Is There a Case for Broadband Utility Communications Networks? Valuing and Pricing Incremental Communications Capacity on Electric Utility Smart Grid Networks
8 May 2009
By James Heidell with Dr. Harold Ware
Smart Grid and broadband deployment have become national priorities -- the American Recovery and Reinvestment Act of 2009 includes a combined total of about $11 billion to fund Smart Grid and broadband projects. This paper explains how the two technologies complement each other and how to assess the incremental costs and benefits of adding Internet access service to utility broadband communications systems. The authors provide an economic framework for analyzing such investments and highlight regulatory policies that can be used to maximize their net benefits. They explain that: use of broadband communications for Smart Grid networks is likely to generate greater benefits than systems that rely on narrow band communications; utilities can take advantage of economies of scope by using their broadband systems to bring high-speed Internet access to more consumers; regulators can promote more rapid and widespread deployment of broadband-based Smart Grid service and Internet access by allowing integrated provision of these technologies, rather than requiring electric utilities to set up separate subsidiaries; and regulators should use economically appropriate pricing and (incremental) cost standards to address concerns about cross subsidies.
