The Smart Grid Reliability Bulletin

Table of Contents
A Smart Grid is an Optimized Grid
This white paper discusses the tremendous efficiency gains that are possible using existing technologies ....................... 3

Security in the Smart Grid

This paper gauges the challenges utilities face and explores how new technologies and operating practices can improve security ..................................................... 5

Toward a Smarter Grid

ABB starts with a look at todays grid, then shares a vision for the grid of the future. In this white paper, ABB discusses how the future should and will merge the business realities of the utilities industry, the increasing energy demands of modern society, and the sustainability requirements of our environment into something more reliable, efficient and secure ....................................................................................... 8

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A Smart Grid is an Optimized Grid

The term smart grid has been used to describe a broad range of technologies, design concepts and operating practices that collectively paint an exciting picture of what our electric power infrastructure might look like in ten or twenty years. But what about the grid we have today? Certainly one of the most important attributes of a smart grid is the ability to wring more out of the assets currently deployed throughout our electricity delivery system. That is the essence of optimization. The benefits of grid optimization are fairly straightforward: To get more out of the existing infrastructure and thus defer investments in new generation, transmission and distribution facilities To reduce the overall cost of delivering power to end users improve reliable delivery of power to end users To reduce resource usage and by extension, emissions of CO2 and other pollutants Running through all of these is the concept of efficiency, whether in an economic or physical sense. So, how do we go about improving the efficiency of our power grid, short of wholesale replacements of aging equipment and massive investments in the latest technologies? In short, what can be done now to make the grid operate better?
What does efficiency mean for a power grid?

Efficiency at the utility level is often overlooked outside of industry circles, in particular the substantial gains that could be made in the efficiency of power transmission and distribution systems. Grid efficiency comes down largely to line losses, the amount of power leaving a generation plant that is lost on the way to our homes and businesses. Losses in the transmission and distribution system of 6 to 8 percent are typical even in the worlds most advanced countries, and they can run even higher. In 2006, a total of 1,638 billion kWh of energy was lost on the US power grid, with 655 billion kWh lost in the distribution system alone. To put this in perspective, consider that a 10 percent improvement in grid efficiency at the distribution level alone would have produced $5.7 billion in savings based on the 2006 national average price of electricity. It would also have saved over 42 million tons of CO2 emissions. But achieving that ten percent is not as difficult as one might think. As well see in a moment, there are technologies available today that can have a tremendous impact without bank-breaking investments. Whats also important to note, though, is that far from convincing millions of consumers to try something new, applying these technologies involve only utilities. Of those, the 210 investor-owned utilities operating in the US today serve over 70 percent of all end users, so the universe of customers for improved grid efficiency is remarkably small. Compare that to the millions of consumers who would have to change their energy usage under demand response programs, for example, in order for those initiatives to realize their full potential.
Reducing losses

Improving the efficiency of power transmission and distribution comes down to two choices: you can reduce the resistance of the wires by making them larger or using better materials (not a practical solution), or you can improve the effectiveness of the flow of electricity. To address the latter, its important to understand one technical concept and that is the difference between active and reactive power.

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Real power is what we use to run our lights, computers and production lines. Its the power the does the work. Reactive power does not contribute anything to doing work, but it does cause conductors to heat up and it takes up a certain amount of space in the wires. The more reactive power flowing on a line, the less room there is for real power, and the less efficient the transmission and/or distribution system will be. So, to optimize the movement of electric energy, we would ideally like to eliminate reactive power flows, or at least minimize them. Utilities do this today on their local distribution systems using devices such as capacitor banks or special transformers, typically located at substations or on feeder. These devices work to keep reactive power flows down, making the full capacity of the conductor available for the real power that will be used by our lights, TVs and refrigerators. This process is known as volt/VAr control. Historically, volt/VAr control devices have operated autonomously, independent of one another and with-out centralized coordination. This approach worked, but it left a good deal of efficiency on the table since actions taken by one device might have less-than-optimal results for another location on the grid or for the system as a whole.
Enter VVO: volt/VAr optimization

