The Smart Grid

The Smart Grid will change the way we use and monitor energy.
The Smart Grid will change the way we use and monitor energy.

When you get home from work tonight you’ll likely turn on several lights, adjust your thermostat and turn on music and/or your TV. You also may turn on the oven, start a load of laundry, jump in the shower, and turn on your computer. Now, think about the millions of other customers of your electric utility doing the same things at almost the same time. That demand creates what electric utilities call peak load. To meet that peak demand, utilities have relied on expensive stand-by power plants, which are costly to both build and operate. Instead, what if utilities and consumers  could manage and reduce peak demand to make the electric grid run more efficiently – and reliably too? It’s coming and it’s called the Smart Grid.

"In a traditional grid, supply follows load," says Jesse Berst, founder of SmartGridNews.com. "If a whole bunch of us turn on our TVs at the same time, there’s a generator somewhere that ramps up and creates more power to produce that electricity. Sometimes, you literally don’t have enough supply. Another way to solve the problem is to reduce the demand. If you could magically dim everyone’s lights by 5 percent, you could fix that problem. If you hit a peak demand on a summer day, utilities could raise everyone’s thermostat by a degree or two."

Better managing of that peak load requires more communication along the

Smart Grid Timeline

2005 – Energy Policy Act supporting innovative technologies to reduce greenhouse gases.

2007 – Energy Security and Independence Act, to modernize the nation’s grid.
2010 – The federal government invests about $4.5 billion, along with $3.5 billion in matching funds from states and utilities, as part of the American Recovery and Reinvestment Act for smart grid technologies, transmission system expansion and upgrades and other investments to enhance electric transmission infrastructure, improve energy efficiency and reliability.


electric grid – a Smart Grid. Just as the Internet enables real-time communication among computers, the goal of the Smart Grid is to enable two-way, real-time communication and monitoring along and among all aspects of the electric grid. The lines of Smart Grid communication include the utility company, the electric generating plants, and the homes the utility company services. Additionally, contact points within the home will also be "on-line," including a Smart Meter, a home energy manager and even "smart" appliances like washers and dryers.
Smart Grid will do more than help manage peak load. "Expect the Smart Grid to spur the kind of transformation that the Internet has already brought to the way we live, work, play and learn," the Department of Energy says in its report Smart Grid: An Introduction.

Work on what will become the Smart Grid began during President George W. Bush’s administration. President Obama has made Smart Grid a key component of his energy plan. A Smart Grid won’t require using as much standby generation to meet demand. It also will be more reliable, will enable the use of more renewable energy sources, and will offer consumers more control over what they pay for energy, says Katherine Hamilton, president of GridWise Alliance, which was founded in 2003 and represents a broad range of entities on the energy supply chain: utilities, large tech companies, academia and emerging tech companies.

The goal is to achieve many of these objectives by 2030 – although supporters of Smart Grid say the technology and associated products will continue to evolve. (see Sidebar). Some appliances and devices are being tested in pilot programs across the country. Some are already available and in use. Utilities and companies are learning what works best based on customer responses. Not all responses have been positive. In California and Texas, customer dissatisfaction with new Smart Meters led to lawsuits and has prompted slower rollouts, more testing and better consumer education. (see Smart Grid On Trial)

Around the world, other countries are investing in Smart Grid technology too. For 2010, China and the United States are the leaders followed by Japan, South Korea, Spain, Germany, Australia, the United Kingdom, France and Brazil, according to a report by Zpryme Research. "For many countries, the deployment of the Smart Grid could easily be one of the leading drivers of wealth into the next 10 or 15 years," Zpryme Research concludes.

Smart Grid Benefits
Compared to today’s grid, the DOE report says, a Smart Grid will be better when it comes to:

*Problems and outages. Today’s grid is plagued by slow outage response and outage cascades. Smart Grid will quickly and automatically detect and respond to actual and emerging transmission/distribution problems.
*Consumer use. Today’s consumers get a power bill. Tomorrow’s consumers can be more involved in controlling and managing energy use to lower their bills.
*Natural disasters and other major problems. Today’s grid is vulnerable to major disruptions because one outage can create a ripple effect throughout the grid. Smart Grid will be more resilient with the ability to isolate problems and restore service.

A Smarter, More Reliable Grid
Our current analog power grid is inadequate for today’s needs, DOE says, making

Smart Grid Timeline, Cont’d

2010 – (Ongoing) Pilot programs test home energy management systems, time of use pricing and appliances that will work on the Smart Grid.

2010 – (Ongoing) Policy makers work to develop security and privacy standards for Smart Grid.

2010 – A few appliances available that will work with Smart Grid.

2010-2014 – Six million Smart Meters to be deployed in Texas.

2011 and onward – Major companies plan to roll out more appliances to work with Smart Grid.

