Smart Grid Creeping into Consumers' Lives
Is the smart grid a pie-in-the-sky idea or will it provide tangible benefits to utilities and their customers? While it may have been sold as a revolutionary tool to integrate renewables and to deliver efficiencies, in reality it looks to be more of an evolutionary process.
The utility industry that is now employing elements of the smart grid into their daily operations is, by nature, a slow-moving creature. That prudence coupled with public austerity measures will mean that the smart grid gets rolled out incrementally. But the technology will continue to make indentations in the market, largely because businesses are always pressured to deliver superior services.
“We’ve seen the effects of the hype around the smart grid and early technology adopters who touted the consumer benefits of an intelligent grid,” says LeRoy Nosbaum, chief executive of Itron. “And, frankly, the promised benefits haven’t been realized. That’s not to say those benefits aren’t real; the smart grid just isn’t mature enough for the broader base of consumers to feel that control over their energy usage or see their energy costs lowering.”
Nosbaum, who will appear at this year’s EnergyBiz Leadership Forum in March, goes on to say that it will be more effective if the technology is phased in. That would then mitigate the risks and provide more opportunities to connect with community stakeholders.
Defining the smart grid, of course, has always been an issue. It can involve everything from the generators that crank out the power to the transmission lines that carry it to the home meters that register how much electricity people use. Perhaps the concept has been most popularized as utilities signaling consumers when the price of electricity is about to spike so that they can adjust their behaviors, or have the utilities automatically do that for them.
A smart grid can also increase overall efficiencies in the system. In other words, when things get congested in one place, the system operators can redirect those electrons and avoid brownouts. That kind of management makes it more possible to integrate wind and solar into the crowded transmission lines. Ditto for the deployment of plug-in hybrid electric vehicles.
Regulatory Issues
The smart grid supports the Obama’s administration’s green initiatives. As such, it allocated $4.5 billion in the 2009 stimulus plan to various projects. Florida Power & Light and CenterPoint of Houston, for example, each got $200 million to rollout more than 1 million modern meters.
Over time, KEMA says that a total of $16 billion in incentives will be targeted to the smart grid. That, in turn, will produce the multiplier effect, creating a total of $64 billion in projects tied to the efficient production, transport and use of energy. The consultancy adds that such investments will produce 280,000 new jobs.
“In the short-term, like anything else, the utility industry is going to have to make some large capital investments to realize long-term savings,” says Guerry Waters, vice president of industry strategy for Oracle Utilities. While it may be difficult to sell to consumers, Waters says that such investments are needed to avoid even larger and more capital intensive power generation projects.
The Galvin Initiative says that the technologies are already working and if regulators would ease the path, more providers would participate and those tools would get even better. It also says that for every $1 invested in smart meters, $4 to $5 is returned in the form energy savings, greater productivity and more jobs.
But the wave of praise has not yet impressed the skeptics. Consider the Maryland Utility Commission: It has said that it understands the potential benefits. But it will not treat the deployment of smart meters in its jurisdiction any different from other big-ticket items. In essence, Baltimore Gas & Electric had wanted to be able to pass through the entire cost without first having to file a rate case.
The commission said to the company that it could not bypass the established regulatory procedures and that it must be able to demonstrate why the benefits outweigh the costs. It must also show that its costs are reasonable and prudent.
That day will come, insists Itron’s Nosbaum. Whereas energy conservation has typically been a back-burner subject, today it is up front. That awareness in combination with a difficult economy means that people will continue to search out ways to cut energy consumption, and costs.
“It will get there, but the smart grid really is still being defined,” says Nosbaum.
Before the New Energy Economy can take off, consumers must get on board. It’s coming but the process will be a methodical and collaborative one.
EnergyBiz Insider is the Winner of the 2011 Online Column category awarded by Media Industry News, MIN. Ken Silverstein has also been named one of the Top Economics Journalists by Wall Street Economists.
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energybizinsider@energycentral.com
Comments
Jigsaw Puzzle - Key Pieces Missing
The smart grid, as I understand the concept, is an effort to flatten the energy consumption curve by: communicating the higher costs of on-peak power consumption to consumers through rates; and, facilitating consumer rate response through the implementation of smart meters and smart appliances, equipment and control systems.
While the smart meters are beginning to be installed, the real time pricing "puzzle piece" and the smart appliance, equipment and control system "puzzle piece" are missing, so the puzzle is not complete. Consumers are not going to sit around waiting for some notice of increasing power cost which would encourage them to adjust the thermostat, delay appliance use and turn off lights. They are also unlikely to delegate that responsibility to their utility or energy supplier willingly.
The smart appliances, equipment and control systems, when available, will require consumer investment. That investment can only be recovered if consumer rates reflect the real time cost of power and the portion of that cost which can be avoided by the "smart" systems is large enough to recover their incremental costs.
There is no consumer incentive to time shift consumption from on-peak to off-peak periods if the consumer cost of power is the same in both periods.
Energy conservation is really peripheral to a discussion of the smart grid. Consumers can conserve energy without smart grid and smart meters. The core issue for smart grid is energy efficiency and system optimization.