Smart Grid report examines barriers, benefits to investment

A Danfoss study reveals the need to communicate an ROI value proposition for investing in the Smart Grid.

07/20/2011


Danfoss, a manufacturer of high-efficiency electronic and mechanical components and controls for air-conditioning, heating, refrigeration and motion systems, recently commissioned a report – Industry Research & Report: Smart Grid – that summarizes the company’s qualitative research on how building owners, engineers and manufacturers view the Smart Grid.

The Ivanovich Group, a third-party firm dedicated to providing strategic services for the buildings industry, conducted the research, interviewing senior executives in facilities and plant services for industrial, K-12 schools, university campuses, commercial offices and government facilities; senior executives in engineering firms; and senior executives for HVAC product manufacturers in an effort to learn what they know and what they think about the Smart Grid. In the course of 30-minute interviews, researchers examined what this sample set perceives to be barriers and benefits to the Smart Grid and what would motivate them to invest in the Smart Grid.

“Survey responses indicate there is skepticism and still low awareness on what the Smart Grid is, what it can do and how much it will cost, which underscores the need for communication,” said Robert Wilkins, vice president public affairs at Danfoss. “The report also highlights the obstacles and challenges that must be addressed by all stakeholders if we are to realize the benefits the Smart Grid offers, including multiple opportunities for reducing peak load.”

Education and Communication are Critical

Although most respondents believe that elements of the Smart Grid will be in place within three to five years, 43 percent feel it is unlikely the Smart Grid will be substantially complete in that same time frame. 52 percent of the participants, however, indicated that they are currently engaged in some form of smart-grid activities.

The value of the Smart Grid needs to be thoroughly communicated in order to better encourage building owners to act. At the same time, by increasing the channels of communication, utilities will learn about the unique wants, needs and expectations of individual building owners, as each typically has a different set of motivators.

Stretched Budgets, Value Focused

The research also confirms that any Smart Grid investment made by building owners competes with other potential investments. In fact, building owners listed costs as the number one barrier to investment in the Smart Grid. Because many buildings are not equipped with control systems that interact with the Smart Grid, that investment may include retro commissioning or retrofits to ensure buildings can take advantage of the benefits the Smart Grid offers.

As they considered benefits of the Smart Grid, respondents cited lower electricity costs followed by better access to information that will help manage energy as the leading reasons to support the Smart Grid. Shorter duration of power outages was also important to building owners.

Other key findings of the report include:

  • Building owners, engineers and manufacturers agreed on the top four motivators to invest in Smart Grid technologies – more effective communications from utilities; financial incentives; significant cuts to electricity rates; and security.
  • In addition to costs, respondents expressed concern about reliability and power quality.
  • Heating, ventilation and air-conditioning manufacturers have assumed a leadership role in the development of the Smart Grid and relevant products.

“The Danfoss Smart Grid report has a lot of useful information for utilities and others in the Smart Grid arena about the expectations and priorities building owners have for the Smart Grid, and what will motivate them to invest in Smart Grid technologies for their buildings,” said Michael Oldak, vice president and general counsel of the Utility Telecom Council. “It’s also interesting to learn how HVAC manufacturers and consulting engineers are preparing for the Smart Grid, and what issues they believe need to be resolved in order to ensure that the Smart Grid will bring its full potential of benefits.

“Overall, it’s good to see such interest and involvement at this stage of Smart Grid developments, and the utilities industry looks forward to working with all constituencies to bring the Smart Grid to market.”