The Duke-Progress Merger: Duel of the Smart Grids

The industry has been abuzz this past week over the announced acquisition (ahem – merger) of Progress Energy by Duke Energy. The combined entity will become the largest electric utility in the U.S. by revenue and generation capacity if approved by the various regulatory bodies, which is no sure thing. Like most mergers, the promised benefits, for shareholders and ratepayers alike, are to be derived from improved economies of scale. In this case, the focus has been on reduced risk associated with large generation projects, as well as better generation dispatch and fuels purchasing power. But as their employees are certainly wondering, such savings also come from reducing “redundancies”. Will their various smart grid programs be one of these redundancies?

Both Duke and Progress are smart grid innovators, and both were big-time recipients of ARRA Smart Grid Investment Program (SGIP) stimulus funds, to the tune of $200M each. Their approaches are different however. Progress has been a leading advocate of advanced distribution automation systems, even using dynamic Volt/VAR control as a demand response tool. They also have a successful and extensive pager-based residential direct load control program, with up to 25% of their Florida customers participating. Their SGIP grant is focused on accelerating and upgrading these programs, though it also includes a relatively small 160,000 unit smart meter rollout and some PEV infrastructure, which was likely included to make their SGIP application appear sexier to the Department of Energy.

Duke, on the other hand, has been a leading proponent of smart meters with an aggressive rollout ongoing in Ohio. Even so, they’ve bucked the trend in the U.S. by using PLC-based AMI systems from Echelon without HAN interfaces. These are aggregated at the distribution transformer level by generalized grid routers from the likes of Ambient, Echelon, and SmartSynch, opening the door to innovative distribution management applications.

Will the merger mean a merger of smart grids as well? Or does this portend an internal battle?

At this point it is hard to say, but with so many different state regulators involved, it is hard to imagine a smooth merger that could leverage any true economies of scale, despite the technical opportunities. Duke’s vision is already hampered by skeptical regulators in Indiana, who have dramatically slowed smart meter rollouts, and the Carolinas where relatively fresh AMR meters are still being paid for.

In this sense, this merger may be seen as a microcosm of the difficulties in achieving a consensus implementation of the U.S. smart grid. While there are certainly strengths that come from diversity, and one size does not fit all, the fragmentation of the industry and its regulators will likely continue to be an obstacle to harvesting the full benefits even within the same company. We are eager to see.

Article by Bob Gohn, appearing courtesy the Matter Network.