Smart Grid Implementation Strategies for Success

by Rebecca Grant, Lexington Institute

The United States is modernizing its energy grid, driven by $4.5 billion in American Recovery and Reinvestment Act (ARRA) grants and other Congressional legislation.

Smart grid must be implemented quickly enough to provide optimal value improving delivery and reliability, and also contribute to the nation’s energy security by tapping more domestic and renewable providers.

But success realizing the full benefits of a smart grid will rely on numerous implementation factors, including the ability of utilities and consumers to use information technology advances, adopt interoperability standards and increase transmission efficiency.

Such success goes beyond near-term steps such as installing meters and improving delivery efficiency. It also depends on a series of long-term moves such as increasing the ability to transmit electricity across states and regions to tap renewable energy sources.

Technologies are coming into the marketplace at different rates, too. Some smart grid elements, such as smart meters, are moving fast. Other essential components, such as grid-level energy storage, are advancing much more slowly.

Moving forward requires change across many grid elements.

“This is a once-in-a-lifetime opportunity to rewire America and rejuvenate one of our most critical infrastructures,” said George W. Arnold, coordinator for smart grid interoperability at the National Institute of Standards and Technology (NIST).

Given increasing demands on power generation, the smart grid also offers the only gateway to increased renewable energy use and decreased fossil fuel reliance. Hydroelectric, wind and solar power offer tremendous potential, but unlike coal-fired plants, these energy sources often are located far from areas of bulk power demand. Tapping into renewables requires more advanced and flexible transmission.

Implementing smart grid is a multifaceted challenge. Investment, regulation, business models, consumer education, cybersecurity and even weather in space are leading factors. The current U.S. power grid evolved over more than half a century to take its present form. Yet with smart grid, the imperative is to push for greater adoption within a decade.

To date, technology breakthroughs and policy imperatives have played their roles in pushing for smart grid. For all the White House attention, smart grid is not purely a matter of federal policy.

Regulation sets standards and several federal entities from the Federal Energy Regulatory Commission (FERC) to NIST have been assigned responsibilities in smart grid implementation. There is no single smart grid czar who can design and implement the future grid. The main engines behind smart grid at the national level have been federal ARRA grants and other Congressional legislation. Progress is a matter of aligning federal and state powers with market incentives, and crucially, with consumer enthusiasm and willingness to modify its energy consumption.

Vital momentum for smart grid implementation also comes from individual states. California, Texas, Colorado, Massachusetts and West Virginia have adopted distinctive approaches to encouraging smart grid implementation. Many are part of larger, state-mandated energy goals.

For example, Empower Maryland, a state-mandated program, aims for a 14 percent efficiency improvement and peak-power reduction by 2015. Beyond this, groups of states such as the Western Governors’ Association have formulated transmission siting initiatives critical to smart grid.

Critical, too, for smart grid will be consumer acceptance. Implementing smart grid depends on resolving two factors that will redefine consumers’ interaction with their electric utilities:

  • Consumers’ embrace of the two-way monitoring technology, which can help control peak-power requirements, and
  • Implementing dynamic pricing that incentivizes consumers to change their energy-use patterns.

One early smart grid vision pictured a full customer gateway. The gateway concept consists of smart meters creating two-way transactions between homes and utilities. Under this concept, every home appliance would have a smart chip capable of performing brief shutoff and restart on command so a utility temporarily could reduce peak power demands.

Most smart grid plans center on significant changes in residential power. The smart grid was created to support customers, according to a recent NIST report.

Energy efficiency is the goal. It sounds simple, but at the consumer level a challenge exists in gaining smart grid acceptance.

Take the installation of advanced metering infrastructure (AMI). One survey found that some 13.6 million U.S. homes had installed AMI devices as of December 2009. Major utilities such as Baltimore Gas & Electric (BGE) actively market the meters with radio advertisements and public information.

Utilities also have work to do to improve their information resources. Then there is the public relations angle. In some regions, electric utilities are coming off a decade during which their public images suffered from seemingly arbitrary price rises. Californians recall rolling blackouts that darkened traffic lights, stranded people in elevators and forced hospitals onto emergency generators.

Not all consumers are interested in smart grids, and many have objected when electricity utility bills increased to offset investment costs. State public utility commissions have registered concern when utilities, many of which are publicly traded companies responsible to stockholders, have filed rate increase requests and in some cases have taken steps to increase the scope of their regulatory scrutiny.

