Administration of the Smart Grid, Smart City Program

Cities and towns Power resources Australia
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This audit assessed the effectiveness of the administration of the Smart Grid, Smart City Program, including the establishment, implementation and ongoing management of the program.

Overall conclusion

The $100 million Smart Grid, Smart City demonstration program was established to implement or trial a range of new technologies in a challenging environment. These challenges included technological issues, consumer resistance to smart metering technologies, regulatory reform in the electricity sector, and responsibility for the program being transferred across four departments between 2009 and 2013. While a number of staff transferred with the program, changes in administrative responsibility occurred at key stages of the program’s implementation (such as the approval of the successful grant applicant) and resulted in changed oversight arrangements and administrative policies and procedures. The changes also made it more difficult to manage program knowledge, including the creation and retention of program records.

As a demonstration program, a key outcome from the Smart Grid, Smart City Program is data and information that contributes to greater knowledge and understanding regarding the rollout of smart grids. To date, reports from the grant recipient, Ausgrid, and the department indicate that many of the program’s trials have been successfully implemented, with a range of data collected. Projects that were completed largely in accordance with the funding agreement included:

  • grid-side applications that tested new technologies to assist distribution network service providers (DNSPs) to better manage electricity supply;
  • energy resource management projects to test the potential impact of wide-scale renewable energy generation (such as rooftop solar panels or wind turbines) on the existing electricity grid, and trial storage batteries and other technologies that can assist to manage peak electricity demand and integrate with energy generated from renewable sources;
  • an electric vehicle (EV) trial that involved the operation of 20 vehicles over short and longer-range journeys for an 18-month period; and
  • a ‘network’ trial that rolled out smart meters to customers’ homes and tested their interaction with feedback technologies providing information on real-time electricity use.

Key components of the program have, however, presented additional challenges, such as the retail trial. This trial, which cost $20 million and represented the largest component of the program, sought to test consumers’ interaction with a range of electricity retail tariffs and feedback technologies. Technological difficulties, combined with customer resistance and problems in securing an electricity retail provider, contributed to significant delays in rolling out the retail trial and, ultimately, the achievement of lower‑than‑expected numbers of customers participating.

Overall, the administering departments established appropriate arrangements to support the implementation of the Smart Grid, Smart City Program. The commissioning and completion of a pre-deployment study, coupled with the engagement of a broad range of stakeholders, informed the design of the program, while oversight arrangements, including an interdepartmental Steering Committee guided the program’s implementation. In addition, the arrangements established to manage the Smart Grid, Smart City funding agreement, including a structured reporting framework to underpin grant payments, enabled the department to monitor whether project milestones were being met and projects were delivered to the required standard.

There was, however, scope for improvement in several areas of the departments’ administration of the program, including: aspects of the grant assessment and selection process, including probity arrangements; and the measurement and reporting of program performance.

While the grant assessment and selection process involved three levels of review undertaken by the then Department of the Environment, Water, Heritage and the Arts (DEWHA), an Expert Panel and an Independent Assessment Panel, there was scope for aspects of the process to be strengthened to enhance transparency and accountability. In particular, it was not evident from departmental records that the Independent Assessment Panel had assessed each applicant against the five published merit criteria. The Chair of the Independent Assessment Panel and the Department of the Environment informed the ANAO that each panel member did conduct an assessment of each application against the published merit criteria, with the assessments subsequently used to rank applicants. However, these assessments have not been retained and the assessment report of the panel did not clearly set out this process.

Probity processes help to ensure that grant assessment and selection processes are transparent and accountable. While DEWHA sought probity advice on aspects of the grant assessment and selection process, overall, the probity arrangements established for the process were not in keeping with those expected for a grant of this scale and complexity. Given the scale of the program and the involvement of independent assessors, there would have been merit in the department: preparing a probity plan; requiring the probity adviser to attend assessment panel meetings; and reviewing the panel’s selection report to confirm that the assessment process undertaken aligned with the published program guidelines and that any identified conflicts of interest had been appropriately managed.

Over the course of the program’s implementation, the departments have provided information on the progress of various program activities through a range of communication channels, such as stakeholder meetings, program seminars, presentations to conferences and the publication of Ausgrid reports. This information has not, however, specifically addressed the extent to which the program’s objectives are being achieved. Developing and reporting against an appropriate set of outcome-focused key performance indicators would have better: informed the department’s senior managers, Parliament and other stakeholders about the progress being made towards achieving the program’s objectives; and supported the planned program evaluation.

This audit has highlighted the challenges in maintaining administrative continuity for complex programs that are transferred across agencies. In these circumstances, sound record-keeping and regular program reviews help to ensure the continuing appropriateness of governance and program administration arrangements. It is particularly important for departments assigned responsibility for continuing programs to undertake a ‘health check’ at the point of transfer, to ensure the key governance elements in place are appropriate and operating effectively.

The ANAO has made two recommendations to enhance the administration of grant programs in those agencies that have had responsibility for implementing aspects of the Smart Grid, Smart City Program. The first recommendation (directed to the Department of Industry) relates to measuring and reporting program achievement against established objectives. The second recommendation (directed to the Department of the Environment) relates to implementing appropriate probity arrangements, and appropriately documenting grant assessment and selection processes.

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