A Critical Assessment of Smart Grid Technology

Introduction
As the first decade of the new millennium comes to an end, it has
become clear that the way people use energy needs to change. With global
climate change a real and pressing threat, there has been a related effort to
halt or limit the human activities which contribute to this phenomenon. A
great deal of wasteful behavior has been identified as part of the problem,
which includes everything from using paper cups, driving gas-guzzling sport
utility vehicles, and inefficient use of electrical energy. Part of this has to do
with consume behavior but part of it also concerns the available technology.
Much as people must adapt to changing times, so too must the technological
foundation on which modern society is constructed be reinforced to meet the
needs of coming generations.
The purpose of this paper is to discuss one of the technological
developments which has an opportunity to make a positive contribution in
the effort to reduce waste, and that is smart grid technology. The thesis will
be that, despite the fact that there are technological and financial hurdles
which must be overcome, the benefits of smart grid technology are too great
to conclude that the policy should not be pursued. This technology can
result in considerable environmental benefit in many respects. For the
consumers, they will be provided with a great deal of information that can
help them better and more efficiently monitor their energy use. For
suppliers, smart grids will allow for the addition of multiple suppliers to the

grid, a crucial change as renewable energy sources like solar and wind power
are introduced. It is therefore up to the government to ensure that smart
grids are pursued aggressively and with commitment, much as the
Government of Ontario has done, with smart meters to be the norm by 2010.

Description of Smart Grid

Changing Attitudes
Smart grids are more than a technology, they represent a new way of
thinking and in this sense is part of a broader paradigm shift. Essentially, a
culture of conservation is being developed. This has been ongoing for some
time but only recently has there been the sense of urgency that leads to
major changes like smart grids. For example, it was not long ago that people
did not recycle, whereas it has now become a way of life. People formerly
used aerosol cans, not anymore. These are all significant because they have
to do with what people consider normal behavior. The task now is
questioning how certain beneficial activities have become normalized and
from there determining how they can be changed so that a sustainable
future is possible.
In Ontario, several related steps have been taken to help reduce the
amount of electricity which is used in the province. First, as the Ontario
Smart Grid Forum reports, there are plans to shut down the provinces coalfired power plants. The burning of coal for the purpose of energy production
is one of the leading causes of the release of carbon dioxide into the

atmosphere which is in turn contributes significantly to the greenhouse

effect. This is one of the main causes of global warming (or more accurately,
global climate change), at least in so far as human activity is concerned. The
amount of carbon dioxide in the atmosphere has increased a great deal and
thus it is time to take measures which stop this destructive trend.
Function
According to the Ontario Smart Grid Forum, a smart grid is essentially "a
modern electric system" (p. 1). It uses a variety of computers, sensors,
monitoring technologies, and communications technologies in a way that
increases the choices available to consumers in part by providing them with
a higher degree of control over their energy choices. Smart grids work by
bringing multiple elements of the power provision system together, including
production, delivery, and consumption (Ontario Smart Grid Forum). Further
they are characterized by being secure, having clear standards, and have an
"open" style of architecture that allows for the incorporation of new
technologies in the future, like green technologies such as wind and solar
power.
One of the characteristics of smart grids is that they are able to
incorporate two way power flows in situations where only delivery had been
possible in the past and at present. Today, the grid is essentially a means by
which power, which is generated at a central site, moves to consumers
(Ontario Smart Grid Forum). This is a one way flow and for much of recent
history this has been perceived as sufficient. However, as noted in the

introduction, perceptions are changing. Soon, it will be necessary to

incorporate power generated through a number of means such as solar or
wind power. This represents a major challenge as a system which can meet
these requirements will necessarily be far more complex. It is also crucial
that while the introduction of other means of power generation are
incorporated that the system remains effective, reliable, and secure. In
other words, not only must there be a changeover, but it must moreover
happen flawlessly.
Implementation
According to the Smart Meter Implementation Summary, there are
several parties which are responsible for the implementation process, which
the Board proposes should have the following respective responsibilities.
First, the Ministry of Energy should have control over policy decisions
pertaining to the project. They must also be the source of information which
consumers turn to in their efforts to understand the purposes and goals of
the smart meter system. Thus communication is an important consideration
for the Ministry as they endeavor to foster an overall environment of
conservation.
Second is the Ontario Energy Board which should be charged with the
task of establishing the regulatory framework for the new smart meters.
This includes determining rates, which is particularly important with the new
variable rate system in place. It is no longer sufficient to simply determine a
single base price, rather many different prices must be determined which will

