The Smart Grid Primer: What is the Smart Grid

This entry is part 1 of 6 in the series Smart Grid Primer

NTCA presents this series of articles on the smart grid. Over the course of the next few weeks, the series will explore the nature and components of a smart grid system; the benefits and drivers of an intelligent grid; the evolving architecture of a rural electric provider who implements a smart grid; the telecommunications requirements for developing a smart grid broadband network; and the development of standards for a viable network architecture.

NTCA has been working with key rural organizations, including the National Information Solutions Cooperative (NISC), the National Rural Electric Cooperative Association (NRECA), and the National Rural Telecommunications Cooperative (NRTC), who, like NTCA, seek to inform rural cooperatives and commercial companies about the smart grid and its technical needs.

An intelligent electrical grid, commonly known as the smart grid, unites broadband and IP networking with the existing electrical grid. The smart grid was first introduced more than 10 years ago but, thanks to recent federal interest and investment, the concept has now moved from pilot projects to full-scale deployments.

Congress allocated $4.5 billion in the American Recovery and Reinvestment Act of 2009 (ARRA) for smart grid activities. Of this, $3.5 billion is set aside for a Smart Grid Investment Grant Program administered by the U.S. Department of Energy (DoE). As of June 2010, more than 100 projects in 49 states have received smart grid investment grants. Additionally, Congress set aside $620 million in ARRA funding for Smart Grid Demonstration and Energy Storage Projects. The DoE is coordinating these 32 projects. Finally, the U.S. Department of Agriculture Rural Utilities Service (RUS) Broadband Initiatives Program (BIP) has awarded grants for broadband infrastructure which may support smart grid activities.

Vern Dosch, CEO of the National Information Solutions Cooperative (NISC), is in a unique position to observe the marketplace as NISC develops and supports software and hardware solutions for both utility cooperatives and telecommunications companies. Dosch described the factors driving the development and deployment of the smart grid as the “perfect storm” uniting technology, investment, utility needs and consumer interest.

“The economy is in a downturn; business and consumers are more conscious of their consumption and ways to save money,” Dosch said. “At the same time, energy prices across the board have increased. There are also environmental consequences to bringing new, traditional power plants online. Oftentimes these are thought of as conflicting forces; however what the smart grid promises is the next-gen technology and the data to utilize the electrical grid more efficiently and effectively.”

Ed Drew, vice president of utility services for the National Rural Telecommunications Cooperative (NRTC), added another driver for the development of the smart grid: reliability. “Much of our nation’s electric grid was built more than 75 years ago, and the aging infrastructure needs to be upgraded to meet today’s demands.”

Drew also explained that the smart grid will utilize alternative forms of energy generation, like wind and solar power. “Federal regulators, industry observers and consumers are also interested in expanding our nation’s portfolio of renewable energy alternatives and, in turn, reducing greenhouse gas emissions,” he said. “Although this is something that most electric cooperatives fully support, the [non-intelligent] grid isn’t designed for wide-scale deployment of renewable energy sources.”

The total smart grid market is estimated at approximately $200 billion spread over the next 10-15 years, according to the Electric Power Research Institute and the Pacific Northwest National Laboratory. The burgeoning market has attracted the attention of electrical utility providers, major networking vendors, tier-one broadband providers and smaller telcos.

Defining the Smart Grid

The modern power grid incorporates communications and information technology into the generation, transmission, distribution and consumption of power. The smart grid will utilize digital technology to create a more efficient, reliable, resilient and responsive network. It aspires to intelligently detect and solve problems within the electrical system. The smart grid also promises to lessen the impact on our environment by reducing overall peak demand for power, successfully integrating renewable energy into the network, and supporting the widespread adoption of electric vehicles.

With such an extensive mission and a diverse set of benefits, there are a wide variety of stakeholders invested in the smart grid concept. As such, there are many definitions of the smart grid concept based upon function, benefits or even technology.

The U.S. Department of Commerce National Institute of Standards and Technology (NIST) defines the smart grid as the “two-way flow of electricity and information to create an automated, widely distributed energy delivery network.”

