Failure always option in R&D, so Xcel should pay for project

Research and development can be expensive. Ideas are only as good as the paper they’re printed on – or the pixels that display them – until someone takes the risk to prove they can work in the real world.

And failure is always an option. Good ideas don’t always pan out the first time. That’s why those who take the risks and persevere until an idea can be profitably implemented reap the rewards. Those who fund innovation deserve a rich return on investment.

So what is publicly traded Xcel Energy thinking when it asks the Colorado Public Utilities Commission to allow it to pass the costs of the SmartGridCity project in Boulder on to all the state’s ratepayers rather than its shareholders?

As a new product rollout, SmartGridCity’s cost overrun made it less than a jolting success, and the company has said it won’t be doing things exactly that way again. As a research project that yielded important information for the future, however, the results were positively electrifying.

The company told the Business Report at the beginning of the year that Boulder had been selected specifically because its grid is relatively self-contained. If anything should go wrong with the experiment, there would be less of a chance other parts of the system could be affected. At least the engineers for Xcel understood they were testing new technology on an untried scale, and they wanted to contain the risk.

The company launched SmartGridCity as a demonstration project and agreed in February to submit an accounting of its costs to the PUC separately from its general rate tariff. That was part of the research the PUC let go forward. Now the publicly traded company wants to renege on the deal.

When Xcel finally refines and implements smart grids throughout its system – an inevitable advancement needed to meet the mandate that 30 percent of energy sold in the state come from renewable sources by 2020 – its investors will reap the financial rewards of the lessons learned in Boulder. If SmartGridCity has been brilliant right out of the box, the ratepayers would have been the last to see a dime.

Let Xcel’s shareholders decide if they are willing to fund the research to get smart grids right. If quarterly dividends are more important than technological advancement, the giant utility may receive a nasty shock from competitors with different technology – and business models – who are willing to take a risk.

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