Case Study 7

Case Study No. 7

IT Enables a Smarter Power Grid

          The U.S. electrical power infrastructure, also called the grid, delivers electricity from points of generation to consumers around the country. The electric delivery network functions via two primary systems: the transmission system and the distribution system. The transmission system delivers electricity from power plants to distribution substations, while the distribution system delivers electricity from distribution substations to consumers.52

          The Department of Energy has been charged with leading the wholesale modernization of the U.S. electrical power grid. This transition is likely to take decades and cost hundreds of billions of dollars. The first phase of the transition involves the implementation of a smart grid, which will convert the power grid from a centralized generation and distribution model to one that is more distributed and diverse. Peaks in demand on the smart grid will be partially met by distributed renewable power sources—such as solar panels and windmills—feeding power into the grid. For example, Pacific Gas & Electric, which serves Southern California, would be able to draw energy from some 15,000 solar installations in its service area rather than fire up an auxiliary power plant in the middle of a hot afternoon.

          The smart grid will use networks and switches for power management, data collection, communications, and real-time monitoring, as well as building sensors and applications for meter reading and optimizing energy use and distribution. The smart grid will create a two-way flow of information from power plant to power plug. Billions of power meter devices, each with its own address—much like every computer device has its own Internet address—will be connected to the smart grid. This two-way communications link between power consumer and power provider will give both parties much greater control over power consumption.53 The smart grid could become enormous in terms of the number of devices connected to it—as big as 100 Internets—and require spending as much as $100 billion on routers, switches, and secure Internet-based communications.54

          With the smart grid, “a power company can optimize grid performance, prevent outages, restore outages faster, and allow consumers to manage energy use right down to the individual networked appliance. Smart grids can also incorporate new sustainable energies such as wind and solar generation, interact locally with distributed power sources, and even accept power stored in the batteries of consumers’ plug-in electric vehicles.”55

Of course, there are a number of unresolved issues with the smart grid, including costs, benefits, value proposition to consumers, implementation, and deployment. To gain answers to these questions, many organizations are forming partnerships and conducting pilot projects:

•                 Google formed partnerships with eight national and international energy companies to allow consumers to access data about their energy use through Google’s PowerMeter software application. The software, which is currently only available to a limited number of customers, displays data about home energy use provided by the new generation of network-ready smart power meters that are being installed by various utilities around the world.56

•                 Cisco, General Electric, and Florida Power & Light plan to deploy 1 million advanced wireless smart meters to every home and most businesses in Miami-Dade County.57

•                 The United Kingdom has plans to install devices in every household in Britain that will enable consumers to monitor their own energy use and make reductions in energy consumption and carbon emissions as a result.58

•                 Duke Energy plans to build a smart grid in Cincinnati, where it serves 700,000 customers—spending about $1 billion on sensors, intelligent meters, and other system upgrades.59

In addition to these pilot projects, part of a 2009 U.S. federal stimulus bill was aimed at giving other smart-grid initiatives a jump start by allocating $11 billion to power utilities to shift their energy supply networks to digital technology.60

          Smart systems have the potential to save billions of dollars a year. Based on initial results from various pilot projects, consumers’ power cost reductions are expected to be in the range of 5 percent to 15 percent.61 Such savings estimates are based on the assumption that consumers will use information about their energy consumption and costs to modify their power-usage habits to save energy and money. If consumers do this, it will enable power utilities to operate more efficiently.

San Diego Gas & Electric will install more than 1.4 million smart meters in the San Diego region by the end of 2011. Hal D. Snyder, vice president of customer solutions, claims: “Just getting this information in the hands of our customers, these customers could reduce energy usage by 5 percent to 10 percent…. Once we get this information into the home, the next step is the automation of home energy usage.”62

          Indeed it is the prospect of “automation of home energy usage” that has many consumers worried. To what extent will the opportunity to conserve energy power become pressure to do so? Will utilities charge a premium for specific power-usage patterns or specific appliances? Will onerous utility or government power-usage guidelines be mandated (e.g., thermostats cannot be set below 76 degrees in the summer or above 70 degrees in the winter)? Will utilities automatically and with no advance warning dial down consumers’ power consumption to allow confined brownouts but prevent widespread outages?

Questions to Answer: 

1.    What do you see as the major advantages of implementing a smart power grid?

-       The major advantage of implementing a smart power grid is there will be more efficient transmission of electricity, quicker restoration of electricity after power disturbances. It can also reduce operations and management costs for utilities, and ultimately lower power costs for consumers.

2.    What are the key issues and barriers associated with implementation of a smart power grid?

-       There are some issues with the implementation of a smart power grid. This includes costs, benefits value proposition to costumers, implementation and deployment. There could also be an issue in ensuring the security of these power grids against theft, abuse, and malicious activities.

3.    If the government provides much of the money required to implement a smart power grid, does that give it the right to control how the power grid is operated?

-       Yes, I think they have the right to control how the power grid is operated because if they can operate the power grids, they can manage affordable energy costs.