FAQ: What the smart grid means to you

Yet again, the tech industry has a buzzword everyone seems to be using but few really understand.

The smart grid follows the footsteps of the Internet and the interstate highway system--they are giant investments in infrastructure. It's not so much a single thing as it is a goal to give the electricity system a digital makeover to make it more efficient and reliable.

Governments and utilities around the world are devoting billions of dollars to lay new transmission lines and make the electricity network operate more like the computer networks we access every day. Big tech vendors and hundreds of start-ups are jockeying for prominence in the smart grid.

The buzz reflects how important reliable, affordable, and cleaner energy is to our modern lifestyle and economy. But what does it mean for individuals? And what technologies make up the smart grid? To give you a clue on what the smart-grid fuss is all about, we offer this FAQ.

Images: The many faces of the smart grid

What is the smart grid?
Building the smart grid means adding computer and communications technology to the existing electricity grid. With an overlay of digital technology, the grid promises to operate more efficiently and reliably. It can also accommodate more solar and wind power, which are inconsistent sources of energy that can become more reliable with better controls. Much like computers and routers manage the flow of bits on the Internet, smart-grid technologies use information to optimize the flow of electricity.

What would a smart grid be able to do that today's not-so-smart grid can't?
Right now, if there's a breakdown at your local substation, the utility usually finds out when customers call to complain. Placing a networked sensor inside a transformer or along wires could locate and report a problem, or prevent it from happening in the first place.

Despite living in the age of information, most of us only get a glimpse of our energy consumption when the utility bills come once a month. In people's homes, the smart grid should mean more detailed information through home energy-monitoring tools. These can be small displays or Web-based programs that give a real-time view of how much energy you're using, which appliances consume the most, and how your home compares to others. Just surfacing that information will give people ideas on how to shave energy bills by 5 to 15 percent, utility executives say.

What's needed to start is a smart meter with two-way communications or some other kind of gateway. Once that conduit is put in place, consumers can get more detailed energy data and start taking advantage of efficiency incentives, such as charging your plug-in electric vehicle in the middle of the night to get off-peak rates.

In theory, networked appliances are smarter and more efficient. GE and start-up display-maker Tendril, for example, will test big appliances--refrigerators, washing machines, and the like--that can get information on fluctuating electricity prices to do its job more efficiently. It could be as simple as making ice or running the dishwasher in the middle of the night. Or, as part of a home-area network, consumers could program lighting and major appliances on a schedule.

The next step toward efficiency is what's called demand response. The goal here is to dial back energy consumption at peak times. This is very important to utilities because it's costly and polluting to bring on auxiliary power plants to meet, say, a spike in demand from the air conditioning load on a hot summer day. Consumers and businesses have financial incentives to participate, such as a discounted rate. "Shedding load" could mean turning the gas heat off of the clothes drier for a few minutes or dimming the lights in a supermarket in the middle of the day.

A smarter grid also makes distributed energy, such as home solar systems, more viable and user-friendly. With a smart meter and monitoring software, a homeowner can see how much solar panels are producing and their carbon footprint is being reduced. A utility, too, is keenly interested in how much distributed energy is available so it can calibrate its own daily power generation.

What are some examples?
Xcel Energy has dubbed Boulder, Colo., "Smart Grid City" and is installing the equipment on power lines and people's homes. Consumers get access to a free Web-based program that gives them a real-time read-out of use, which helps them lower their usage. It also lets them know when they are buying electricity made from clean sources.

When you go deeper into the smart grid, though, you realize it isn't just about a more detailed utility bill. It can also diversify our energy sources, potentially avoiding the need to build new power plants to meet growing demand.

Consider Duke Energy's smart-grid trial in Charlotte, N.C. A substation--the point that distributes electricity from long-haul transmission lines to a neighborhood--is equipped with 213 solar panels and a large battery. About 100 households have smart meters and in-home energy management tools.

When the sun is shining, the 50-kilowatt solar array makes electricity for the homes in the neighborhood. It also feeds the battery, giving the area a few hours of backup power in the case of an outage and a buffer to draw from during peak times. Consumers can take part in demand-response programs, too, to get a reduction on their electricity bill.

One of the more aggressive utilities in this area, Duke plans to have millions of smart meters installed in homes over the next two years. In addition, it envisions putting sensors along power lines, and networking gear, such as routers, in substations and transformers. In people's homes, individual appliances like water heaters could eventually be networked as well.

