There are few pieces of infrastructure that are more critical to the economy and daily life than the electric grid. However, it is surprisingly difficult to gather real-time information on its operations and control the flow of electricity.1 That’s because the Information Technology revolution has largely skipped over the electrical grid, leaving it inefficient and vulnerable to power interruptions. Utilities have done a remarkably good job providing reliable power over the grid, considering that it still relies heavily on 1960s-era technology.2 But a modernized grid could greatly improve America’s electricity system, making it more reliable, clean,3 and efficient.4
The technologies involved in modernizing the grid, generally referred to as “smart grid”, add new information gathering and control mechanisms to all parts of the electricity system, from generation all the way down to consumer appliances. Depending on the goals of a state or utility, smart grid infrastructure may range from smart meters to remote fault detection5 to smart appliances that can be scheduled for off-peak demand hours. As utilities are beginning to invest in smart grid infrastructure, it is critical to make efficiency a priority in order to maximize the benefits to consumers and the environment from those investments.
One of the key advantages of smart grid is its ability to increase energy efficiency. Instead of requiring consumers to change their behaviors to reduce energy use, smart grid delivers the same services that customers are used to, but does it much more efficiently. And if consumers want to take additional steps to lower their bills, smart grid can help them identify ways to reduce waste, like turning off lights or the air conditioner while not at home. Another potential capability of smart grid technology is demand response, which allows consumers to choose when to operate appliances based on real-time price. In the future, it may be used to help consumers shift their energy consumption to the times when electricity is cheapest and provided by the generation cleanest sources, such as during peak wind times.6
Some utilities have begun to invest in smart grid technologies in order to complete repairs more quickly, make the grid more robust and fault resistant, and lower maintenance and operation costs.7 There are many utilities that, in cooperation with state public utility commissions (PUCs), are making great strides toward efficiency.8 However, without support from PUCs, utilities do not engage in efficiency-boosting programs, because they lower customers’ utility bills and undermine profits.9 Some states have recognized the importance of efficiency and have implemented programs to compensate utilities for revenue losses when they adopt efficiency programs, but many have not.10 Without action, it will be inefficient business-as-usual for utilities in these states.
To overcome obstacles and encourage smart grid infrastructure deployment by utilities, government could take several actions to increase grid resilience and encourage efficiency.
Create a Race to the Top for Grid Resilience
Similar to the L Prize11 that successfully encouraged private companies to develop more efficient lighting, Congress should create a monetary prize that rewards utilities that best use technology to create a stable grid. Smart grid technology can be used to prevent outages, but it comes at some expense. By creating a small but effective monetary prize,12 utilities would be able to recoup some of these expenses only if they reduced downtime and improved services to customers through technology use.
Require Demand Response in Regional Markets
The Federal Energy Regulatory Commission (FERC) oversees and regulates regional electricity markets.13 Currently, some regional electricity markets allow for reduction in demand in place of additional generation, but this varies by market. FERC should require that all regional electricity markets permit demand curtailment as a substitute for generation and fairly reward utilities for this capacity as it would for adding generation. If utilities are compensated for demand response, they can see a return on the costs of advanced infrastructure as well as have aligned incentives for promoting efficiency at peak hours, when dirtier, older plants are often used instead.
Establish Smart Device Standards
To achieve widespread adoption, demand response must be viable not only for large commercial users but for retail consumers as well. As smart appliances and smart meters become more common, DOE should establish an open standard14 so that these disparate devices can communicate. DOE should, in conjunction with industry experts, devise a set of standards that ensure all companies’ ability to participate in the smart grid but also protects consumers’ right to privacy and choice. These standards would encourage third parties to make devices and software compatible with demand response requirements and open up the 3.8 billion GWh retail electricity market to curtailment capabilities.15
- United States, Department of Energy, “What is the Smart Grid?: Grid Operations Centers,” Accessed November 10, 2012. Available at: http://www.smartgrid.gov/the_smart_grid#operation_centers.
- Joel Achenbach, “The 21st Century Grid,” National Geographic, July 2010, Accessed November 12, 2012. Available at: http://ngm.nationalgeographic.com/2010/07/power-grid/achenbach-text/4.
- Jeffery Ball, “The Matrix Overloaded: Clean Energy Will Depend on a New Smart Grid,” Wall Street Journal, October 24, 2008. Accessed November 12, 2012. Available at: http://online.wsj.com/article/SB122479941639164453.html.
- Tom Simchak and Lowell Ungar, “Realizing the Energy Efficiency Potential of Smart Grid” Alliance to Save Energy, May 2011, p.1. Accessed November 11, 2012. Available at: http://www.ase.org/resources/realizing-energy-efficiency-potential-smart-grid.
- Remote fault detection is the ability to determine where the grid has failed or, colloquially, the power is out. Currently, most utilities rely on customers to report an outage.
- Seyed Hossein Madeni and Ramteen Sioshansi, “Using Demand Response to Improve the Emission Benefits of Wind,” forthcoming in IEEE Transactions on Power Systems, p. 7. Accessed November 11, 2012. Available at: http://ieeexplore.ieee.org/xpl/articleDetails.jsp?tp=&arnumber=6316155.
- Simchak and Ungar, p. 4.
- “Smart Grid,” PG&E, April 10, 2013. Available at: http://www.pge.com/myhome/edusafety/systemworks/electric/smartgrid/; See also “EDGE Energy Efficiency Program,” Dominion, April 10, 2013. Available at: https://www.dom.com/business/dominion-voltage/edge-program.jsp.
- Martin Kushler, Dan York, and Patti Witte, “Aligning Utility Interests with Energy Efficiency Objectives: A Review of Recent Efforts at Decoupling and Performance Incentives,” American Council for an Energy-Efficient Economy, October 2006, p. 3. Accessed November 11, 2012. Available at: http://www.aceee.org/research-report/u061; See also “Gartner Says Energy Companies Need to do More to Educate Consumers on Energy Efficiency,” Press Release, Gartner, June 10, 2009. Accessed November 11, 2012. Available at: http://www.gartner.com/it/page.jsp?id=1013212.
- Ben Foster, Anna Chittum, Sara Hayes, Max Neubauer, Seth Nowak, Shruti Vaidyanathan, Kate Farley, Kaye Schultz, and Terry Sullivan “The 2012 State Energy Efficiency Scorecard,” American Council for an Energy-Efficient Economy, October 2012. Accessed November 11, 2012. Available at: http://aceee.org/research-report/e12c.
- United States, Department of Energy, L Prize, “DOE Announces Philips as First Winner of the L Prize Competition,” press release, August 3, 2011. Accessed June 26, 2012. Available at: http://www.lightingprize.org.
- The largest U.S. utility, PG&E, reported total net income of less than $1B for the previous 4 reported quarters, a performance prize of $10M would add 1% of pure profit. Other, smaller utilities would see a larger effect.
- United States, Federal Energy Regulatory Commission, “FERC.” Accessed April 10, 2013. Available at: https://www.ferc.gov/.
- Open standards are publicly available for free use by all.
- United States, Department of Energy, Energy Information Administration, “Electric Power Annual,” Report, Table 2.2, January 30, 2013. Accessed April 10, 2013. Available at: http://www.eia.gov/electricity/annual/.