What's the Buzz on Smart Grids?

CASE STUDY

h e existing elec trici ty infrastructure in the

Un ited States is outda te d and in efficient.
Energy com pa nies provide power to
con su mers, but the grid pro vides no
infor m ation abo ut ho w th e con sumers are usin g th at
energy, makin g it difficult to develop m ore efficie nt
approache s to distribution . Also, the current elec tric
ity grid offers few ways to h andle power provided by
alte rnative energy sources, wh ich are critical com po
nents of mo st efforts to go "gre en ." Enter th e smart
grid.
A smart grid deliv ers electric ity fro m supplie rs to
cons umers using digital technology to save ene rgy,
reduce costs, and increase reliability and trans
parency. The smart grid enables in formation to flow
ba ck and forth b etwe en electric power providers and
individual households to allow both cons umers an d
energy com pa nies to make more intelligent
decision s regarding ene rgy cons um ption an d
production. Information from smart grids would
show utilities when to raise prices when demand is
high and lower th em when demand lessens. Smart
grids would also h elp cons u mers program h igh-use
electrica l applia nces lik e h eating and air condition
ing systems to reduce cons um ption du ring times of
peak u sage. If implemented nati onwide, proponents
beli eve, sm art grids would lead to a 5 to 15 percent
decrease in energy cons um ption . Electricity grids are
sized to m eet th e m aximum electricity n eed , so a
drop in peak demand would enable utiliti es to
operate with fewe r expe ns ive power plants, thereby
lowering costs and pollution .
Another adva ntage of smart grids is their ability to
det ect sources of power outages m ore quic kly and
precisely at the individual household level. With
such pr ecise information , utilities will b e able to
respond to service problems m ore ra pidly an d
efficiently .
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Man agin g th e infor ma tion flowin g in th ese smart

grids requires technology: n etworks an d switch es for
power m an agement; se nsor and m onitoring devices
to track energy usage and distribution trends;
systems to provide energy suppliers an d cons umers
with us age data; com m unic ations systems to relay
data along the entire ene rgy supply syste m; and
systems linked to pro grammable applia nces to run
them when energy is least costly .

If consum ers h ad in-h ome displays sh owing h ow

much energy they ar e con sum ing at any m om ent
and the price of th at energy, th ey are m ore likely to
curb their consum ption to cut costs. Home
th ermostats an d applian ces could adju st on their
own automatically, dep endin g on th e cost of power,
and eve n ob tain th at power from nontraditional
sources, su ch as a n eighbor's roo ftop solar pan el.
In stead of power flowing from a sm all number of
power plants, the smart grid will make it possibl e to
h ave a dist ributed ene rgy system. Elec tricity will
flow from homes and busin es ses into th e grid, and
th ey will us e power from local and faraway sources.
Besides in creasing energy efficien cy, converting to
smart grids along with other relat ed ene rgy
initiatives could create up to 370,000 jobs.
That 's why pion eering smart grid proj ects su ch as
SmartGridCity in Bould er, Colora do, are att racting
atte ntion . SmartGridCity repres ents a collabo ration
by Xcel Energy In c. an d residents of Boulder to test
th e viability of smart grids on a sma lle r scale.
Participa nts can check th eir power consu m ption
lev els an d costs onli ne, and will soon b e able to
program home appliances over the Web. Cus tomers
access th is in formation an d se t goals and guide lines
for their h om e's en ergy usage through a Web portal.
They also have th e option of allowing Xcel to
remotely adj us t th eir thermostats during periods of
high demand.
SmartGridCity is also atte m pting to turn h omes
into "m iniature power plants" using solar-powered
battery pa cks th at "TiVo electric ity," or stash it away
to use at a lat er tim e. This serves as b ackup power
for h om es using the packs, but Xcel can also tap in to
th at pow er during times of peak energy con sum ption
to lessen the overall energy load . Xcel will b e able to
remotely adjus t th ermostat s and water h eat ers an d
will h ave much better info rmation ab out the power
cons um ption of th eir cons ume rs .
Bud Pet erson, ch an cellor of th e Un ivers ity of
Colorad o at Boulder, and hi s wife Val h ave worked
with Xcel to turn their home into the prototyp e
residence for the SmartGridCity project. Their h ouse
was supplied with a six-kilowa tt photovoltaic system
on two roofs, four thermostat s.contro lle d via the
Web, a plug-in hybrid electric veh icle (PHEV) Ford
Escape, and other high-t ech , smart grid-com pa tible
features . Xcel em ployees ar e able to m onitor peri ods

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of hi gh power cons um ption and how m uch energy

