The smart grid is an electrical grid that communicates. The idea is that the Internet and communications technology can make our electrical system far more resilient to problems like blackouts, better accommodate unconventional power sources, and ease energy demand by providing instant information about prices to consumers.

Public investment in smart-grid infrastructure has ballooned over the past several years. The charge has so far been led by the U.S. and China. In 2009, the U.S. government set aside $4.5 billion as part of a larger economic stimulus package to fund projects designed to modernize the grid and deploy smart technologies. China has also committed billions of dollars. 

Renewable energy is a key driver of the smart-grid idea. Although wind turbines and solar panels still generate only a tiny fraction of the world’s electrical power, the installed capacity of the two energy sources—the total potential electricity that can be generated—is increasing rapidly. A grid dependent on large amounts of wind and solar power must be able to adapt to sudden changes in power supply, such as when the wind dies down near a wind farm. That will create new demands for tighter digital monitoring and control over electrical systems.  

A smarter grid will employ an array of devices monitoring conditions in real time; that will help integrate new power sources and also avoid blackouts, which can cause billions of dollars in economic damage. One such device is called a phasor measurement unit, or PMU. As of 2011, about 150 such devices sat at strategic points on the North American power grid taking detailed measurements of electrical waves at a rate of 30 times per second, much more often than conventional equipment. The data can be time- and location-stamped using GPS technology, allowing information from multiple utilities to be combined and synchronized into a high-resolution picture of conditions across the grid.

Jeff Dagle, senior electrical engineer at Pacific Northwest National Laboratory, likens the change to upgrading from x-ray pictures to MRIs. In the next 20 years, the Electric Power Research Institute expects utilities to install around 1,250 more PMUs around the U.S. and Canada.

Source: EPRI

A smarter grid will also fold consumers into the management of demand for power. Studies have shown that when consumers are aware of the actual price of electricity, which can fluctuate greatly during the day, they will often scale back their use during peak hours, easing strain on the grid. In the future, homeowners may be able to program smart thermostats, appliances, and electric-vehicle chargers to adapt automatically to the changing price of electricity and keep power bills below a specified budget. For now, we’re still in the first phase: spurred by government subsidies, utility companies are equipping millions of homes with smart electrical meters that enable two-way wireless communication. 

So far, utility companies are installing them mostly because it’s cheaper to read meters (and bill customers) automatically than to send meter readers from house to house. Eventually, however, more utilities will offer pricing plans that charge according to the time of day the power is used.

Consumers will have access to real-time price information from meters they can access on the Web, or from smart appliances like refrigerators that run only when electricity is cheap. Analysts predict that the market for smart appliances will grow substantially over the next few years.

We’re still a long way from a smart grid, or even from a clear idea of how much it will cost. For example, the Electric Power Research Institute estimated in 2011 that implementing a fully functional smart grid in just the U.S., including upgrades to transmission and distribution infrastructure as well as tools and applications for consumers, will cost between $338 billion and $476 billion.

The transition to the smart grid will be complicated by things other than technology. The U.S. grid, for example, is governed by a patchwork of different regulatory frameworks and is managed by more than 3,000 separate utilities, local governments, and companies. What’s more, smart meters and the smart grid are still unfamiliar concepts to many consumers. A Pike Research survey of 1,050 people in the U.S. found that nearly half described themselves as unfamiliar with smart meters. The study also found that the main concern of respondents who took an unfavorable view of smart meters was that the devices would lead to higher electricity bills.