Energy & Utilities Café serves as a platform to generate casual conversations about Energy and the Utilities Industry. The content here is meant to strike curiosity and to encourage discussions on the topic for everyone, even if you are not an expert in the field – because energy matters to all.

Our electrical grid is over a hundred years old, meaning there’s a need for tune ups to the system. With society’s advancements in technology and population growth, a newer and more intelligent grid is the next natural step to meet our modern energy needs. Industries like communications and logistics have changed rapidly in the last 2 decades with the internet, smart phones, and faster or even same-day shipping – why shouldn’t electricity move just as quickly? A newer and more intelligent electrical grid is referred to as Smart Grid (SG)¹. SG allows for the efficient operation of the grid, matching electricity generation to demand, and reducing not only cost but carbon footprint. SG also facilitates the incorporation of renewable energy sources into the grid as well as electric vehicles and other transformative technology that benefits users¹. But what really is the Smart Grid, and is it a reality in the U.S. today?

Let’s have a Casual Conversation about the Smart Grid

 What is the Smart Grid?

Coined in 2007, SG represents the next stage of our electric grid². Some supporters use SG as a symbol of environmentally friendly practices such as the reduction of carbon emissions. A smarter grid allows electric utilities to run a more efficient grid by matching generation to demand. A more efficient grid generates only the necessary electricity, decreasing the need and use of fossil fuels. Furthermore, through SG, Utilities communicate with consumers and identify near real-time issues with grid infrastructure. As a result, Utilities solve power problems quicker, reduce costs, and increase customer satisfaction.

For end-users, SG allows the integration of on-site solar generation to the grid along with other generation and storage systems. Consequently, end-users become prosumers (producing-consumers). End users now have lower electricity bills and increased on-site power reliability in case of a grid outage. The latter application is a common practice for high-energy consumers and critical users, such as hospitals and datacenters³.  

“Operations efficiency, environmental consciousness, and cost reduction are all great qualities. So, is the Smart Grid implemented all over the U.S.?”

Not quite. SG has not been embraced across the U.S. 

Let’s review some of the facilitating factors that have enabled its implementation in areas like the north-east and California.

Smart Grid Drivers     

Policy can be one of the major drivers of any industry, and energy is not the exception. Regulatory mandates at the Federal and State level can drive or defect Utilities from grid modernization – it all has to do with stability. Like the early beginnings of the grid, companies and Utilities are hesitant to invest capital on an uncertain future. Projects such as building new power plants or installing smart meters have a long-term return on investment. Therefore, if regulators cannot ensure stakeholders’ regulations will favor or continue to favor their investments, these SG projects become difficult to justify⁴.

Technology has been the driver and often the disruptor of many industries such as transportation (Rideshares), communication (Smart phones) and fitness (Wearables). However, for the energy industry, it has been a difficult transition. Energy can be considered a basic need and electricity is something we use daily in almost every activity. Also, technology has not evolved equally across domains, limiting device interoperability and functionality⁵.

For example, a manufacturing company will find it difficult to combine all its systems, gather their data, and communicate the results with the utility company. The machinery on the production floor, the administration building’s systems like HVAC and lighting systems, and on-site generation are all separate energy entities, and they seldom communicate. Without this connectivity and interoperability, the manufacturing company cannot offer a true energy consumption-production picture to the Utility company, which ends up limiting the Smart Grid’s potential.

Security is a major concern with interconnected systems in energy. If vulnerabilities are exploited, perpetrators can cause larger damage compared to independent systems⁶. For this reason, very comprehensive security standards are necessary. But that is the problem – how can you develop one standard for different systems belonging to different domains, which are regulated by different institutions? To have all institutions and regulatory bodies working together will be a monumental task, but a necessary one.

Imagine all these systems connected as the ideal future: renewable energy resources (solar, wind), residential buildings (HVAC, Thermostats, EVs), commercial buildings (HVAC, Lighting), industrial buildings (automation, controls, equipment) and utility systems (distribution, asset management). All these systems can communicate with one another (wired and wirelessly), and also communicate with the smart grid over a wide area network.  

The last SG driver to consider is economics. We mentioned investments and rate of return earlier in this post, but now let’s focus on sales and profitability. If you remember our post on How Does a Utility Make Money?, you learned  that most utilities are limited through regulation in the amount of profit they can make. Consequently, this may limit the incentive a Utility would have to seek efficiency and grid modernization. One answer could be to dissociate sales profit and investment recovery mechanisms from efficiency, modernization, and other progressive investments. For this to happen, the collaboration of regulatory bodies and long-term policies which provide a stable panorama for investors is critical. 

To conclude, the Smart Grid is the natural next step for our electrical grid. It has several benefits ranging from environmental consciousness, reduction of costs, and operations efficiency. However, it requires several different industry players working together with policy makers to ensure a powerful, reliable, and clean future. 

“But what makes the grid smart? What combination of technologies are required to accomplish a Smart Grid?”

Those are great questions. We will answer them in our next post

We encourage you to find out more about this topic. Start by checking the following references:

• [1] Smart Grid system Report (2018). Washington, D.C.: U.S. Dept. of Energy.
• [2] Smart Grid system Report (2009). Washington, D.C.: U.S. Dept. of Energy.
• [3] Moreno-Munoz, A., Bellido-Outeirino, F., Siano, P., & Gomez-Nieto, M. (2016). Mobile social media for smart grids customer engagement: Emerging trends and challenges. Renewable and Sustainable Energy Reviews, 53, 1611-1616. doi:10.1016/j.rser.2015.09.077
• [4] Hall, S., & Foxon, T. J. (2014). Values in the Smart Grid: The co-evolving political economy of smart distribution. Energy Policy, 74, 600-609. doi:10.1016/j.enpol.2014.08.018
• [5] Shomali, A., & Pinkse, J. (2016). The consequences of smart grids for the business model of electricity firms. Journal of Cleaner Production, 112, 3830-3841. doi:10.1016/j.jclepro.2015.07.078
• [6] Paul, S., Rabbani, M. S., Kundu, R. K., & Zaman, S. M. (2014). A review of smart technology (Smart Grid) and its features. 2014 1st International Conference on Non Conventional Energy (ICONCE 2014). doi:10.1109/iconce.2014.6808719