Consumer acceptance of smart grid also will depend on honest public information campaigns that explain the benefits in terms consumers appreciate and can use.

Many American families are willing and prepared to alter their behavior to save energy. But without access to the useful, real-time feedback on energy use that the most useful smart meters can offer, they lack the information they need to know how much energy it takes to run a load of dishes, bake a turkey or cool their homes.

Two long-term issues can perturb consumer acceptance of smart grid.

First is providing adequate assurances that electric utility consumers are not asked to shoulder an excessive burden to pay for the modernization. One set of questions that must be resolved is to what extent consumers in a particular state should be asked to subsidize transmission technology that provides some benefits but also crosses state boundaries.

Second, while efficiencies promise savings over time, transparency will show up in pricing disparities. Power plants are amortized over 30 years. But consumers understandably look at just two or three years to see how smart meters, energy-efficient appliances and larger regulatory price changes affect their balance sheets at home. The smart grid promises great consumer and environmental benefits, including lowered energy costs, increased usage of environmentally friendly power sources, and enhanced security against attacks and outages.

The smart grid, however, presents new privacy threats through its enhanced collection and transmission of detailed consumption data that can reveal details about activities within the home and that can be transmitted easily from one party to another.

Action in Washington, D.C., is by no means a panacea for the implementation hurdles. But smart grid must be implemented quickly enough to improve delivery and reliability and to contribute to U.S. energy security by tapping more renewables. The national importance of smart grid calls for strong federal action where it can do the most good.

Another macro issue is whether smart grid and associated technologies can carve a viable market space that attracts capital beyond government stimulus.

Putting electricity generated by renewables onto the grid depends on building more and different high-voltage transmission lines. How wind power from Delaware or solar power from Arizona or New Jersey arrives in upstate New York depends on transmission.

Transmission lines expanded from local plants to local communities in the 20th century. Some 157,000 miles of high-voltage transmission lines carry bulk power in the continental United States. The grid is organized into three major sectors: the Eastern, Western and Texas interconnections, with links to Canada and Mexico. It’s a grid that covers U.S. territory, but its flexibility is limited.

Achieving near-term, improved efficiency in transmission is a crucial goal. If the grid were 5 percent more efficient, the energy savings would equate to permanently eliminating the fuel and greenhouse gas emissions from 53 million cars, the Department of Energy reported in 2008.

The U.S. power grid operates on an amalgamation of old alternating current (AC) transmission lines. Most lose 10 percent of the electricity they convey and only can move electricity across certain distances. Even these power lines are known to be inadequate for the job. Power losses because of congestion once were considered a minor factor. Before 1970, such losses typically averaged 5 percent. In 2001, the combination of rising demand and an aging grid made for a 9.5 percent loss. That means 9.5 percent of generated power was wasted before it could be delivered, with the costs in dollars and carbon emissions.

New technological developments could aid transmission efficiency. The discovery of high-temperature superconductivity (HTS) materials in 1986 soon netted a Nobel Prize for IBM researchers Karl Màƒ¼ller and Johannes Bednorz. HTS also spawned new transmission cables and transformers. HTS technologies offer reduced resistance and increased efficiency of transmission.

They suit applications in dense, urban environments where underground transmission exists or where building more transmission lines and substations to meet demand is difficult. According to a RAND report, HTS technology in some situations can increase voltage without new line installation.

None dispute that these entering costs for smart grid are high, especially to bolster high-voltage transmission capacity. The Electric Power Research Institute pegged the costs at $165 billion, or about $8 billion a year for two decades. A report by The Brattle Group found that approximately $1.5 trillion will be required between 2010 and 2030 to pay for this infrastructure.

Investment, however, also can return benefits. A 2010 Sandia National Laboratories and Lockheed Martin report by Jim Eyer and Garth Corey identified $220 billion total in potential benefits to the U.S. economy of 19 electric energy storage technologies between 2010 and 2020. Electric storage can be used best with a smart grid in place and is essential to implementing strategies to ease supply strains during peak-use hours. More than a third of these potential benefits might come from time-of-use energy cost management, a major payback related to implementing smart grid.

The end state vision of a revamped electricity market is compelling. Consumers and suppliers alike may transform how they manage power. And international competition to promote growth of clean energy manufacturing sectors increases incentives to move swiftly and decisively.

It’s time to take advantage of the political conditions and technology edge to make the U.S. smart grid a reality.


Rebecca Grant, Ph.D., is a senior fellow with the Lexington Institute,


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