in turn play a major role in how much energy people use and when. In this
sense pricing becomes part of the conservation strategy. This party is also
responsible for the licensing of distributers.
Distributors, in fact, are the third group. Their task, according to the
Smart Meter Implementation Summary, should be to determine precisely
which smart meter system is most suitable based on factors pertaining
specifically to their region and mix of customers. This, of course, is in
addition to the duties they already have such as installation, service, and
meter reading. It makes sense to maintain this aspect of the traditional
model because of the high level of experience which present distributers
have in terms of dealing with consumers as well as metering. It would be
advisable, moreover, for distributors, of which there are many in Canada, to
make purchasing decisions concerning smart meters in groups. This is
because the process would be more cost effective if it was streamlined and
distributers were able to make purchases in such an economical manner.
Criterion for Evaluation
The way in which this type of program is evaluated depends to a large
degree on its goals, which in general are to make energy use more efficient
and secure. Specifically, vanGerwen, Jaarsma, and Wilhite (2006) identify
several interested parties along with what they can be logically presumed to
wish to get out of such an arrangement. First, for metering companies,
success can be measured according to whether this change results in
reduced costs for them as far as their bottom line is concerned. For grid

operators, the question is whether or not smart grids prepare them for the
future needs of consumers and the electrical loads that they might be
expected to carry. For suppliers, it is about whether they are able to bring
new services to customers while at the same time reducing their customer
service costs. Governments on the other hand will be judged according to
far loftier criteria such as whether this measure enables them to meet
emissions targets such as that established according to the Kyoto Protocol.
As for the customers themselves, or end users, the system can be evaluated
according to whether it raises their levels of energy awareness while
reducing the amount of energy they actually use (and thus the cost they
have to pay). In this sense both environmental and economic objectives go
hand in hand because the more power saved the more money consumers
should save. If this was indeed the case it would be an extremely enticing
selling point for the smart grid system.
Advantages of Smart Grid
The benefit of smart grids is that they are more flexible, secure, reliable,
efficient, and safe than the present system (Gunther, 2009). They are able
to combine a variety of environmental initiatives concerning power
pertaining both to its use as well as its generation. Thus smart grids can
help in terms of both promoting sustainable power production methods as
well as in ensuring that the power which is generated is utilized in the most
efficient means possible.
Looking at Ontario in particular, smart girds have the potential to

markedly increase efficiency. At the present time, there are a number of

distribution utilities and a single large generation company supplemented by
a number of smaller power generating facilities. What the smart grid system
will be able to do is ensure that these various parties are able to work better
together. Smart grids also have the potential to contribute to the more
efficient use of energy because they are able to accommodate electric
vehicle charging (Ontario Smart Grid Forum).
Promote the Use of Renewable Energy
One of the most important characteristics of smart grids is that they are
intended to facilitate a wider variety of power generation methods than have
traditionally been utilized. As Gunther (2009) notes, "Only a Smart Grid can
control and manage unpredictable power feed-ins from renewable energy
sources. Major power plants, of course, will continue to guarantee the grid's
base load. But many smaller power plants tapping renewable energy
sources will have to be integrated into the grid" (n.p.). This includes
variable generation sources whose output depends on the wind and sun.
Such sources of energy are highly advantageous in that they are far cleaner
than alternatives like coal; however, the disadvantage is that they do not
yield a steady and consistent output. This is due to the fact that the sun is
simply not always shining and the wind is not always blowing. It is for this
reason that flexibility is so important. Whereas wind may not be presently
feasible in terms of supplying all of the provinces energy needs, it can
certainly contribute as long as the system makes it possible.

