The Big Smart Grid Challenges

Regulations, privacy and security concerns, and other issues could hold back developments.

A smarter electricity grid could fundamentally change the way people pay for and manage their electricity use. In theory, the technology could help reduce demand, save money, and improve reliability and efficiency. But implementing the necessary changes will be difficult, according to experts attending a symposium on the smart grid at GE Global Research in Niskayuna, NY, this week. They expect resistance from regulators and consumers alike, citing the complexity of the proposed system as well as concerns about privacy and security.

Smarter meter: Possible strategies for reducing energy consumption rely on devices that can send and receive information from utilities and communicate wirelessly with appliances. Credit: Kevin Bullis, Technology Review

Multimedia   See how the smart grid works.

The smart grid will incorporate new networking technology, including sensors and controls that make it possible to monitor electricity use in real time and make automatic changes that reduce energy waste. Furthermore, grid operators should be able to instantly detect problems that could lead to cascading outages, like the ones that cut power to the northeastern United States in 2003. And the technology ought to allow energy companies to incorporate more intermittent, renewable sources of electricity, such as wind turbines, by keeping the grid stable in the face of minute-by-minute changes in output.

For consumers, the smart grid could also mean radical changes in the way they pay for electricity. Instead of a flat rate, they could be charged much more at times of high demand, encouraging them to reduce their energy use during these periods. Companies such as GE are developing refrigerators, dryers, and other appliances that can automatically respond to signals from the utility, shutting off or reducing energy consumption to allow consumers to avoid paying the peak prices. Such strategies could allow utilities to put off building new transmission lines and generators to meet peak demand--savings that could be important as proposed regulations on carbon dioxide emissions force them to switch to more expensive sources of electricity.

Story continues below

But the necessary changes could prove difficult for consumers to adjust to, says Garry Brown, chairman of the New York State Public Service Commission, a utility regulator. Industrial and commercial electricity customers already have variable electricity rates that change with the time of day, but "they have the ability and expertise and wherewithal to figure out what to do with this," Brown says. "They have a manager that spends their life trying to react to it." Ordinary consumers don't have that advantage. Indeed, in the 1990s the New York state legislature blocked mandatory variable pricing amid concerns about the impact it could have on customers who couldn't avoid peak prices, such as people who must use electric-powered medical equipment around the clock. We have to be "slow and cautious," about introducing the technology, Brown says.

The grid upgrade may also face resistance from regulators because some of the benefits are difficult to measure. Regulators are responsible for ensuring that utilities make wise investments that restrain the price of electricity. But improved efficiency and reliability can't easily be quantified, says Bryan Olnick, a senior director at the major utility Florida Power and Light. He says that regulators need to start considering long-term societal benefits in addition to electricity costs. Ultimately, regulators will need proof that the systems can deliver the promised benefits, which is why there are now smart-grid demonstration projects in places including Boulder, CO; Maui; and Miami.