2012 – The Energy Independence and Security Act, passed in 2007, goes into effect. Manufacturers will be required to make products that meet new minimum standards of energy efficiency, GE says.


this comparison: "If Alexander Graham Bell were somehow transported to the 21st century, he would not begin to recognize the components of modern telephony—cell phones, texting, cell towers, PDAS, etc.—while Thomas Edison, one of the grid’s key early architects, would be totally familiar with the grid."

Today’s analog grid is an engineering marvel that was designed nearly a century ago to do one thing – deliver electricity to homes and businesses, Duke Energy says on its website. But even in today’s digital world, you still have to call someone to report your power is out. And utility employees usually have to do what they call ‘ride the lines’ to find the problem.

Although utilities describe the current grid as reliable, blackouts are getting more common. Of the five massive blackouts in the last 40 years, DOE says, three occurred in the last decade. DOE blames this on a lack of automation, slow mechanical switches, and what it calls "a lack of situational awareness," on the part of grid operators.

Blackouts are costly. The average cost of one hour of power interruption is $2 million for a semi-conductor manufacturer, DOE says. For a financial brokerage, make that nearly $6.5 billion. Sun Microsystems estimates that a blackout costs the company $1 million … every minute. A one-hour outage that hit the Chicago Board of Trade in 2008 delayed $20 trillion in trades. The annual cost of power outages in the United States is $150 billion – about $500 per person, according to GE, which is designing appliances that will work with Smart Grid.

A smarter grid will have sensors on the lines, on transformers and in substations to tell operators if equipment is running at full capacity, if equipment or lines need work, and if a line is energized or not, Hamilton says.

The Smart Grid will quickly detect and limit power outages.
The Smart Grid will quickly detect and limit power outages.

Grid, Heal Thyself
The Smart Grid will feature distributed intelligence all along the system, Berst says. He explained that in the event of a minor problem—if a branch touches a transmission line and singes it, for example—the grid might be able heal itself by resetting a smart fuse, called a digital relay. Also, according to Berst, if a falling tree broke a line, a smarter system could isolate the power loss to just that section of line, eliminating the corresponding surges and sags across the lines that create system-wide power losses. "You open the switch on both ends and power can’t pass through that section," says Berst.

Utilities have begun investing in modernizing their plants and transmissions

Smart Grid Timeline, Cont’d

2012 – 100-watt incandescent bulbs will phase out, GE says.

2013 – 75-watt incandescent bulbs will phase out.

2014 – 60-watt and 40-watt bulbs will phase out.

2020 – DOE expected to set even higher energy efficiency limits.

2020 – President Obama’s target date for reducing greenhouse gas emissions 14 percent below 2005 levels.

2020 – Consumers in California will be required to begin time-of-use electricity pricing.

2030 – Many features – including some we can’t envision now – of Smart Grid expected to be in place. Demand-response (incentives to shift energy use to off peak hours) and increased energy efficiency could offset 40 percent of the growth in summer peak demand.

Ongoing after 2030 – The target date is not the endpoint – the grid will continue to improve and change – just as the Internet has.

systems with digital technology. New digital technology will allow utility companies to see what’s happening on the grid at a rate of 30 observations per second, compared to one every four seconds now, says Paige Layne, a spokeswoman for Duke Energy.  This warp speed data can be used to quickly trigger corrective actions to maintain reliability. "This technology allows us to respond faster and talk back to the grid," says Gianna Manes, Duke Energy’s chief customer officer. "It drives up reliability."

With the current grid, "Most utilities find outages now by recording where the complaints are coming from," Berst says. "If more are coming from one area, they send trucks that way, and then poke and prod to try to guess where the problem is. With Smart Grid, the problem will light up on a giant map. You can see how many homes are affected, notify them with an automatic dialer and see what work crew is the nearest."

This new technology is working already. Duke Energy has upgraded equipment in Hendersonville, N.C. Recently, says Layne, a tree fell across a line near a substation serving about 1,500 customers. With previous technology, the system would shut down all 1,500 customers, and they’d remain off until someone from Duke Energy assessed the problem in person and turned the equipment back on. "We’d have to send a crew to the equipment," Layne says. "They’d have to climb the poles and operate the equipment manually. That may take an hour or more." With the new digital technology, the sensors quickly determined the precise location of the downed line. "Instead of shutting everything down, the system will stop the power flow only on the segment of line where it senses a problem," Layne says. "The digital system will switch the energy in another direction so electricity continues to flow on the line where there’s not a problem. Instead of 1,000 or more customers out, it was just a handful."

According to Berst and Manes, this fast-response technology allows the utility to confine a problem to a smaller area, and help prevent a medium-to-large outage, whatever the cause, from becoming a widespread blackout. "During a major outage, electrical flow either sags or surges, throwing the entire grid out of balance," Berst says. "Too much or too little power can bring the whole system down and the ripple spreads out from there."

Says Manes: "We can create a wall with the equipment to prevent the wave from rolling through the entire system."

