Audit reveals some mismanagement of smart grid demonstration stimulus funds

Over three years ago the Department of Energy allocated around $4.5 billion in stimulus funds for smart grid projects in the U.S. That included$700 million for demonstration projects that helped install technology like wireless data networks and battery farms for the power grid. With such a large amount handed out over a relatively short period of time, the chances of problems were high. And according to a newly released report from the Department of Energy’s Inspector General, the smart grid demonstration program had some management issues.

Those problems included:

1. Handing out funds for a couple projects for estimated costs instead of actual costs of projects, which resulted in over payments.
2. Funding a project that also received a grant from another DOE program, the ARPA-E program, for the exact same project.
3. Funding a project that had not handed in proper documents, and had not begun making the energy storage units that it claimed for the award.

The audit looked at just 11 projects, with a total of $279 million in awards, out of the$700 million smart grid demonstration program. Out of that section alone they found $12.3 million in questioned costs, and they have now recovered$6.6 million of those misspent costs, and plan to recover another $5 million. It’s probably safe to assume there’s similar levels of mismanagement throughout the entire$4.5 billion.

The report says:

The Department had not always managed the Program effectively and efficiently. . . .In the absence of significant improvements, the Program is at risk of not meeting its objectives and has an increased risk of fraud, waste and abuse.

As a result the report recommends that the program:

• Ensure adequate review of payments made to recipients
• Provide training to recipients on proper submission of reimbursement packages
• Ensure that recipients contribute their required cost-share from allowable sources
• Ensure the elimination of any potential overlapping funding among awards authorized by various Department programs
• Contracting officers should resolve the questioned amounts in our report.

The stimulus funds delivered an unprecedented, and game-changing amount of federal support for the next generation of power grid technology. It’s natural that with such a large amount of money allocated that mismanagement would happen.

One of the things not addressed in the report is how effective — or not — this type of stimulus program for smart grid projects actually was. Many in the industry back in 2010 complained that the funds actually had a sort of chilling effect on the sector, because the funds took awhile to actually get delivered, which meant utilities waited on these projects and didn’t put money into other new ones.