Volume 13 | Issue 2 | Year 2010

“Smart grid” is a term used to describe a modernized electric transmission and distribution system – enabled by digital technology – that provides two-way real-time communications about energy use between electric utilities and their customers. The smart grid will allow utility companies and consumers to continuously monitor and adjust electricity use while providing a pricing and control system to flexibly integrate new renewable energy resources such as solar and wind power, energy storage devices, and electric vehicles. A smarter grid also will help minimize interruptions in electrical service during storms and other routine power outages.
The smart grid promises to be one of the most dynamic growth markets of the next decade. The next 10 to 20 years will see more than $400 billion invested in various smart grid technologies – from smart meters to an upgraded transmission and distribution system. The smart grid is envisioned as providing a communications network for the energy industry similar to that which the Internet now provides for business and personal communications.

Of the $787 billion in funds for the American Recovery and Reinvestment Act of 2009 (commonly known as the stimulus package), signed into law by President Barack Obama in February 2009, more than $3.4 billion was designated for smart grid technology development grants. Grant awards to 100 electric utilities were announced in October 2009. Recipients will provide matching contributions for funded projects.

The smart grid may be best viewed as a unified communications and control system working in conjunction with the existing power delivery infrastructure to provide information to end-use devices, transmission and distribution (T&D) system controls, and customers. It is a system that optimizes power supply and delivery, minimizes losses, is self-healing, and enables next-generation energy efficiency and demand response applications.

A smart grid entails an open standard for communications with devices – both T&D and end-use devices – smart meters, two- way communications between a utility and its customers, and smart interconnections to distributed energy resources. The end-use devices receive information, such as price signals, and respond by adjusting their operation accordingly and communicating their energy use characteristics upstream to the electricity provider. Consumer communication devices facilitate load aggregation and control from the scale of a single residential meter to an aggregation of multiple buildings.

On the consumer side, smart meters allow residential customers to understand and control their energy consumption, just as commercial and industrial customers have done for decades. Smart meters establish a two-way data connection between the customer and the electric utility by sending information over a communications network that may include power-line, radio or cellular-network connections. Smart meters will communicate with smart thermostats, appliances and other devices in the home, giving people a much clearer view of how much electricity they are consuming.

Customers will be able to access that information via read-outs in their homes or Web-based portals, through which they will be able to set temperature preferences for their thermostats, for example, or opt in or out of programs that let them use cleaner energy sources, such as solar or wind power.

For electric utilities, the advanced metering infrastructure (AMI) of the smart grid will help determine the location of outages more easily. Additionally, utilities will no longer need to send crews to read meters or to turn the power on or off at a particular property. Smart meters also help to curtail the theft of electricity.

On the power generation side, the smart grid facilitates balancing supply and demand by reducing consumption at times of peak demand. Further, a smart grid will make it easier to coordinate the intermittent and dispersed sources of power such as rooftop solar panels and wind turbines.

On the transmission and distribution side, sensors and digital relays installed on power lines will enable utilities to operate systems with greater efficiency and reliability.

Smart meters are the main component of an advanced metering infrastructure (AMI) and generally the first technology deployed by an electric utility in a smart grid program. They provide two-way digital communication between electric utilities and their residential customers. Smart meters have been used by commercial and industrial customers for decades but only in recent years have become economical for wider deployment.

The most widespread deployment of smart meters is in California, where approximately 12 percent of the U.S. population resides. The California Public Utilities Commission has approved a $4 billion investment by Pacific Gas and ElectricCompany, San Diego Gas & Electric, and Southern California Edison for deployment of smart electric and gas meters for approximately 12 million customers. Extrapolating this expenditure nationwide suggests a total investment of about $60 billion for smart meters – both electric and gas – by U.S. utilities.

Among the approximately 130 million households in the United States, smart meters had been installed at approximately 14 million at year-end 2009. This number is projected to increase to approximately 23 million households by year-end 2010.

Energy efficiency has been a low priority for most consumers in large part because people don’t feel connected to how much electricity they use. Smart meters are providing consumers with easy-to-understand information about their energy consumption, enabling them to adjust their consumption for more efficient use and reduced electricity bills.

Studies have found that when people are made aware of how much power they are using, they reduce their use by about seven percent.

A 2009 study by researchers from Carnegie Mellon University reported that U.S. consumers could save $23 billion a year by switching a mere seven percent of their power consumption to off-peak hours.

If electricity prices also vary with a grid’s load, rising when demand is heavy, customers cut back by 10 percent to 15 percent during peak hours. That number doubles if smart meters linked to in-home energy management systems turn appliances off automatically when rates rise above a certain point.

Working towards building up the smart grid marketplace is a mix of Fortune 500-level companies and dozens of startups, several of which have assumed leadership positions.

The field has attracted many of the top companies in the information technology and Internet fields, including Cisco Systems, General Electric, Google, IBM, Microsoft, Oracle, and Siemens, among others. Aerospace contractors BAE Systems, Boeing, Lockheed Martin, and Raytheon have also become active in the smart grid sector. The market participation of these companies attests to the dynamic growth foreseen in the smart grid marketplace.

Richard K. Miller is Director of AEE Market Research, a service of the Association of Energy Engineers. Richard is a Certified Energy Manager (CEM), Certified Sustainable Development Professional (CSDP). AEE Market Research follows the field on a day-by-day basis and reports on activities periodically in its publications. The most recent such report is Smart Grid: Utility Programs & Technology Providers, published by AEE Market Research in November 2009. For information visit www.aeemarketresearch.org.

The Association of Energy Engineers (AEE) is a non-profit professional society of over 12,000 members in 73 countries. The mission of AEE is to promote the scientific and educational interests of those engaged in the energy industry and to foster action for sustainable development.