By 2030, global energy consumption will increase by 50 percent, the U.S. Energy Information Agency estimates. One way to meet this growing energy demand is to increase capacity by building new power plants. Another way is to use the electricity we currently have coursing through our grid more efficiently.
While we will likely need both, there are many compelling arguments that we should focus on developing a smarter, more efficient grid now -- and also building one from scratch in places that currently have little or no electrical grid infrastructure.
But there are still a few things holding up this smart grid we’ve been talking about for the last several years, fortunately there are also reasons to believe those obstacles will be overcome.
1. People don't understand what the smart grid is... But that apparently doesn’t matter.
A recent study found that 70 percent of Americans are not familiar with the phrase "smart grid.”
In short, a smart grid is any electric grid where suppliers and consumers communicate via two-way technology to share information about electricity use and pricing. A smart grid will allow a network of homes, businesses and other electricity consumers to control their electricity consumption automatically via the price signals sent from utilities. When demand on the grid is higher, electricity would be priced at a higher rate, incentivizing users to hold off using a given appliance until rates were lower.
A smart grid is also one that can not only incorporate the input of new, distributed sources of electricity produced by solar, wind and geothermal installations of all shapes and sizes, but one that can also account for that electricity coming onto the grid, making that meter of yours finally spin backwards.
But does it really matter if people know what a smart grid is? Remember that research showing the majority of Americans were unfamiliar with the term ‘smart grid?’ That research also shows they are in favor of it regardless.
That said, an efficient smart-grid will be one with effective education, outreach and buy-in.
It’s no secret that modernizing the electricity infrastructure won’t be cheap. Upgrading transmission and distribution infrastructure to carry more information requires a fiber optic overhaul of massive proportions. That is part of the reason why “smart grid cities” are being tested where utilities or municipalities can run controlled experiments about how to plan, build and pay for smart grid infrastructure.
The Electric Power Reserch Institute (EPRI) estimates the cost of updating the U.S. grid at $165 billion over the next two decades. And soaring costs for smart grid infrastructure in the city of Boulder, Colorado have already driven construction estimates to over $100 millions.
The good news is that there has been some pretty significant interest from governments and investors in smart grid technologies. Smart grid has seen the most significant investments in China and the U.S. The Chinese government says it will invest 25 billion yuan ($3.7 billion) this year alone on building China’s smart grid network.
3. The smart grid is a regulatory nightmare... In some places more than others.
Structural obstacles in the way electricity has been marketed, sold and regulated have ensured that the regulatory infrastructure for a smart grid is still behind the technological infrastructure. The success of smart grid deployment depends more on the regulatory landscape than it does the market. The best and most efficient smart grid products will be utterly useless without the regulatory framework needed to make them attractive to the consumer. In short, without a smart rate tariff, smart meters and smart grids are not smart at all.
Not only that, but layers of multilevel governance and regulatory oversight make the situation even more complicated. In the U.S., for example, each state's public utility commission regulates the retail price of electricity and rate of return. That means fifty separate rate-setting processes for a system that would work most efficiently on a regional grid level.
Of course, the U.S.’ fragmented federal structure offers an extreme example. In countries where national rate-setting and regulatory oversight is more closely tied to the electricity applies, smart grid rate-setting and rulemaking may be easier to implement.
The smart grid does not consist solely of a network of smart meters. In actuality, smart meters are a fraction of the smart grid industry. But smart meters play a hugely important role in building out a smart grid. Two-way meter communication technology has existed for years but without the means to transfer the information gathered by smart meters, the grid also needs to be bolstered with tens of thousands of miles of fiber optics -- for which the technology is also readily available, just expensive.
5. A culture of (in)efficiency dominates utilities... One word: decoupling.
Electric utilities have long been rewarded for how much electricity they sold. The more they sold, the more revenue they took in. Whether the utility was public or private, they were all faced with the same dilemma: why encourage efficient use if it cuts into your bottom line?
The good news, according to smart grid analyst David J. Leeds, is that public utilities commissions (PUCs) “are responding to the Energy Dept.'s statements about the need to explore dynamic pricing and new business models that reward demand-response initiatives.”
In other words, decoupling, or making it so that profit is not tied directly to the quantity of electricity sold, is happening in utilities around the world, albeit slowly.
6. The smart grid has privacy and security issues... Now you’re worried?
Privacy advocates argue that the development of a smart grid increases security risks, because previously private information may be obtainable about customer patterns of electricity use.
Ultimately, the nature of the smart grid is one of transparency, the smart grid is about sharing information. Customers learn about the electricity they buy (or don’t buy, as the case may be) in exchange for information about how they use energy.
If users and privacy advocates cannot get beyond the idea that sharing information is essential to a properly-running smart grid, they will not be able to see, or take advantage of, the benefits of a smart grid. That said, safeguards to protect privacy can and will be taken to obscure users’ electricity use and identification.
But with companies like Google already tracking your every move on the internet, my question is whether you would reallly feel threatened by your utility because it knows what time you like to turn on your air conditioner?
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Image one: Sourced from IBM
Image two: Sourced from Photobucket.