Smart Grid Vision Meets Distribution Utility Reality

by David Moore and Don McDonnell

The term “smart grid” is hyperbole that seems to imply a future when the grid runs itself absent human intervention. While this is clearly not the case, there is a hard reality emerging: The smart grid concept in many ways suggests that utility companies, executives, regulators and elected officials at all levels of government will indeed face a brutal “pass/fail” future with regard to electric service, a driving force of the U.S. world-leading economy.

Intelligent distribution systems are an inevitable reality for utilities as they replace aging infrastructure, deal with capacity constraints and strive to meet the demands of an increasingly sophisticated end-use customer. The benefits of a real-time, single-platform smart distribution network are clear.

The smart grid will be automated to support self-healing technologies and to respond to disturbances in the transmission system to prevent outages. Sensitive and specialized loads will be provided with improved power quality. New operating challenges will be confronted as distributed generators transform the network into micro-grid operations.

Utilities must have a “no regrets” approach to investment in smart grid systems.The business case must take into account the cost-effectiveness, operational improvements and return on investment of specific initiatives and must consider community-wide benefits. A proactive incremental implementation of smart distribution systems can have a dramatic impact on system improvements and customer satisfaction. A proactive review of smart grid strategy is vital: the utility leadership landscape will reward those who move early.

Distribution Business Case for the Smart Grid

Distribution utilities are under significant pressure to meet new electric energy needs. Despite this, investment in smart distribution systems has historically been low as companies struggle with tightened capital budgets and other critical priorities. According to a 2006 UtiliPoint International report, distribution information and communications systems are installed at less than 75 percent of North American electricity substations and distribution automation penetration at the system feeder level is estimated at only 15 percent to 20 percent. Combine this with the fact that nearly 90 percent of all power outages and disturbances originate in the distribution network, and it’s no surprise that industry is now making a strong case that a fundamental investment in an intelligent distribution technology roadmap should be at or near the top of a utility’s priority list.

Undeniably, the industry is coming to the realization that we need a smart grid to complement traditional investments in generation, in order to address supply, demand, efficiency, and environmental impact as mutually critical components of national and utility industry energy strategy. At the distribution level, the utility industry is now in the early stages of deploying many computer-driven automation, modeling, and distribution operation paradigms embodied in smart grid concepts and recently, the National Association of Regulatory Utility Commissioners provided critical support for advanced metering infrastructure, an enabling foundation for the smart grid, at the February 2007 meeting.

Clearly, momentum for the smart grid is growing and, despite the recalcitrance of some, it is not a passing fad. At the heart of all of this rapid movement-unusual in the utility world-is the growing realization by many utility executives that, over time, the practical and cost-effective deployment of smart grid strategies will separate longer-term winners and losers. Simply stated, utility leaders are starting to see the smart grid as smart money.

An October 2006 study by The Energy Policy Initiative Center in San Diego outlines a scenario of smart grid implementation on the San Diego electric grid. The study shows that an initial $490 million investment would generate $1.4 billion in utility system benefits and nearly $1.4 billion in societal benefits over 20 years. It is evident that smart grid investments will pay handsome dividends to utilities, shareholders, customers and society at large.

The smart grid also serves an important role in facilitating energy efficiency programs and distributed/renewable energy integration, key trends that will help ensure improved environmental outcomes in the future. Smart grid studies are underway now as regulators, government, and utilities collectively embrace both the challenges and opportunities.

The essence of the smart grid lies in digital control of the power delivery network and two-way communication with customers and market participants. This intelligent infrastructure will allow for a multitude of energy services, markets, integrated distributed energy resources, and control programs. The smart grid is the essential backbone of the utility of the future.


David Moore is president of Advanced Control Systems Inc., a global provider of distribution management systems, supervisory control and data acquisition (SCADA) systems, and substation and distribution automation solutions for the electric power industry. Don McDonnell is managing director of The McDonnell Group Inc., providing strategy, business development, and marketing communications services to energy technology companies. Contact David at and Don at


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