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Summary:

The latest ugly data unearthed about the flagship smart grid project SmartGridCity in Boulder, Colorado, is cringe-worthy. According to SmartGridNews, which dug through Colorado PUC filings, the project was woefully mismanaged, and didn’t follow the proper procedures or do the proper cost analysis before it was started.

The latest ugly data unearthed about the flagship smart grid project SmartGridCity in Boulder Colo. — one of the most widely publicized experiments in bringing smart grid systems to an entire city — is cringe-worthy. According to SmartGridNews, which dug through Colorado Public Utility Commission filings, the project was woefully mismanaged, and didn’t follow the proper procedures or do the proper cost benefit analysis before it was started.

By now most of you know that SmartGridCity, the showcase smart grid project from utility Xcel Energy, has gone way over budget. As we noted back in February the latest estimate for a project that was projected to cost $15.3 million, has risen to an estimated $42.1 million, and that doesn’t include operations and maintenance (the entire project is expected to cost in excess of $100 million). SmartGridNews says the project is now estimated to cost $44.8 million.

According to Xcel, it was the cost of building the fiber optic network that serves as the backbone of SmartGridCity’s communications, a task that was given to consortium partner Current Group, that’s one of the main culprits responsible for the ballooning cost. Not only did the utility need far more underground fiber than it originally anticipated, it also faced other unexpected costs, such as using diamond-tipped drill bits to tear through granite and bringing in cranes and dump trucks to remove boulders, the utility reported in a May 2009 document.

But the real problem is that Xcel, and the who’s who of industry partners in the group, which included GridPoint, Accenture, Current Group, SmartSynch, Ventyx and OSISoft, didn’t perform a cost-benefit analysis prior to starting the project, says SmartGridNews. In addition to no cost analysis, the group originally didn’t file for a “Certificate of Public Convenience and Necessity,” back in 2008 when the project started, which is a filing that would have enabled the PUC to cap costs of the project to protect rate payers. SmartGridNews says that Xcel didn’t file this because “they didn’t think they needed to for what they deemed a research project.” That’s an expensive bit of research.

The project was getting so pricey that in 2009, Xcel asked the PUC to approve a rate increase so that it could recoup some of its costs. In December 2009 the PUC approved an $11 million rate hike to cover additional costs (among other things) but told Xcel it now needed to go through the process of filing a CPCN and it needed to prove why it needed to increase rates. The rate increase and the details of the request for CPCN, are what has been leaking out all these ugly details and media coverage of the mismanagement in this smart grid saga.

SmartGridNews says now that the project is almost done, only 43 percent of Boulder residents have smart meters and the installed metering systems are not providing as many benefits as anticipated. Overall: smart grid FAIL.

For more research on the smart grid check out GigaOM Pro (subscription required):

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  1. This is Exhibit A for why a wireless component is necessary for any smart grid installation.

  2. SmartGridCity is a Smart Grid Flop « SmartGrid Current Thursday, August 5, 2010

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  4. José Antonio Vanderhorst-Silverio, Ph.D. Friday, August 6, 2010

    Under the commentary SmartGridCity Meltdown: How Bad Is It? ( http://bit.ly/aleti4 ), by Jesse Berst, I have added the following two (out of 24) comments):

    1: YES! I Saw This Coming…

    In response to Jesse’s request “…who should have seen this coming – if anyone…,” I am glad to refer everyone to the 2007 EWPC article “Solving Smart Grid Cost Recovery ( http://bit.ly/EWPC37 ),” whose summary says: “To solve the Smart Grid cost recovery dilemma requires a restructuring of the electric industry in such a way that the regulator gets the right signals. A shift from The Anti-System Utility to EWPC solves the problem, as cost recovery of AMI technologies are sent to the market with an international standard interface, that will restrict business model innovations by Second Generation Retailer – 2GR.”

    That article was in response to the [E]nergyPulse article New Trends Emerging For AMI Cost Recovery, where Will McNamara, Principal Consultant, KEMA, Inc. had written that “The unfortunate result is that state regulators may be reluctant to approve cost recovery or even the implementation of AMI / Smart Grid technologies without specific guarantees that benefits of the technologies will exceed the costs in the long-term.”

    That generalization that applies to all utilities, necessarily applied to the Smart Grid City Meltdown. My take is that Xcel management actually though they could monopolize the smart grid by being first to market.

    José Antonio Vanderhorst-Silverio, Ph.D. – 08/05/2010 – 17:02

    Lack of Leadership of the Power Industry.

    The SmartGridCity Meltdown is about the lack of leadership of the power industry. Everything else is secondary.

    Jesse’s Berst SmartGridCity Retrospective and Post-Mortem on the SMART GRID NEWSLETTER distributed by eMail on August 6th, 2010, cover lessons about management and most importantly about leadership. While Lesson #1: “Don’t set unrealistic expectations” is clearly about leadership, and Lesson #2: “Employ proven planning and project management practices” is without a doubt about management, Lesson #3: “Work with regulators early,” seems to be about management, but when we look at the supporting evidence it is essentially about leadership.

    José Antonio Vanderhorst-Silverio, Ph.D. – 08/06/2010 – 12:25

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