For broadband service providers, the smart grid concept can be simplified as a robust, two-way communications network which is dynamic, interactive, provides real-time data and relies on an open-architecture. This network will link smart devices, which will reside in homes and businesses, with utility or third-party information processing companies. Smart infrastructure will provide the electric provider with far greater insight into the grid, and the consumer with more information and control over his energy use and bill.

The Smart Meter

The smart meter is often thought of as the poster child for the smart grid concept and the first step toward achieving an interconnected grid. The smart meter, which will reside at the customer’s home or business, will transmit information to the utility provider regarding historical energy consumption and real-time measurements of current usage. When combined with home energy-monitoring tools, the smart meter will provide the end user with detailed information on current energy consumption, which appliances consume the most power, the month’s billing estimate and how his home compares to others. Providing the consumer with this basic information will offer ideas for how to reduce his energy bill by 5%-15%.

Taking this one step further, the smart meter can be used in conjunction with a gateway and a home area network. If appliances are connected to a home-area network, the consumer will able to program major appliances on a schedule via one convenient tool.

Consumers also will be able to make on-the-spot decisions based upon current energy conditions and the resultant prices. Traditionally, customers have been charged one flat rate for power. Time-based or dynamic-pricing schemes attempt to more closely match the cost of production with what the retail customer pays for the service. Under this new pricing platform, utility companies will charge a premium for peak energy usage. This will likely encourage consumers to reduce their energy consumption, allowing utility providers to shed loads placed on the power grid.

In order to fully understand these new efficiencies, let’s examine the following example. Under the current electrical and flat-rate pricing system, consumers return home from work and turn on devices such as air conditioners, TVs, computers and kitchen appliances. Without being able to precisely determine when demand will peak or how high it will reach, utility providers must bring peaker plants online to meet customers’ needs. Peaker plants provide backup power once a generation site has reached its capacity, and run for a short or variable amount of time until demand is reduced. Peaker plants are often more expensive and not as efficient and environmental friendly as a base-load power plant.

But with a networked smart meter combined with time-of-day pricing, the consumer will understand how much it is costing him, in real time, to set his thermostat at 75 compared to 78 degrees, or to dry his clothes and charge his electric car during peak-load versus low-demand times. The possibilities are endless. If the customer turns on his oven to cook a meal when electricity rates are high, the stove might tell the refrigerator to delay defrosting or adjust its temperature until dinner is served. Likewise, the washing machine will be able to communicate with the dishwasher, ensuring that it will switch on only after the clothes are cleaned. Through the use of a home network and Web applications, the end user might also be able to set up rules for appliances, such as specifying a monthly electricity budget and instructing his appliances to operate within that defined budget.

Customer education and buy-in is vitally important to the success of the smart grid. “At the heart of the smart grid is customer education,” Dosch said. “When consumers understand their consumption patterns and the real-time rates for such usage, the information may influence them to change their behavior.”

Dosch reminds us that the electric industry can learn from the telecom industry. “What utilities are going through today is reminiscent of the evolution telecommunications providers experienced 10 or 15 years ago,” he said. “Telcos have employed time-of-day pricing for many years which allowed providers to influence customer behavior and constrain demand when the telco did not have enough network capacity. This is very similar to the scenario utilities are experiencing today as they don’t have enough power production to meet these high demand times.”

Installing smart meters and utilizing time-of-day pricing will allow the utility to reduce customer needs, and balance energy supply and demand throughout the day. This is the first step to achieving the smart grid and the efficiencies promised by an interconnected system.

Stay tuned for part two in our series which will explore the evolving architecture of an electric provider.

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One Response to “The Smart Grid Primer: What is the Smart Grid”
  1. JIM LEMBERG says:

    I am familiar with one of the smart grid grant winners. The business case analysis prepared by the financial consultant (and available to the public) shows that customers could be offered a 0.5% rate decrease during the first four years of the project . Once principal payments on debt start in year 5, the project generates less cash each year than the status quo. The business case does not appear to fully capture all costs, but appears to speculatively overstate savings. Obviously, this project is driven by politics, not by dollars.

    AMI technology does not appear to do a great deal more than could be accomplished with a programmable thermostat. A reasonable person could easily figure out when to run the clothes washer and the dishwasher. Use the brain instead of buying the latest gizmo.

    AMI appears to me to be mostly manufacturers selling their goods. It does not appear to meet a true need.