The Smart Grid is Coming! What’s a Smart Grid?
Several hundred utility executives, government regulators, and engineers have gathered in downtown San Diego this week for a three-day conference that is focused on what may be the utility industry’s biggest paradigm shift since the Tennessee Valley Authority electrified the Southeastern United States.
The only problem is that it’s the biggest paradigm shift that people have never heard of. A Harris Poll recently highlighted the fact that U.S. utilities have committed billions of dollars to upgrade the electric grid by installing new “smart meters” in homes and businesses. But the Harris Poll shows about two-thirds of Americans (68 percent) have never heard the term “smart grid” and 63 percent don’t know what a smart meter is.
So for at least some people, you got it here first: Instead of merely tracking how much total electricity (or gas, or water) a customer uses each month, a smart meter tracks a customer’s usage continuously throughout the day and uses wireless technology to automatically transmit the data in real time to the utility. This automated meter reading technology makes it possible for regulators to set prices that vary at different times of day—and which encourage or discourage consumption—based on the relative cost of power production and periods of peak energy demand. As the Harris Poll shows, if the price of electricity changes according to how much it actually costs to produce, three out of four people want to be able to see and control how much electricity they are using.
So why are smart meters a big deal? And why should technology innovators care? A few highlights from the “Metering America” conference are in order:
—In California, the big three investor-owned utilities are in the process of deploying 12 million smart meters, covering about 80 percent of the state’s population at an estimated cost of $4.5 billion, according to Commissioner Nancy Ryan of the California Public Utilities Commission. Ryan told the “Metering America” conference that utility rates based on time-of-day pricing related to the cost of producing electricity must be coupled with extensive customer communications and education campaigns, or the effort to align consumers and true market costs will be wasted.
—San Diego Gas & Electric is on schedule to complete installation of 1.4 million electric smart meters and 850,000 gas smart meters in its service area by the end of 2011 at an estimated cost of $600 million, says Anne Shen Smith, SDG&E’s senior vice president for customer services. While there really are benefits to the deployment, Smith says the industry is “lagging in developing the kind of software that goes with this technology. Until then, it will just be a meter.”
—SDG&E also is deploying its smart meters before technical standards have been set. “We just can’t wait for the perfect technology to happen,” SDG&E’s Smith told the audience. She says smart meters “have to have flexibility, so we can incorporate new technologies as we go.” Smith says it is imperative for the industry to continue development of smart meters as “a software-driven technology platform—so the smart meter itself can be updated remotely as we move forward over time.” Updating the smart meter’s hardware would be a costly proposition that utilities want to avoid. Meanwhile, The California utilities commission has been working to establish smart meter standards with the National Institute of Standards and Technology, or NIST, the U.S. Department of Energy, and other agencies.
—The deployment of smart meters at the end points of the power grid also will necessitate the deployment of extensive technologies to collect and store the data—and add intelligence to grid management. Utilities will need new applications for data mining and data analytics to make use of the data being generated. New innovations are being developed and new startups are being formed to serve this emerging industry sector.
—As a case study in what not to do, Ryan pointed to the installation of smart meters in Bakersfield, CA, under a pilot program by Pacific Gas & Electric. Outraged residents who saw their utility bills quadruple following deployment filed a class-action lawsuit against the utility, meter installer Wellington Energy. “PG&E has conceded it did not do enough customer education,” says Ryan, who describes Bakersfield as “the epicenter of the revolution” against smart meters. The state utilities commission has halted the lawsuit, pending its own investigation into the PG&E’s smart meter program, including the accuracy of its meters and billing system.
—SDG&E, which has installed 600,000 smart meters of all types so far, says it has no immediate plan to change from its current flat-rate to time-of-day billing—which prudently separates the smart meter from dynamic pricing that can send customer bills soaring. The PUC’s Ryan says it’s “imperative that the installation of smart grids be seen as something done for customers and not something done to customers.” Yet Ryan says the California utility commission also is intent to follow smart meter deployment with utility rates based on “dynamic pricing that encourages customers to use electricity when it’s abundant and produced at lower cost”—and which discourages them from using electricity during periods of peak energy demand.