Advances in automation and communications have laid the foundation to make centralized, coordinated voltage control possible and in fact applications to take advantage of it have been in the works for years. The problem lies in the fact that the computing requirements for such applications to generate useful solutions in near real time are staggering. However, new methodologies and todays faster computers have converged to make volt/ VAr optimization viable. VVO, as it is known, is an advanced application that runs periodically or in response to operator demand at the utility control center or in substation automation systems. Combined with two-way communication infrastructure and remote control capability for capacitor banks and voltage regulating transformers, VVO makes it possible to optimize the energy delivery efficiency on distribution systems using real-time information. The real breakthrough here is in the speed and quality of the computation. VVO uses advanced algorithms to identify the optimal operation strategy from millions, or even billions of possibilities. Arriving at that result fast enough to apply it in practice, in a day-to-day utility working environment, is a tall order. The result is improved efficiency that reduces the amount of power that must be generated and with it the emissions of CO2 and other pollutants associated with power generation. VVO also allows utilities to control costs better by getting the most out of their networks.
Whats next

More applications are being developed now that address not only the efficiency of grid operations but also reliability. For example, fault detection, isolation and restoration (FDIR) will require more components (devices on the grid and software applications) than VVO, and different utilities are likely to take different approaches to implementing this type of functionality. Similarly, managing large volumes of distributed generation resources like rooftop solar panels will take even more sensors, faster computers and more robust algorithms to manage the interrelated effects of so many devices on the utilitys system. For all of these applications, however, one component is vital: communications. The ability to move large amounts of data from disparate points on the grid is the key to enabling the applications that will in turn facilitate the widespread adoption of distributed generation and maintain (or even improve) the level of service customers expect. Of course, challenges remain. There are issues surrounding standards and interoperability, security, and of course cost to name a few. The long-term benefits, though, are compelling. VVO is only the beginning of a new stage in the evolution of our power systems that will make them simultaneously more reliable, more efficient and more economical.

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Security in the Smart Grid

Its hard to avoid news reports about the smart grid, and one of the medias favorite topics is security, cyber security in particular. Its understandablethe grid as we know it today already relies on a wide variety of digital devices and computerized controls to keep the lights on. The grid of the future will only be more wired (or wireless, as the case may be), and the combination of those systems with public communications infrastructure creates the potential for unauthorized access. The question then becomes, how do we protect such a vast system from hackers, criminals, disgruntled employees and others who would do harm to the grid? Security is primarily about people, processes and technologies working together to prevent an attack. It is not just technology, or a set of procedures, and it is not a one-time investment. There is no single solution that is effective for all organizations or applications, but effective solutions can be realized through the cooperation of vendors, systems integrators and end users.
Gauging the threat

Ultimately, security is about managing risk, but the task of defining security threats to power utility systems is a difficult one, in part because there is relatively little statistical data on security breaches. These have been (thankfully) rare as compared, for example, to natural disasters like hurricanes, ice storms and the like. Nature is also fundamentally random, and as such lends itself to statistical analysis. Cyber threats, on the other hand, are posed by human beings who are able to learn and change their methods over time. Security in this context is by nature a dynamic and ever-changing process. It is never done. Security threats also do not know technical limits (i.e., there are many potential vectors of attack that might be used to circumvent security measures). This is why security experts often refer to the need to have defense in depth, a combination of policies, procedures and technologies that are mutually reinforcing. Another distinction that should be made with regard to security in utility systems is the relationship between security and reliability. These two objectives are not always aligned, given the priorities behind each of them. For example, the increasing amount of data flowing out of substations back to utility control centers is highly useful for managing reliability but it presents additional challenges from a security perspective. Modern routable communication protocols are seen as vulnerable, and with the proliferation of intelligent electronic devices (IEDs), the utilitys exposure to cyber attack seems to grow by the day. However, a return to older serial protocols would not allow the bandwidth required to run advanced applications like wide-area monitoring, and would also not offer nearly as much as IP-based protocols in the way of security tools to harden utility systems. Ultimately, though, reliability and security are on the same team. If a security breach allows an intruder to disrupt the utilitys operations and cause a blackout, then clearly reliability has also been compromised. Today of course, utility systems have not only grown more extensive and more numerous, they have also forged connections between one another and with remote facilities like substations. In addition, interoperability of utility systems has emerged as a priority, as demonstrated for example by the rapid adoption of open communication standards like IEC 61850. Vendors must therefore ensure their security measures do not come at the expense of interoperability. Meeting utility security requirements in the current environment is a multi-faceted and ever-changing challenge. From the system vendors perspective, one of the first hurdles in addressing security lies in meeting the different and sometimes contradictory requirements of utility users, regulators and various industry working groups and standards. Requirements from these sources were developed within a certain context and with specific objectives, and are not likely to account for concerns outside of that scope. For example, NERCs CIP requirements address operators, not vendors, but system users will likely still expect vendors to support their compliance efforts.