General System Modernization

The technology which provides the basis of smart grids moreover is, like
many modern advanced technologies, becoming more power and less
expensive. Indeed, the systems which already exist, and as will be
discussed, are already being utilized, are already likely sufficiently advanced
to function effectively. This means in five or ten years down the road even
better technology will likely exist. Of course it is important to ensure that the
system not become obsolete, though there is little evidence that this is a
problem.
Promotion of Efficiency
Part of how smart grids can reduce energy use is by being more specific
in terms of both when energy is used and how much it costs. As the Ontario
Smart Grid Forum reports "By measuring hourly electricity consumption,
these meters allow the provision of prices that vary with time-of-use.
Research has shown that providing transparent electricity prices to
consumers together with time-of-use rates can lead to consumption
reductions that range from five to fifteen percent" (p. 1). In this sense,
energy reduction is achieved through increased information as well as by
bringing the cost to consumers in line with the strain their energy use has on
the system as a whole. Regarding the former point raised in the quote,
consumers will know precisely when they use the most energy so that they
can determine which activities are responsible for the most power use. Once
this determination is made they can change their habits accordingly.

Regarding their personal finances, this system will encourage consumers to

use energy during non-peak times because it will be less expensive. For
instance one may be motivated to do laundry at a time of low energy use if it
will be less expensive in the long run. What is more, consumers will be able
to get more out of the energy which they do use since it will be more closely
in line with their actual needs instead of what is possible given the limits of
the present system Therefore for instance it may be possible to spend less
on heating one's home while at the same time enjoying more warmth simply
because heat would be generated when it is needed as opposed to all day
long when there may not even be anyone home.
This information is provided to consumers through displays which
indicate the amount of energy use thus giving individuals and small
businesses specific information about their energy use. Whereas presently
they are merely provided with an idea by looking at energy use on a monthly
basis. For instance, one may already be aware that their energy bills
increase during the winter, but this does not provide the full picture. What is
more, by monitoring energy use all of the time instead of only when the bill
arrives at the end of the month, this sort of system makes consumers more
aware of their activities on a day to day basis.
The National Energy Board (2008) notes that this program is already
underway in Ontario and has been successful in the sense that the province
is on its way to meeting its target concerning how many homes will have
smart meters, nothing that "So far in Ontario, more than two million smart

meters have been installed- almost half the target number. Every home and
small business should have a smart meter installed by 2010" (p. 40). This is
significant because it means Ontarians have a valuable tool that can be used
to help them moderate their energy use.
The precise manner in which consumers will be able to access the
information regarding their energy use is through the phone or internet
whereas distributors would transmit customer consumption data to retailers
for those customers who had signed with retailers. However, "It should be
noted that two-way communication is not, in itself, sufficient to provide
functions such as customer display, integration with load control systems,
interface to smart thermostats, voltage monitoring, earlier payment, load
limiting, and remote cut off" (Smart Meter Implementation Summary, p. 2).
The reasons are that such functions are dependent on whether ancillary
devices, which may have associated additional costs, are or are not
available. Thus, if interoperability is to be improved as well as ancillary
service development, then it may be necessary for the system of smart
meters to have an open network interface where the connection is made to
the wider area network. (Smart Meter Implementation Summary).
A related benefit, discussed by vanGerwen, Jaarsma, and Wilhite (2006)
is the fact that readings are done digitally, which means that the physical act
of reading meters at the source will no longer be required. This should result
in cost savings that offset some of the other expenses. This system also
allows for the amount of electricity flowing into any given area to be limited

or in some cases cut off. Even individual appliances can have their energy
use measured and in some cases even controlled, so wide is the potential
range of applications for this system. Thus, for instance, an air-conditioner
might be shut off once it has reached its daily maximum power usage. This
however requires that a sufficient communications infrastructure exists,
which again should prove to be an increasing likelihood given the rapid pace
of technological development overall.
Reliability
Smart grids would also be more reliable than the present system. As
vanGerwen, Jaarsma, and Wilhite (2006) maintain, When all households and
small to medium enterprises in a country would be able to adapt their energy
use during a period of high prices or diminished availability, this would
improve the reliability of supply en enhance energy market transactions,
energy savings, energy awareness and energy efficiency" (p. 3-4). This
means that in cases of extremely high energy use, such as hot days during
the summer, suppliers can more accurately determine where power needs to
go. And as well consumers, who would be armed with far more information
about their power use, would be able to determine means of energy
conservation which are likewise more accurate. Through these collective
efforts it may be possible to avert brownouts or blackouts like the major
power outage that occurred across Canada and the United States in 2003.
What is more, the precision of the system means that it would be
possible to identify suspicious or fraudulent use. An example of this might