The technology won’t prevent problems, "But you haven’t gone from Ohio to New York in a blackout as we did in 2003," Berst says. That particular blackout resulted in a $6 billion economic loss to the region, DOE says.

Managing Peak Demand
The problem with peak demand, DOE says, is that electricity must be consumed at the moment it’s generated. Without being able to precisely determine that demand, having the right supply available is problematic on the existing grid. According to DOE, When demand peaks, electric utilities must stand ready to ramp up expensive-to-run peaker (or stand-by) plants. The goal is to avoid building and using these plants.

 "We need these standby generators for only 100 hours a year," Berst says. "It’s the equivalent of buying a house but staying in it only two weeks a year."

With Smart Grid in place, utilities could manage peak demand by asking customers for permission to limit some usage during busy periods—perhaps by raising your AC two degrees for 15 minutes at 6 p.m. on a hot summer day or turning off your hot water heater for a few minutes during a peak use period.

New technology—digital Smart Meters, home energy managers and smart appliances—will make that possible. For example, a smart refrigerator-freezer might cycle into its energy gulping defrost mode at 2 a.m. instead of at random times, including 7 p.m. when your oven, AC, and washing machine are already in use. When you start your dishwasher at night, the default setting would be a delay start – until demand and rates dropped in the middle of the night. In a rush for clean dishes? The consumer still has the option of overriding the default setting. Your water heater could include a special chip that would enable your utility to delay its heating cycle during peak demand. Benefits to you might include a price break on your bill in exchange for allowing your utility to make these adjustments for you in some cases with smart appliances.

Time-of-Use Pricing
With time-of-use pricing,  you’d pay more for electricity you use at peak times – just as you often pay more for phone time, restaurant meals and hotel rooms during busy periods. "Speaking as an economist, it makes sense to price according to cost," says David W. Kreutzer, Ph.D., a research fellow in energy economics and climate change in the Center for Data Analysis at the Heritage Foundation, a conservative think tank.

Kreutzer cautions this will take some adjustment and consumers might have trouble paying a new, much higher cost. "But how often are we changing the cost?" he says. "What if the choice is to pay 30 cents a kilowatt hour or do without?"

Time-of-use pricing is an incentive to rethink energy use. Consumers who were willing and able to change their behavior would be rewarded, Berst says. "Right now the person who cranks the AC to real cold even in the middle of a peak event is paying the same rate (per kilowatt hour) as the person who doesn’t have the AC on at all," Berst says.

Other Generation
One intriguing source of additional peak demand generating power is the backup generators that many companies already have to use in the event of outages, Pullins says.

In Portland, Ore., Portland General Electric is doing just that. The utility has started a Dispatchable Standby Generation Program to put commercial and industrial standby generators to work for up to 400 hours a year to meet peak demand, the utility says on its website. The utility will install equipment to reduce emissions, assume maintenance of the standby generators, and if needed install equipment to make the generators run faster.

Employing these already-existing generators will allow PGE to meet peak demands at about one-fifth the cost, Pullins says. "It’s a great community approach and a community solution," he says.

Changing the Way Utilities Make a Profit
Switching to a Smart Grid system will require regulatory changes covering how utilities make profits for their shareholders, Berst and others say.  Under current regulatory practice, utilities are rewarded for selling electricity and building more plants to generate power.

"That was great in the 1920s to the late 1970s when we were trying to build the electric system for everybody in the country," says Steve Pullins, president and CEO of Horizon Energy Group. "All the systems were set up to reward growth."

Now that the plants are built, "we don’t need utilities to build more," Berst says. "We need them to do more with less. But the only way they’re allowed to make more money is selling more electricity. We don’t want them to sell more electricity. We don’t need them to be building new plants. But they have a responsibility to shareholders to maximize returns. We need to decouple profits from how much electricity is sold."

Change is coming. For example, Duke Energy has won approval from state utility commissions in North and South Carolina and Ohio to offer customers energy management tools and programs – some as simple as free or discounted energy-saving compact fluorescent light (CFL) bulbs. The more effective the programs are at saving energy, the more Duke Energy is allowed to allowed to profit. So, a program that achieved less than 60 percent of its target energy savings would yield the utility only a 5 percent profit while a program that hit better than 90 percent would mean a 15 percent profit.

Utilities are now regulated by state commissions. Those in the industry differ over whether regulatory change should come at the state level or whether new federal standards are needed. "Everybody wins," Manes says. "The customer benefits by saving money. We continue to be a strong company. The environment wins – the more efficient we are, the fewer power plants we have to build and run."

The Smart Grid will allow you and your utility to more actively manage power use. You’ll have the chance to make more choices that will lower your bills. Those choices, along with other options, will help your utility avoid ramping up expensive standby plants. A Smart Grid also will help utilities quickly diagnose problems, meaning blackouts are less likely to be as widespread.

Read on to find out about a few problems with Smart Grid.

Credit: Renovate Your World