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This presents a moving target for systems vendors as they develop new product and service offerings. Defining product requirements, then, takes on an even more vital role. Similarly, security issues must constantly be revisited throughout the development process with a heavy emphasis placed on security assessments and testing.
Challenges for utilities

While system vendors are vital in their role of developing fundamentally secure products, after the sale it is primarily the job of the user, the utility, to ensure ongoing security. Ultimately, it is the utility that is accountable. For that reason, security within the modern utility organization is by necessity a complex and high-visibility function. Utilities must assess the security of their existing systems, evaluate and plan for new costs associated with security, craft security policies and procedures, train their employees on those policies and procedures, and establish a management mechanism that ensures all of these things get done in a thorough and timely fashion. From an organizational perspective, security is an interesting function in that power engineers are not security experts by training. Their focus is on operating the network to maximize reliability. Likewise, security professionals typically are not operations people, and their focus is on preserving the integrity and functionality of the system rather than actually using it on a day-to-day basis. Managing security as a corporate function requires balance in order to draw on the skill sets of the user and the security professional alike. It also takes a good deal of basic vigilance in terms of monitoring the security infrastructure (e.g., regularly analyzing system log files, reevaluating threat models, updating security policies and processes), a concept we will return to later.
Improving security

For the utility, security begins with policies that address human behavior, which is the basis for all security whether technical, procedural or organizational. Relatively few security breaches can be attributed solely to a technological failure. What is far more likely is that a technological weakness will be exploited through the application of social engineering on the part of the intruder, or through a seemingly innocuous oversight on the part of the system operator. Monitoring log files is an important, if unglamorous, way for utilities to keep track of the nature and frequency of attempted security breaches their systems are facing. If all goes well, the policies, systems and procedures in place will deter the garden-variety threat, but log files provide valuable information on unsuccessful attacks that may be applied to preventing more sophisticated ones. There are many simple things that utilities already do to maintain IT system security. They may seem obvious, but the key to their successful application lies in the organizations ability to stick with them. Some examples of such basic but vital practices include: Using and listening to alarms Removing unused software from servers and workstations Disabling unused services Removing unused accounts Changing default passwords regularly system setup on a redundant or test system, not the production server Using host-based firewalls Regularly updating antivirus software Using a vendors patch management process This last item points to the importance of cooperation between vendors and utilities over the entire system lifecycle. It also highlights maintenance of security systems, which are as vital as the control systems they protect. The maintenance phase is by far the longest in the lifecycle of any security regimen. The vendor addresses security during product development and an integrator will handle it during installation and major upgrades, but over most of the systems life, the care and feeding of security falls to the utility.

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This brings us back to the organizational character of the security function. To be successful, security must be formally established within the utility and that can sometimes present a problem in terms of who owns security within the company. Cross-functional teams are vital because security spans the entire organization (and because similar challenges are faced in different departments), but the lines of responsibility should be well defined and a security czar or stand-alone department should coordinate the various activities. Legacy systems also present a particular security challenge. In most cases, it simply is not practical to replace systems that are otherwise perfectly functional simply to apply the latest in security technology. However, depending on the age of the system in question, its also conceivable that the security inherent to it is not at all adequate for current requirements. Fortunately, there are several approaches that can secure legacy systems without replacing them. One option is to encapsulate the given system within a secure zone of cyber protection so that it is isolated from direct contact with other systems, both within the utility firewall and outside it. Communication channels can also be secured by upgrading to modern protocols that support encryption, authentication and authorization mechanisms. Access to the legacy system can also be controlled by bolting on a new user interface layer along with the application of appropriate procedures for authorization. Finally, if remote access to the legacy system is required, that can be achieved using a secure virtual private network to connect to a terminal server rather than the operation system itself. As with any system, new or old, non-essential applications should be hosted from hardware that is physically separate from the main system.
Security best practices for the vendor