The project reflects how the utility industry seems to be following the path of the computing industry, which went from centralized processing with mainframes to a much more distributed and varied architecture.

Who are the companies participating in the smart grid?
The smart grid is shaping up to be a giant mash-up of the electricity utility, computing, and communications industries.

Heavyweight tech companies--Cisco, IBM, Microsoft, and Google--all have serious initiatives in this area and loom large among utility executives working on smart-grid programs.

IBM, which sees big dollar signs when it gets involved in large infrastructure projects, is building the technology backbone for many grid modernization programs. That includes installing communications equipment along the grid as well as the software and servers to process the mountains of data that need to be processed.

Cisco, too, is jumping in with both feet with a broad initiative to supply networking equipment for utilities as well as in-home energy management tools. Verizon is looking at this as well, seeing the home network as a point to gather data on home energy use and, potentially, control lighting and appliances for better efficiency.

Microsoft and Google are going after consumers as well while trying to sign on utility partners.

The other key players are the host of start-ups in the area, many of which focus on energy displays. A handful of stronger network-oriented companies are emerging, notably Silver Spring Networks, which offers a wireless card that goes into smart meters.

Finally, there's the electrical infrastructure itself: meters, transformers, transmission equipment, and other hardware that makes the grid tick. In addition to a number of smart meter makers, there are the global infrastructure companies like GE, Siemens, and ABB that are introducing modern control systems to manage the flow of electricity.

OK, so the smart grid is supposed to reduce wasted energy, give consumers better information, and allow the grid to use more solar and wind power. What's the hold-up?
Where to start?

Utilities aren't known as the most fleet-of-foot businesses and the energy industry invests a lower percentage of revenue in technology than most industries. This helps explain why we've been hearing about the grid for 10 years but very few of us actually have it.

But lack of investment is only part of the picture. The whole point of a smarter grid is to use electricity more efficiently, but in many states in the U.S. utilities operate without strong incentives for efficiency, say industry executives. They invest big dollars--think multibillion-dollar power plants--based on their ability to sell more kilowatt-hours, not less. The more progressive utilities have found ways to justify their investments in the smart grid based on savings from energy reductions, but many utilities aren't nearly as enthusiastic because of how they are regulated.

A key regulatory piece of the smart grid is time-of-day pricing, which is supposed to reflect the fluctuating cost of energy delivery in a day. Some sort of tiered pricing would allow a consumer to take advantage of off-peak rates, but it isn't the norm in many states.

Then there's the lack of standards for a dizzying number of tasks. The National Institute of Standards and Technology, which is responsible for establishing an interoperability framework for smart-grid standards, recently released a road map but everyone agrees there's much work to be done.

The basic idea: be more efficient, resilient, and able to use more renewable energy.

(Credit: Department of Energy)

Amid all the technical and business challenges, there's the question of consumer acceptance. Consumers, in general, are likely to welcome more detailed information on how much electricity, natural gas, and water they use. But even though there's the promise of energy savings, it's not clear that people are willing to pay much money for home energy-management tools.

Some people and businesses are willing to allow a utility to communicate through a smart meter to remotely control the thermostat on the air conditioner in exchange for cheaper rates. But these demand-response programs are clearly not for everyone. The trick for successful demand response programs is to entice consumers with lower electricity bills without being intrusive or forcing a dramatic change, say industry executives.

Finally, these technology businesses need to be profitable, but many of the technologies and business models need to be ironed out. There's even some concern that a mini-investment bubble is building around smart grids.

Is the smart grid more secure?
Given the smart grid's fledgling status, it's hard to provide a definitive report card. But the rush to modernize the grid has gotten some security experts raising the alarm and calling for more scrutiny.

The increased use of the Internet instead of private networks for Supervisory Control and Data Acquisition (SCADA) control systems and the bleeding together of existing corporate networks with energy providers' control networks opens up more potential cyber-vulnerabilities, they say. Security experts are calling for security to be better baked into the standards for the smart grid and for industry professionals to use better security practices to avoid dangerous hacks.

So when will I have my smart grid?
Like the highways and the Internet, the smart grid will take years to build, probably decades.

The first signs will be better energy-saving tools for consumers, much like the Web brought consumers better tools for managing personal finances. Some enthusiasts will want to closely monitor energy use and ratchet down consumption for environmental and financial reasons. Others may just set up "auto pilot" programs to take advantage of off-peak rates, much like you might use a programmable thermostat.

That said, it's early on and there may be a killer application that will emerge from the smart grid platform.