According to the ABB Group, conventional, centralized electricity generation systems waste, on average, over 60 per cent of their energy as heat before they deliver any useful energy to the end-user. Additional losses in the transmission and distribution networks only add to the need to bring the source of the electricity closer to where it is used.

Smart Grid Features
Smart grid systems can bring together variable distributed electricity sources to form 'virtual power plants,' whilst enabling clean technologies like renewable energy, demand response and plug-in vehicles.  A Climate Action report author, Dr. Ulrich Eberl, head of Technology Press and Innovation Communications department of Siemens, says, "Smart grids can efficiently turn specific consumers on and off in order to balance out peak loads, thereby creating a dynamic balance in the power network rather than the static one that exists today."

A year-long study by the US Department of Energy GridWise program to modernize the US power grid estimated that smart grid technology, if used nationwide, could save some $120 billion in unneeded power plants and transmission lines, and over a 20-year period could displace the equivalent of 30 large coal-fired power plants.  

"This research is vital because decreasing power consumption during the busiest times on the power grid improves efficiency and reliability and reduces the need to build additional infrastructure," said Sen. Patty Murray (D-Wash.).

Since a smart grid is intended to carry both energy and information across a 2-way communication network, electricity customers can also control their energy usage and costs.  GridWise studies have so far proven customers can save more than 10% on energy costs using a computerized household smart meter.

As an example, by using a smart meter, customers could choose the most economical time of day to charge their car batteries, and automatically monitor real-time energy use from various appliances.  They may also be offered the ability to adopt virtual pre-payment programs and dynamic pricing to reduce peak power demand. In addition, power outages and voltage fluctuations can be prevented.

Rocky Mountain Institute (RMI) calls the smart grid vision the 'Next Generation Utility.'  "The potential of smart grid technology is to enable the intelligent integration of the power grid, the building stock, and the vehicle fleet, to make energy use in each of these sectors more efficient and more reliant on [intermittent] renewable sources."  In essence, it will be like an "internet" of smaller-scale, distributed energy resources such as solar panels, wind turbines, and combined heat and power units.

RMI further states, "It is a key step in making utilities compatible with the carbon-constrained future that we are entering."

The Perfect Storm
For the last decade, utilities and regulators have been stuck in a gridlock over who will absorb the risk and cost of adopting new technologies for electricity.

"We are now seeing the perfect storm.  Utility customers are wanting more control over their energy use and costs, while regulators are now getting in front of utilities in response to the sense of urgency about high gas prices…its usually the other way around," says Chris King, Chief Strategy Office, eMeter.

Even the federal government is stepping in.  Many working groups haven taken place between the Federal Energy Regulatory Commission (FERC), Department of Energy (DOE), National Association of Regulatory Utility Commissions (NARUC), and the National Institute of Standards and Technology to work on smart grid incentives and legislation.

"At some point we will get critical mass, where the herd of utilities move all at once when they get pushed by regulators.  Right now, the herd is pawing at the ground," says King.

Critical mass is necessary for the smart grid to have maximum benefit, since the smart grid needs to be pieced together with a greater area, hence, greater distributed energy potential.

Smart Grid Geographic Trends
Boulder, Colorado is soon to become the nation's first fully integrated Smart Grid City . It has an ideal geographic concentration and easy access to all grid components. More importantly though, the city has a shared environmental commitment amongst customers, regulators, and its utility, Xcel Energy.

Xcel Energy announced just three weeks ago its multi-phase timeline for Smart Grid City and how the proven technology will be pieced together. In what could be a $100 million effort, Xcel Energy's Smart Grid City project, funded in part by itself and government grants, will be providing 100,000 customers in Boulder with smart power by December 2009.

 "We're on our way toward building the grid of the future and making Smart Grid City a reality," said Dick Kelly, Xcel Energy chairman, president and CEO. "This is a forward-thinking project that will transform the way we do business. In SmartGridCity, our customers will have more information, including the tools to communicate directly with us, and will choose when and how they use their energy based on price, generating resource or convenience."

On the west coast, "by the end of 2012, there will be 20 million smart meters in California," according to King.  PG&E has previously experimented with several early smart grid prototypes, including SCADA and its Demand Response program.  Its latest smart grid announcement is a partnership with Google and Intel to demonstrate a small Vehicle-to-Grid (V2G) pilot, which the company hopes to bring to scale.   The pilot is being tested at Google's Mountain View headquarters as part of Google's Plug-in Electric Hybrid Vehicle (PEHV) initiative.

Another new pilot project in the U.S. initiating smart grid trends is the Intelligent Utility Network Coalition in Texas with CenterPoint Energy and IBM. This coalition plans to spend nearly $750 million over the next 5 years on testing and deploying smart grid equipment.

Like most utilities, CenterPoint is installing a broadband-over-powerline, or BPL, to talk back and forth with its customers. Using powerline is also more common in Europe and Asia, because there is greater population density per transformer allowing for easy dissemination of information.

Xcel, on the other hand, is deploying Wi-Fi for high speed 2-way communication and remote access, since the majority of its Boulder customers already use Wi-Fi for internet access.  Wi-Fi advantages over BPL include easy, low cost installment, more sensors and interactive controls, in addition to its availability during blackouts and disasters.

PG&E plans to use a cost-effective medium band-over-powerline, where meters use a Radio Frequency Mesh (RF Mesh) to send radio signals to the powerline and back. PG&E's RF Mesh is due to be installed later this year.

Despite geographic differences, "the best metric for all smart grid deployment is reliability as opposed to cash incentive," according to Eric Dresselhuys, Vice President and Co-Founder of Silver Spring Networks. For instance, "PG&E isn't going to make more money if its customers use more energy within a decoupled unregulated market."  

"In a ubiquitous smart grid market, you will have a network mentality about distributed generation."

Smart Grid Caveats
Simultaneously, you also will have many caveats to work through, as all the panelists at June's California Clean Tech Open agreed.

"While the expense of the technology has been justified, the question is now what do we spend it on," says Dresselhuys.  

Grid experts must also figure out how to deal with new regulation, privacy issues, undeveloped energy storage options, and third party involvement.

"With a new communication protocol and all the uncertainty surrounding it, there will be many third parties opting to build a business around this," says Neal Dikeman, Partner, Jane Capital.  

What time you wake-up and turn on your car is valuable aggregated data for third parties, addresses Dresselhuys.

Therefore, experts are anticipating there will be an evolving regulatory issue surrounding who owns the data and customer privacy.  There will also be a question of how easy the utilities and regulators will allow third parties to establish a value proposition with electricity customers.

Meter automation also has room for improvement. Otherwise known as the 'set-it and forget-it nirvana,' according to King,  "When customers cut load by 20%, they can double the response with sound automation."

"Once IBM moves into the AMI [advanced metering infrastructure] space, this will open up a lot of opportunity," says Dikeman.

"[Third party intervention] is a great opportunity for utilities, business, and regulators, because companies can exploit the inefficiencies in the market," says Dresselhuys.

"There is still a lot we don't know how to do at all," says Stefan Heuser, President and CEO, Siemens Technology-To-Business Center.  "The holy grail of this system is storage," which has not been achieved.  "This would eliminate a lot of the margin optimization."

Lastly, making the universal deployment of smart grids happen sooner rather than later, in the face of high-energy costs, will be a challenge in and of itself. 

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