While suppliers of critical utility IT systems take security seriously, its almost impossible to overstate the importance of having a pervasive security culture across the development process. Developers themselves should be trained in security strategies and development tools, and system vendors should build development methodologies to model the ever-changing array of potential threats. Security requirements also need to be addressed as early as possible in the development process as they may have far-reaching implications for the product. Testing, as mentioned earlier, is also vitally important. At the device level, a formal testing methodology should be created that leverages current state-of-the-art commercial and open source testing tools in the development life cycle. Multiple approaches should be employed. Profiling tools can help to determine vulnerable services; known flaw testing can check for the latest identified threats; resource starvation testing (which looks at denialof-service attacks) and negative testing can be used to examine departures from a protocols specifications and operating parameters. At the system level, thorough preparation, strict follow-up and clarity in who will receive test results can streamline the testing process. However, this is one area where time and money will be required, and wise investments of both are likely to produce a superior end product. The complete system delivered to a utility user should address security from several vantage points. It should be secure by design (secure architecture and code, robust threat analysis, reduction of vulnerabilities), secure by default (reduced attack surface area, minimum privileges used, unused features turned off by default), and secure in deployment (training and documentation for users; management of detection, defense and recovery). Finally, the vendor should strive to maintain an open communication process with users regarding security. No system is perfect, and the ease with which fixes can be applied will directly impact the overall security of the system.
Conclusion

When we look at the organizations involved in maintaining utility system securityvendors, integrators, end usersits fair to say that security is everybodys business. To the extent these groups cooperate with one another throughout the system lifecycle, security will be enhanced. At the same time, perhaps the most important aspect of security for the various players to keep in mind is that it is a journey and not a destination. There will always be new threats. Likewise, there will be new methods and technologies for meeting those threats. Vigilance, cooperation and technical expertise, when applied in unison, offer the best defense.
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Toward a Smarter Grid

There is a convergence occurring between the business realities of the utility industry, the energy demands of modern society, and the sustainability requirements of the environment in which we live. The combination of these factors is driving the development and implementation of a new power delivery system. This network will utilize the same basic infrastructure we know today, but will also draw on advanced monitoring, control and communications technology that is presently only beginning to be applied. The result will be a grid that is largely automated, applying greater intelligence to operate, monitor and even heal itself. This smart grid will be more flexible, more reliable and better able to serve the needs of a digital economy.
Whats wrong with the grid today?

Given the level of reliability we are accustomed to in North America, its easy to overlook the unattractive truth that our investments in our power system have long been outpaced by the demands we place upon it. While transmission spending, for example, has increased in recent years, it still lags the pace of increasing energy consumption. According to a Morgan Stanley analysis, power outages cost the U.S. economy between $25 billion and $180 billion every year. The grid is also not performing at the same level it was decades ago. Energy losses in the transmission and distribution system rose from around 5 percent in 1970 to as high as 7 percent in recent years. There is also a considerable security risk in the design of the grid with centralized generation plants serving distant loads over long transmission lines. However, adding more distributed generation, in particular variable sources like wind and solar, present new operational challenges. Meanwhile, changes in the way electricity is bought and sold at the wholesale level have drastically increased the amount of power being traded between regions. Even the way we use electricity has changed. In our digital society, power quality is of much greater importance than it was just 15 years ago, both for end consumers and businesses like chip manufacturing, where even small disturbances in the power supply can have detrimental effects to production. Taking all of these factors into consideration, it becomes apparent that the grid we know today is insufficient to serve us in the future.
What makes a grid smart?

There is a great deal of variation both within the power industry and outside it as to what exactly should be included under the idea of a smart grid. Ask a room full of utility professionals to define the term and youre likely to get a wide range of answers. Similarly, most consumers would likely associate smart meters or home automation with the concept of a smart grid, but there is much more to the picture. ABB takes an expansive view of the smart grid, defining it by its capabilities and operational characteristics rather than by the use of any particular technology. Deployment of smart grid technologies will occur over a long period of time, adding successive layers of functionality and capability onto existing equipment and systems. Technology is the key, but it is only a means to an endthe smart grid can and should be defined by broader characteristics.