the Pete rsons' Escap e is using on the road.
A digital dashb oardin the Pet erson s' hou se
displays power us age in formatio n in dozen s of
different ways-live hou seh old cons um ption an d
production, store d backup power, and carb on emis
sion reduction s translated into gallons of gaso line
and acre s of trees saved each year. The dashboard
also allows th e Peters ons to program their home
thermostat s to adjus t th e temperature by room, time
of day , an d season . Since the proj ect b egan in the
spring of 2008, th e Pet ersons have b een able to
reduce their electricity u se by on e-third.
Xcel is n ot alone. Hundred s of technology com pa
nies and almost every m ajor electric utility company
see smart grids as th e wave of the future.
He igh te ni ng inte res t is $3.4 billion in fed eral
eco no mic recovery money for smart grid technology .
Duke Energy sp ent $35 million on smart grid ini
tiati ves, in stalling 80,000 smart m et ers as part of a
pilot project in Charlotte, North Carolina, to prov ide
business and residential customers with up -to-th e
mi nute informati on on their energy use, as we ll as
data on ho w much their appliances cost to ope ra te .
This h elps th em save money by curb ing usage
during peak times when rat es are h igh or by repl ac
ing in efficient applia nces. Duke now plans to spe nd
$1 billion on sensors, intelligent m et ers, and other
upgrades for a smart grid serving 700,000 cus tomers
in Cin cinnati.
Florida Power and Light is budgetin g $200 millio n
for smart m et ers cove ring 1 million hom es and busi
nesses in th e Miami area over the n ext two years.
Center Point En ergy, which services 2.2 million cus
tomers in th e m et rop olitan Hou ston area, is plannin g
to sp end $1 billion over the n ext five years on a
sm art grid . Altho ugh residential cus tomers' m onthly
elec tric bill s will b e $3.24 hi gh er, the com pa ny says
this am ount will be m ore than offse t by energy sav
in gs. Pacific Gas & Electric, which distributes power
to Nor thern and Central California , is in the pro cess
of ins talling 10 million smart m et ers by mid-20l2.
Google h as develop ed a free Web service calle d
PowerMete r for trackin g energy us e online in h ou ses
or busin esses as power is cons umed. It expects othe r
com pa nies to build the devices th at will supply data
to Powe rMete r.
There are a number of challe nges facing th e
efforts to implem ent smart grids. Changing th e
infrastructure of our electricity grids is a dauntin g
task. 'TWo-way m eters that allow in formati on to flow
b oth to and from h om es n eed to b e ins talle d at any
h om e or building th at uses electric power-in other

words, esse ntially everywhere. Another challe nge is

creating an intuitiv e en d-u ser interface. Som e
Smart GridCity particip ants reported that.the dash
bo ard they us ed to manage th eir applia nces was too
confus ing and high-te ch . Even Val Pet erson admitted
th at , at first , managin g th e information abo ut h er
power usage supplied through the Xcel Web portal
was an intimidating pro cess .
The smart grid won't b e cheap, with estimate d
costs runnin g as hi gh as $75 billion. Met ers run $250
to $500 each when they are acco m pa n ied by new
utility bill in g systems. Who is going to pay the bill ?
Is the ave rage cons umer willing to pay th e up front
costs for a smart grid system an d then resp ond
appropriat ely to price signals? Will cons umers and
utility com pan ies get the promised payb ack if they
buy in to smart grid technology? Might "sm art
m et ers" be too intru sive? Would cons umers really
want to entrust energy com panies with reg ulating
th e energy usage in side th eir homes ? Would a highly
com pute rize d grid in crease the risk of cybe rattac ks?
Jack Oliphant, a re tiree living n orth of Houston
in Spring, Texas, b eli eves that the $444 h e will pay
Ce nter Point for a smart m eter won't j ustify the
expe nse. "There's no m yst ery abo ut h ow yo u save
energy," h e says. "You turn down the air co n di
tioner and sh u t off so me lights. I don 't n eed an
expe nsive m eter to do that ." Others h ave pointed
out other less-exp ensive m ethods of re ducing
energy co ns u m ptio n . Marcel Hawiger, an atto rney
for The Utility Reform Network, a San Francis co
co ns umer advocacy gro u p, favors expan ding
exis ting air con di tioner-cy cling programs, where
utilities are able to con trol air con ditioners so they
ta ke turns com ing on an d off, thereb y reducing
demands on the electric syst em. He b eli eves air
co n ditio ner con tro lle rs , wh ich con trol temperature
se tti ngs an d com pressors to re duce overall energy
costs, pro vide much of the b enefit of sm art m eters
at a fraction of their cost.
Cons umer advoca tes h ave vowe d to fight sm art
grids if they bo ost rates for customers who are
unabl e or unwilling to use Web portals and allow
energy com panies to control aspects of their
appliances. Advocat es also argue th at smart grids
re pre se nt an Orwellian intrusion of peopl e 's right to
us e their appliances as they see fit witho ut disclosin g
facts ab out their usage to others. A prop osal by
officials in California to require all new h om es to
have remotely adjustable th ermostats was soundly
defeat ed aft er critic s worrie d abo ut th e privacy
im plica tion s.

Energy companies stand to lose money as

individuals conserve more electricity, creating a
disincentive for them to cooperate with conservation
efforts like smart grids. Patience will be critical as
energy companies and local communities work to set
up new technologies and pricing plans.
Sources: Rebecca Smith, "What Utilities Have Learned from Smart
Meter Tests," The Wall Street Journal, February 22, 2010; "Smart
Grid: & Reasons Why IT Matters," CIG Insight, March 24,2010;
Yuliya Chernova, "Getting Smart About Smart Meters," The Wall
Street Journal, May 10, 2010; Bob Evans, "IT's Dark-Side Potential
Seenin SmartGridCity Project," Information Week,
March 24, 2009; Bob Violino, "No More Grid-Lock," Information
Week, November 16, 2009; K.C. Jones, "Smart Grids to Get Jolt
from IT," Information Week, March 23,2009; Rebecca Smith,
"Smart Meter, Dumb Idea?" The Wall Street Journal, April 27, 2009;
Stephanie Simon, "The More Your Know ..." The Wall Street
Journal, February 9,2009; and Matthew Wald and Miguel Helft,
"Google Taking a Step into Power Metering," The New York Times,
February 10, 2009.

CASE STUDY QUESTIONS

1.' How do smart grids differ from the current

electricity infrastructure in the United States?

2. What management, organization, and technology

issues should be considered when developing a

smart grid?
3. What challenge to the development of smart grids
do you think is most likely to hamper their
development?
4. What other areas of our infrastructure could
benefit from "smart" technologies? Describe one
example not listed in the case.
5. Would you like your home and your community to
be part of a smart grid? Why or why not? Explain.