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When Will We Get Smart Grids?

Regulators and utilities still have far to go to make electricity delivery more efficient.

Through grants from the 2009 stimulus legislation, the U.S. government and businesses have committed more than $9 billion to fund smart-grid projects. The goal: to upgrade the aging electricity infrastructure so that it is better adapted to the intermittency of renewable energy sources and people can use energy more efficiently.

Power lines in Bulgaria.

As part of this push, utilities have deployed 50 million smart meters, largely in homes. Because these meters deliver real-time information on electricity usage instead of being read just once a month, they could, among other things, let people know when high demand is driving electricity prices well above normal and guide them (or their appliances) to shift some consumption to a cheaper time of day. For now, though, many of those smart meters aren’t being used to their full potential because retail electricity prices still don’t vary with demand in most places, and it is unclear if that will change in coming years.

Changing economics

Power companies have done some pilot programs to see how consumers would react to electricity prices that change every hour. But outdated regulatory models that determine retail electricity prices in each state don’t do much to reward utilities that offer dynamic rates for customers. “The regulatory model just hasn’t evolved as fast as the technology,” says Bernard Neenan, senior technical executive at the Electric Power Research Institute.

Navigant Research estimates that fewer than 1 percent of U.S. households are seeing dynamic rates, a report from the Federal Energy Regulatory Commission points out. But new pricing models have led to big savings in some areas. In Illinois, where the electric provider ComEd has installed more than one million smart meters and hopes to deploy more than four million by 2018, about 10,000 customers are enrolled in a program where electricity prices vary by the hour. On average, these customers save 15 percent on their bills every year and use 4 percent less electricity than customers charged a flat rate, says Jim Eber, the company’s manager of demand response and dynamic planning.

Under one particularly successful program in Oklahoma, electricity customers signed up for a two-year program in which their rates would change with supply and demand. New thermostats and Web portals displayed their appliances’ energy usage and helped the customers shift some energy-intensive tasks to periods with lower overall demand. Customers saved an average of $150 over the summer months. Thanks to its good results with this trial, the utility is rolling out the variable rate to about 120,000 of its customers by 2016 and might defer investing in 170 megawatts of new power-plant capacity.

Widely implementing dynamic electricity prices will require adequate funding to educate consumers, says a report released by Department of Energy last September. Sometimes the notifications that customers have received about electricity prices have been too frequent and confusing, it says. But new home appliances and electric vehicles that can get real-time data about pricing could free consumers from even having to make such decisions—devices can be configured to turn on or charge their batteries only when the price of electricity is low. UCLA’s Smart Grid Energy Research Center is using data gathered from about 130 electric-vehicle charging stations around campus to develop algorithms that use a person’s price preferences to determine when the cars should charge. The model is described in a paper presented at an Institute of Electrical and Electronics Engineers conference in February.

New power sources

Other smart-grid technologies could make electricity delivery more resilient by letting homes and businesses instantly switch from a larger grid system to a smaller one during bad weather or system maintenance. In the United States, these “microgrids” currently exist mainly at universities and government sites (here’s a list of the main ones around the world), but several projects aim to spread them to communities. For example, the California Energy Commission recently awarded San Diego Gas & Electric $5 million to connect a microgrid in Borrego Springs to a solar facility with battery storage that can provide power day and night. Smaller-scale energy storage solutions are starting to hit the market as well. Through its partnership with Tesla Motors, SolarCity has installed 300 battery storage systems in the San Francisco Bay area. Vehicle2Grid, a pilot project led by Dutch grid operator Alliander and several other companies, is beginning to outfit a home in Lochem, the Netherlands, so that its activities can be powered with energy stored in electric-vehicle batteries. The project could scale up to a whole neighborhood in Amsterdam by 2016.

The Takeaway:

It’s still not clear when a full-fledged smart grid will appear, or even that many more places will adopt dynamic pricing schemes. Ultimately, the U.S. Department of Energy aims to have a fully functioning smart grid in place by 2035 to help cut carbon emissions.

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