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'Smart' Stimulus

Over the last year, Japan’s long economic doldrums have been used as a cautionary lesson for stimulus spending in Washington policy circles. While there is little doubt that Japan has overspent on public works projects, it is also clear that Japan invested mainly in the same old projects: dams, roads, and airports. Today’s release of the  smart grid stimulus grants shows that the United States  does not have to repeat the Japanese experience.

Announced by President Obama during a visit to a solar energy facility in Arcadia, Fla., the grants consist of $ 3.4 billion for smart grid projects, spread across 49 states and the territory of Guam. This is three quarters of the amount announced initially in the stimulus package. The money will go directly to private companies, utilities, or equipment manufacturing. The private sector guarantees an additional $ 4.7 billion to finance 100 projects aimed at demand management and technological update of the electricity grid.

A quick look at the spatial distribution of the grants shows that most of funds will go to companies located in the top 100 metros. Two-thirds of the projects and 85 percent of the funds will be managed from these areas. They will invest most of the money in crosscutting systems, a combination of demand response programs, smart grid technologies, and appliances. A quarter of all the money will be spent on smart meters projects. The utilities in the top 100 metros will also spend $148 million on improved reliability of transmission lines.

Utilities that develop projects outside of the largest cities in the country have a greater share of federal funding. In general, those grants cover about 42 percent of the cost of the smart grid projects. In the case of the integrated projects that hold the lion’s share of spending, these utilities are subsidized at a 49 percent rate. The smart meter projects follow the same trend, with projects outside of the top 100 metros subsidized at a higher rate.

While the amount spent on smart grid improvements is only 0.4 percent of the total recovery package and 3 percent of the infrastructure stimulus, it is a positive start. Absent national renewable energy standards (though they are contained in pending congressional legislation), states can encourage utilities to reduce electricity demand or increase rate transparency for their customers.

Bigger picture, talk about changing our mix of energy sources and the promotion of electric cars is far more advanced than the actual infrastructure on the ground. Before investing in more cables and wires, this $3.4 billion provides a step toward the necessary technological update of the electricity grid and demand management programs for those game-changing ideas to move forward. Now that’s smart.