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In June of 2008, the U.S. Department of Energy held a meeting of industry leaders who identified seven defining traits of what a smart grid will do: 1 2 3 4 5 6 7 Optimize asset utilization and operating efficiency. Accommodate all generation and storage options. Provide power quality for the range of needs in a digital economy. Anticipate and respond to system disturbances in a self-healing manner. Operate resiliently against physical and cyber attacks and natural disasters. Enable active participation by consumers. Enable new products, services, and markets.

What is not explicitly stated here, but is equally important, is that a fully developed smart grid concept goes far beyond smart meters. It includes technologies at both the transmission and distribution level and extends to both IT hardware and software, such as monitoring and control systems, as well as primary equipment like transformers and relays. ABBs list of smart grid criteria covers much of the same ground as DOEs, but focuses on broad characteristics rather than specific functions. Under this model, the smart grid is: Adaptive, with less reliance on operators, particularly in responding rapidly to changing conditions. Predictive, in terms of applying operational data to equipment maintenance practices and even identifying potential outages before they occur. Integrated, in terms of real-time communications and control functions. Interactive between customers and markets. Optimized to maximize reliability, availability, efficiency and economic performance. Secure from attack and naturally occurring disruptions.
So how does the smart grid differ from the one we know today?

The table below provides a concise summary of some of the differences: Current Grid Communications Customer interaction Operation and Generation Power flow control Reliability Restoration following disturbance System topology
Adapted from Research Reports International

Smart Grid Two-way, real-time Extensive Digital (enabling real-time pricing and net metering) Centralized and distributed Comprehensive, automated Automated, pro-active protection; prevents outages before they start Self-healing Network; multiple power flow pathways

None or one-way; typically not real-time Limited Electromechanical Centralized Limited Prone to failures and cascading outages; essentially reactive Manual Radial; generally one-way power flow

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From hierarchy to network

The last item in the table, topology, hints at what is perhaps the most fundamental shift that a fully realized smart grid will require. Todays power systems are designed to support large generation plants that serve faraway consumers via a transmission and distribution system that is essentially one-way. But the grid of the future will necessarily be a two-way system where power generated by a multitude of small, distributed sourcesin addition to large plantsflows across a grid based on a network rather than a hierarchical structure. Just as the internet has driven media from a one-to-many paradigm to a many-to-many arrangement, so too will the smart grid enable a similar shift in the flow of electricity. Todays hierarchial power system Fully realized smart grid

The diagrams above illustrate this shift. In the first, we see todays hierarchical power system, which looks much like an organizational chart with the large generator at the top and consumers at the bottom. The second diagram shows a network structure characteristic of a fully implemented smart grid.
Standards: the key to interoperability

Interoperabilitythe capacity for devices from various manufacturers to work togetheris vital to the realization of a network-based smart grid, and the key to interoperability is standards. Indeed, the entire smart grid proposition is predicated on open communications between the smart devices using common protocols. DNP3, for example, is a widely used communications protocol in substation applications and is the de facto standard in North America. IEC 61850 is an open source alternative to DNP3 and other proprietary protocols that has been adopted rapidly since its introduction. However, for various reasons it has not penetrated the North American market to the same degree as in other parts of the world. Other standards will be integral to smart grid deployments of various kinds. For example, there is broad agreement that the grid of the future will feature far more distributed generation resources than todays largely centralized system. One standard, IEEE 1547, addresses grid interconnection for distributed resources and the broader adoption of this standard will ease the development of more distributed generation resources. The U.S. National Institute of Standards and Technology (NIST) is leading a process to identify and propagate key smart grid-related standards within the power industry. These include the standards mentioned above, as well as some that are specific to other portions of grid operations. In the near term, however, it will be especially important for equipment vendors across the electricity value chain to supply multi-lingual devices that can communicate using standardized protocols, preferably more than one. Proprietary systems simply do not provide the flexibility required to achieve widespread adoption.

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Benefits: what good is a smart grid?

