrorists, were the chief threat to grid security, since they're the ones who know how the system works and what its weaknesses are.