A Drop in the Bucket

Governments and utilities will spend billions modernizing the electric grid. But that's not nearly enough.

Image: iStockphoto

Governments and utilities worldwide are likely to spend $200 billion on so-called smart-grid initiatives by 2015, a development that promises greater energy efficiency on a global scale, but that is only a small step towards what could be done to use energy more efficiently.

Right now, only a fifth of the energy we actually burn or otherwise generate for electricity is actually used. The rest is wasted, either right at the transmission plant, through the transmission lines, or at the final destination—the home or business buying the electricity.

Smart-grid initiatives are meant to cut down on that waste by combining more modern transmission systems with communications technology that allows both consumers and utilities to better manage the flow of electricity.

A smarter grid is the basic building block for such initiatives as electric and hybrid cars, and utility executives like Jim Rogers, CEO of Duke Energy, consider increasing efficiency a source of energy in and of itself.

According to a new report from Pike Research, there is new urgency to adding to smart grids worldwide that will result in utilities and governments spending $200 billion on the new technologies by 2015.

Now, don’t get me wrong, $200 billion is a lot of money and could do a lot of good. But it’s a pittance if we really believe we need to be more efficient with energy—if we take seriously the threat of global warming or the promise of delivering cheaper energy. And it’s a figure that shows just how out of whack our spending priorities can be.

Bringing a full smart grid online in the United States alone is a $1 to $2 trillion proposition over the next couple of decades, according to research by Jackson Associates, and it will save $48 billion for the 200 largest U.S. utilities.

So worldwide spending over the next few years is a mere fraction of what needs to be spent right here in the United States to modernize our grid.

And the spending on such modernization is pretty paltry compared with some of the money our government has thrown away over the past eight years.

Take, for instance, the Bush tax cuts of the early 2000s. That legislation cost $2.48 trillion from 2001 to 2010—enough to have already modernized our electric grid by now—if we’d chosen to invest it that way. Of course, those tax cuts, instituted at a time when the nation is fighting two wars, have left the government in such a fiscal hole that every spending plan is a dangerous addition to an already overwhelming debt.

Closer to our own time, the government will spend more money bailing out banks, AIG, General Motors, and Chrysler than the entire world will spend on smart-grid technology that could lay the groundwork for future growth and help mitigate the effects of global warming.

So, while it’s nice to see the world taking steps toward modernizing one of the basic building blocks of a modern economy, it’s discouraging that our leaders over the past decade chose to spend so much money so unwisely that there’s little left over to invest the really big money we need in such an initiative.