be a marijuana grow operation which often involves the theft of electricity

which moreover is used in predictable cycles. This would therefore mean the
smart grid system could be used for the purposes of law enforcement as
well. While this is certainly not the intended focus of smart grids, this
example serves to highlight the potential utility which can be gained through
implementing a system that provides such a high quantity of detailed
information.
Disadvantages of Smart Grid
As promising as smart grids are, there remain significant challenges in
terms of their implementation. One point raised in closing the previous
section relates potentially to privacy. Indeed, at what point, if any, can
information on an individual's energy use constitute an invasion of privacy?
The few would bemoan an illegal drug operation being discovered, this may
represent a slippery slope towards an erosion of personal liberty.
On a less philosophical note, the Ontario Smart Grid Forum notes that
some of the technology which would be utilized if smart grids were to
become the norm remains in the early stages of development. What is more,
there is no guarantee that some of these technologies will ever reach the
point where they are feasible from a commercial point of view regardless of
the level of government involvement. There are also challenges associated
with getting the newer generation technologies to work in conjunction with
the system which already exists. Indeed, smart grid technology does not
mean creating a whole new system but rather adapting that which already

exists and as well by incorporating certain new elements.

Whether or not change happens depends substantially on the market.
For instance, the Ontario Smart Grid forum writes that "Clearly defining the
roles and opportunities for all the potential market players will create an
environment that encourages the investment necessary to support this
transformation" (p. 2). Indeed, though the government must be a driving
force in promoting change (for instance, the Ontario Center of Excellence has
14 projects at the moment underway relating to smart grids which includes
approximately 12 million dollars in investments), the development of new
technologies must ultimately be a private sector undertaking at least in a
significant respect. Yet this need not be a disadvantage if the private sector
can step up and provide the technologies which Canada needs. In addition
to helping Canadians conserve, this technology could then also be made
available to other countries thus allowing Canada to participate further in the
emerging "green economy".
Among the most significant downsides concerning this venture is
financial cost. As the Smart Grid Implementation Summary notes, "The total
capital cost through to 2010 for the proposed system (meter,
communications, installation and distributor system changes) is estimated at
$1 billion. The net increase in annual operating cost for the province, when
all meters are installed, is estimated to be $50 million" (p. 3). For the
consumer, this equates to an increase in power costs of about $3 to $4 per
month, or about $40 per year. This rate would be added to distribution

costs. Of note is the fact that this increase would apply regardless of
whether or not one actually has a smart meter. Given that the program is to
be implemented over time, the full cost will not need to be charged to the
consumer initially. This means rate increases will be gradual which should
therefore minimize their negative impact.
Ultimately the question of cost is something which cannot yet be
answered. The reason is there are additional expenses which must be
incurred but at the same time there are savings. The question then becomes
how the various factors balance out. Much like a hybrid car is more
expensive but uses less fuel, thus making the overall cost-benefit calculus
difficult to determine, the true value of smart grids cannot be known. At the
same time, this comment is made from a purely economic point of view;
indeed, the benefits to the environment can only be estimated as they are
difficult to quantify.
Conclusion
While it is impossible to predict the future, the plurality of evidence
points to there being a major roll for smart grids as the issue of sustainability
becomes increasingly important. As vanGerwen, Jaarsma, and Wilhite (2006)
maintain, "it looks like the future of smart metering will depend heavily on
the energy policy and decisiveness of the government bodies involved.
Energy savings and an increased security of supply will be main drives and
believe in smart metering as a means to reach these goals is indispensable"
(p. 9). As discussed, the Government of Ontario has been a world leader in

implementing smart meters, with a complete change over expected to be

completed by 2010. This development is crucial in terms of ensuring that
Ontario is equipped to deal with the challenges of the digital age which
includes the threat of drastic climate change. Thus, despite the costs
involved, it is a sound policy decision to pursue smart grids and smart
meters.

References
van Gerwen, R., Jaarsma, S., and Wilhite, R. (2006). Smart Metering.
Distributed Generation, June.

Gunther, E. (2009). Know-how and Project Experience with Smart Grids.

Siemens Press Conference.
National Energy Board. (2008). Canadian Energy Overview 2008.
Ontario Smart Grid Forum. Enabling Tomorrow's Electricity System: Report
of the Ontario Smart Grid Forum.
Smart Meter Implementation Summary