July 9, 2009Client Alert

U.S. Department of Energy Makes $3.9 Billion Available for Smart Grid Investment and Demonstration Projects

U.S. Department of Energy Secretary, Steven Chu, announced on June 25, 2009, that $3.9 billion in funding under the American Recovery and Reinvestment Act of 2009 (the “Act”) is now available for grants that support efforts to modernize the electric grid such as manufacturing, purchasing and installation of existing smart grid technologies that can be deployed on a commercial scale and demonstrations of how emerging technologies can be applied in innovative ways within the electric delivery system to provide integrated and economically-feasible solutions. After collecting more than 600 comments on drafts of these grant solicitations, the U.S. Department of Energy (the “DOE”) has released announcements detailing two new funding opportunities: the Smart Grid Investment Grant Program and the Smart Grid Demonstration Program.

Smart Grid Investment Grant Program. Approximately $3.4 billion is expected to be available in grants under the Smart Grid Investment Grant Program (the “SGIG”). Letters of intent to submit an application and applications are due for each of the three phases of the SGIG as follows:

    • Phase 1: Letter of Intent is due by July 16, 2009, and application is due by August 6, 2009.
    • Phase 2: Letter of Intent is due by October 23, 2009, and application is due by November 4, 2009.
    • Phase 3: Letter of Intent is due by February 10, 2010, and the application is due by March 3, 2010.

The purpose of the SGIG is to accelerate the modernization of the nation’s electric transmission and distribution systems and promote investments in smart grid technologies, tools, and techniques which increase flexibility, functionality, interoperability, cyber-security, situational awareness and operational efficiency. Included among the goals of the SGIG are enabling informed participation by consumers in retail and wholesale electricity markets, accommodating all types of central and distributed electric generation and storage options, anticipating and responding to system disturbances and operating resiliently to attacks and natural disasters.

The cost share or match from the federal government must be at least 50% of the total allowable costs of the project. Approximately 40% of the SGIG funding will be allocated to smaller projects in which the federal share of the project would range from $300,000 to $20,000,000 and approximately 60% will be allocated for larger projects in which the federal share of the project would range from $20,000,000 to $200,000,000. The period of performance for projects is three years. While the funding opportunity announcement for the SGIG does not specify what each phase of the program should involve, the DOE expects to make awards for Phase 1 in October 2009, Phase 2 in March 2010, and Phase 3 in June 2010.

Smart Grid Demonstration Program. Approximately $615 million is expected to be available in grants under the Smart Grid Demonstration Program (the “SGDP”), which includes two areas of interest: demonstrations of smart grid technology viability and validation and demonstrations of major, utility-scale, energy storage installations. Applications for the SGDP are due by August 26, 2009.

The goal of the SGDP is to demonstrate and evaluate technologies that will lead to reductions in system demands and costs, increases in energy efficiency, optimization of allocation of resources to meet that demand, and increases in the reliability of the grid. The first area of interest under the SGDP is to support regionally unique demonstration projects of smart grid technologies such as advanced digital technologies for use in planning and operations of the electric power system and the electricity markets, including microprocessor-based measurement and control, communications, computing, and information.

The second area of interest under the SGDP is to support demonstration projects for major energy storage installations at scales that can be readily adapted and replicated across the United States, including technologies such as advanced battery systems (including flow batteries), ultra-capacitors, flywheels, and compressed air energy systems, and application areas include wind and photovoltaic integration with the grid, upgrade deferral of transmission and distribution assets, congestion relief, and system regulation.

A grant recipient must share at least 50% of the total allowable costs for demonstration and commercial application projects under the SGDP, and the recipient’s share of allowable costs must come from non-federal sources unless otherwise allowed by law. As described in the DOE’s funding opportunity announcement, the anticipated number of SGDP recipients to be selected and award sizes, by area of interest, are as follows:

Area of Interest

Anticipated Number of Selections

Anticipated Award Sizes (Government Funding)

1. Smart Grid Demonstrations

8-12 total

Up to $100M

2. Energy Storage

12-19 total

See below

Battery Storage for Utility Load Shifting or for Wind Farm Diurnal Operations and Ramping Control


$40M to $50M total

Frequency Regulation Ancillary Services


$40M to $50M total

Distributed Energy Storage for Grid Support


$25M total

Compressed Air Energy Storage (CAES)


$50M to $60M total

Demonstration of Promising Energy Storage Technologies


$25M total

The period of performance for projects under the SGDP is expected to be three to five years. The DOE anticipates notifying applicants of their selection for an award by early November 2009, and making awards beginning in December 2009, or January 2010.

This client alert is one of a series designed to provide summaries of the Act and information and guidance regarding opportunities and relief made available through the Act. All of the Act client alerts are available on Michael Best's Stimulus and Economic Recovery Team publications page. For additional information on this topic, please feel free to contact one of the authors of this alert, or your Michael Best attorney.

If you are interested in learning about other provisions included in the Act, the Michael Best Stimulus and Economic Recovery Team is prepared to assist you in understanding the implications and in developing and implementing a strategy to secure the benefits of this unprecedented legislation. Specifically, we will assist you to identify opportunities, prepare appropriate proposals and make targeted contacts to secure funds. We will also work with you to ensure that your applications are tailored to meet your needs and that your funded projects proceed in compliance with award requirements and applicable laws.
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