Societal Actors and Dominant Smart Grid Visions - Smart Grid (R) Evolution: Electric Power Struggles - page 81

through their own production of electricity) could undercut electricity sales and expand
regulatory decision making to include new actors with divergent interests.
As mentioned in Chapter 2 , smart grid represents both an opportunity and a potential
threat for utilities. While utilities gain new abilities to control system operations, there
are no assurances that they will benefit economically. Under the current business model,
utilitiesaregenerallypaidforelectricity thattheygenerateandsell.Forsomeutilitiessmart
grid investments could be a way to further ensure returns. By investing heavily in costly
smart grid technologies and getting them included in the rate base, they could potentially
earn healthy returns in an era of decreasing or stagnant electricity sales.
4.2.2 Suppliers of Electricity System Equipment
Suppliers of electricity system equipment are another set of key actors in smart grid
development. These suppliers produce the hardware and software for the electric system.
Electricity systems integrate equipment for generation, transmission, and distribution of
electricity; some technology suppliers want to continue to sell the equipment they have
been supplying for years, while others may be eager to seize new business opportunities
with new technologies and new approaches to energy management.
For companies who specialize in providing electricity system equipment, building a
smarter grid presents a major business opportunity. Building and maintaining electricity
system infrastructure involves complex and expensive engineering work that requires
multiple types of equipment and expertise. A coal-fired power plant costs over $1 billion to
build, while installing a 2 MW wind turbine costs $3-4 million. High-voltage transmission
lines cost roughly $1-2 million per mile. Infrastructure investment and construction are
costly in terms of hardware, software, and personnel training and many private firms
are poised to capture the emerging business opportunities. EPRI estimates smart grid
investment in the United States over the next twenty years could range from $338 billion to
$476 billion, while providing benefits ranging from $1.2 trillion to $2 trillion (EPRI 2011 ) .
The companies which supply smart grid hardware and software are spread across
generation, transmission, and distribution networks ( Figure 4.1 ). Some of these companies
are incumbents like GE and Westinghouse. Engineering firms like ABB, Alstom, GE,
Siemens, Mitsubishi Heavy Industries, UTC, and others build the hardware and control
systems for electric power systems. Established ICT companies like IBM, CISCO,
ORACLE, and others are also involved in smart grid equipment. For these companies,
smart grid presents an enormous business opportunity, allowing them to create new
products for new markets.