The transition to a fully implemented smart grid brings a host of benefits to a wide range of constituencies. Grid operators will enjoy a quantum improvement in monitoring and control capabilities that will, in turn, enable them to deliver a higher level of system reliability, even in the face of ever-growing demand. Utilities will experience lower distribution losses, deferred capital expenditures and reduced maintenance costs. Consumers will gain greater control over their energy costs, including generating their own power, while realizing the benefits of a more reliable energy supply. The environment will benefit from reductions in peak demand, the proliferation of renewable power sources, and a corresponding reduction in emissions of CO2, as well as pollutants such as mercury. To put a number to these benefits, EPRI has estimated that an investment of $165 billion in smart grid technology, integration and development will produce benefits valued between $638 billion and $802 billion. That implies a cost-benefit ratio of between 4:1 and 5:1. Its important to understand that, in many cases, these benefits have a symbiotic relationship to one another. Reliability and efficiency, for example, are two important objectives of any power system. With a smart grid, though, technologies applied primarily to improve one will often improve the other at the same time. Power electronics devices known in the industry as FACTS (flexible AC transmission systems) enhance reliability by making transmission lines more resilient and less vulnerable to system disturbances. FACTS also greatly increase the capacity of transmission lines, making them far more efficient. This is just one example of how smart grid technologies can achieve multiple objectives simultaneously.
Smart grid technologies in use today

Utility companies are already implementing smart devices in various ways. Some examples of how smart technologiesand the practices they enablecan impact the operation and overall health of the grid include the following: Real-time situational awareness and analysis of the distribution system can drive improved system operational practices that will, in turn, improve reliability. Fault location and isolation can speed recovery when outages do occur by allowing work crews to drastically narrow the search for a downed line. Substation automation (SA) enables utilities to plan, monitor, and control equipment in a decentralized way, which makes better use of maintenance budgets and boosts reliability. Smart meters allow utility customers to participate in time-of-use pricing programs and have greater control over their energy usage and costs. SCADA/DMS (distribution management systems) put more analysis and control functions in the hands of grid operators. Voltage control, through reactive power compensation and the broader application of power electronics, increases tranwon capacity of existing lines and improves the resiliency of the power system as a whole. Of course, this is not an exhaustive list. Smart grid technologies similar to those used for voltage control, for example, are already being applied to bring power from wind farms to the local grid. In this way, the smart grid acts as an enabler for all forms of renewable generation.

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Smart grid drivers

The forces driving the development of the smart grid are as varied as they are influential. Environmental concerns are increasing around the globe, and that is driving the expansion of renewable energy on a larger scale than ever before. The widespread addition of wind, solar and other renewables presents operational challenges due to those sources intermittent nature. A grid that can handle a generation mix with a high percentage of renewables, therefore, will become a necessity for those technologies to realize their full potential. The efficiency of the power grid itself has also come under examination, as even in the most modern systems, up to 8 percent of the electricity leaving a power plant is lost in the transmission and distribution network. Reliability, for years the chief concern of utilities and grid operators, is now only one of a wide range of considerations in power system planning, operation and management. Energy efficiency has now come to the fore as another key issue that, in many cases (notably in areas suffering from transmission congestion), is closely linked with reliability. On the demand side, energy consumers are seeking ever greater control over their energy usage and the application of technology is already meeting this need. Residential smart meters, for example, allow utility customers to take advantage of time-of-use pricing that was formerly available only to large commercial/ industrial users. Self-generation (e.g., using rooftop solar) is also on the rise and is driving a need for net metering to manage power sales from many small-scale generators. Regulators have taken note of all these trends. There are now many examples of regulatory support for expanding renewable generation, increasing grid efficiency and enhancing system reliability. These efforts range from local government actions to ease the installation of rooftop solar panels, to state/provincial requirements for renewable generation, national reliability standards and cross-border agreements for improved interconnection between power systems.
Status of smart grid development in the U.S. and beyond

