With a broad brush, one can describe Smart Grid technologies as being adopted through the regulatory process or through market forces (price and demand). Both processes depend on the benefit to cost ratio of the technology. Unless the ratio is much better than “One” market forces will ensure slow adoption of Smart Grid. Because of this, and the use of the regulatory process that ensures economics of scale and system integrity for grid infrastructure, the regulatory process is the focus of Smart Grid advocates. However, the benefit to cost ratio shows up in regulatory processes as the “used and useful” condition[1], which requires new infrastructure development to have a good track record (“used”) and a short period for cost recovery (“useful”). The benefits that impress regulators are measurable (called “hard”) in dollars. These can be benefits for the utility or consumers. During rate cases, much of the negotiation is about who will receive benefits, typically the monetary (hard) benefits.
Soft benefits are either unmeasurable, or usually enter the utility decision process another way. For instance, environmental benefits can be estimated by counting avoided medical costs per unit of energy produced. Although this estimate is made in dollars, it is subject to uncertainty and value judgments and is therefore viewed as soft. However, if this environmental benefit is mandated by law, then it immediately is transferred to the hard benefit side. In this case, any technology or program that reduces pollution has a dollar value.
[1] “Used and Useful” definition, http://www.regulationbodyofknowledge.org/glossary/define/Used%20and%20Useful/
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