Utilities overwhelmed by smart-grid cost

For all the attention that the smart grid has gotten recently, actual deployments are only occurring with 8% of utilities around the world, but more than half of these haven’t even started yet, according to a survey released today by Microsoft (NASDAQ:MSFT). Rather than conclude the smart grid is a non-starter, however, Microsoft believes it’s an untapped market set that is set to explode.

The survey, a relatively small sample of 200 professionals across the globe in the electric, gas and water utilities, demonstrated that utilities are willing to adapt to the smart grid, but the magnitude of the changes required in business models to technology and everything else is overwhelming to most utilities, Jon Arnold, managing director for the Worldwide Power & Utilities Industry at Microsoft, concluded.

“There’s been a lot written about disruptive technologies in the past, but our survey results indicate that the implementation of the smart grid and all its components throws a wrench in the process of everyday life at utilities,” Arnold wrote in Microsoft’s blog. “And that’s not a bad thing, of course. Utilities are responding to limitations of an expensive grid infrastructure in the face of growing demand for electricity, political desires for a cleaner environment, and acknowledgement that a smart grid operating environment could benefit every utility company’s overall financial performance and efficiency.”

Microsoft, which makes an energy management portal, Hohm, as well as partners with utilities on smart-grid integration, believes that utilities recognize the need for a smarter grid, but they are just challenged in its implementation. In particular, its survey respondents indicated that utilities recognize the importance of distribution management and smart metering, but 63% think the information technologies available today are not sufficient to address future challenges. This is significantly higher than the respondents in Europe, the Middle East, Africa and Asia that felt the same way.

Cost and return on investment on smart-grid deployments were the top concern of respondents across the globe. Regulatory challenges factored the most into their deployment decisions, with the economic climate having a bigger impact on Asia Pacific respondents. This could be good news for telecom service providers that are anxious to partner in the smart-grid space. With a network already in place, they could potentially offer significant cost savings to the utilities. Only 8% of Microsoft’s respondents believed that their utility had a technology architecture that was adequate to support new business processes and new technologies, and nearly 80% were planning to expand their budgets to account for the expense over the next two to three years.

When it comes to integrating distributed generation sources, 42% were already incorporating wind and solar technologies on rooftops and 25% said they would start to do so in the next one to three years. By early 2013, half of the respondents indicated they would at least offer time-of-use pricing to all their residential customers.