All of these elements, from the economic to the environmental, are amplifying the need for the grid to evolve. We need our power delivery infrastructure to do more, much more than it does today. To meet the many challenges facing it, the grid needs an infusion of intelligence, most of all at the distribution level. The first steps toward a fully realized smart grid are being taken now, and the potential investment is substantial. EPRI estimates the market for smart grid-related projects in the U.S. will be around $13 billion per year over the next 20 years. That comes in addition to an estimated $20 billion per year spent on transmission and distribution projects generally. More recently, a Morgan Stanley report analyzing the smart grid market put current investment at $20 billion per year, increasing to over $100 billion per year by 2030. Despite these remarkable forecasts, however, smart grid deployments still represent a major departure from current utility practices. For an industry with a time honored focus on reliability and certainty in the application of new technologies, the shift to smart grid presents a daunting challenge. However, some exciting projects are already underway. ABB is working as part of a consortium in Germany to develop a minimum emissions region. The MEREGIO project, as it is known, will integrate renewable, distributed generation and provide the grid operator with realtime information on conditions across the network. This will enable the operator to predict power flow, adapt rapidly to changing situations, send price signals to the consumer to encourage demand or restrain it if there is risk of a bottleneck, and create a regional energy market that incorporates end customers. Consumers will be able to monitor their energy consumption and CO2 footprint, respond to price signals and adapt consumption according to price and availability. They will also be able to sell surplus power from their own generators to the grid when price conditions are most favorable. Similar demonstration projects are being undertaken around the world.

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The role of government

The U.S. is home to several consortia working on smart grid issues. EPRIs IntelliGrid program and DoEs GridWise Alliance are just two examples. Likewise, the nations utilities are actively involved with approximately 80 percent of investor-owned utilities developing some form of smart grid, for example by participating in pilot studies of wide area monitoring systems (WAMS). However, while programs like MEREGIO and Excel Energys Smart Grid City in Boulder, Colorado are important to advance smart grid technologies in real-world applications, the widespread adoption of these technologies will likely depend to a great extent on governmental support of various kinds. In the U.S., the Energy Policy Act of 2005 (EPAct) introduced mandatory reliability standards and required state regulators to investigate advanced metering, time-based pricing, and demand response programs, all of which will rely on smart grid advances. The Energy Independence and Security Act of 2007 (EISA) included an entire title devoted to smart grid that provided funding for R&D efforts, created a Smart Grid Advisory Committee, and requires state regulators to consider smart grid alternatives before approving investments in traditional technologies. More recently, the American Recovery and Reinvestment Act of 2009 (ARRA) made provisions for $11 billion in funding for grid improvements with a heavy emphasis on the application of smart grid technologies. Specifically, ARRA provides $4.5 billion in grants, $2.3 billion in tax credits and another $6 billion in federal loan guarantees, all aimed at upgrading the nations power systems. These funds are directed toward a number of specific activities, ranging from grants for R&D in energy storage to matching funds for new T&D construction. Of the total, $3.4 billion will go to smart grid-related projects with utilities investing an additional $4.7 billion according to a December 2009 study by Pike Research. Notably, one provision in ARRA sets aside $10 million for the creation of a smart grid interoperability framework. Its a comparatively tiny drop in a large bucket, but, as noted earlier, standards are vital to accelerate the adoption of smart grid technologies across the utility industry. The National Institute of Standards and Technology (NIST) is leading the standards effort and, in May 2009, published an initial list of standards that will be used in smart grid development. The government will also play a major role in the development of the smart grid through its many regulatory agencies, both state and federal. EPAct (2005), for example, established a mechanism for creating so called National Interest Electric Transmission Corridors to speed up the approval process for new transmission lines in heavily congested areas. The Federal Energy Regulatory Commission (FERC) recently issued an interim rate policy, whereby smart grid investments would be included as recoverable costs in a utilitys regulated rates. FERC has also joined with the National Association of Regulatory Utility Commissioners to create a Smart Grid Collaborative of regulators at the state and federal level. Among other things, the Collaborative has made recommendations to the Department of Energy on the criteria to be used in funding projects through ARRA. These examples are only the beginning. Whether in the role of advisor, regulator, policymaker or even banker, the government holds tremendous influence over the course of smart grid development.
Conclusion

The smart grid is more than any one technology, and the benefits of making it a reality extend far beyond the power system itself. The transition from the grid we know today to the grid of tomorrow will be as profound as all of the advances in power systems over the last hundred years, but it will take place in a fraction of that time. That said, this transition will not be easy. The integration of smart technologies of many different kinds will be essential to a functioning smart grid, and the path to integration is lined with interoperability standards. Realizing smart grids potential will require a new level of cooperation between industry players, advocacy groups, the public and especially the regulatory bodies that have such immediate influence over the direction the process will take. In the end, though, a fully realized smart grid will benefit all stakeholders.

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