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Mention smart-grid technology to Frederick Butler, a utility regulator in New Jersey, and he'll immediately remind you of two recent crises. The first is the...
by | June 30, 2009

Mention smart-grid technology to Frederick Butler, a utility regulator in New Jersey, and he'll immediately remind you of two recent crises. The first is the great Northeast blackout of 2003. That emergency began on a hot summer afternoon, when a distribution line in Ohio sagged into some trees and shut down, triggering a cascade of outages that spread across transmission interconnections all the way to the Atlantic coast. Some 50 million people in seven states and Canada lost power. Had the regional power grid been equipped with smart-grid features such as high-tech sensors and communications devices, Butler says, the system "would have known what was happening when that tree hit that line in Ohio."

The blackout, Butler believes, highlights smart-grid technology's surest payoff: making the backbone of the electric system more resilient against failure and more efficient at transporting power over long distances. Importantly, those improvements can happen without customers even noticing. But there are other aspects of smart-grid technology that touch consumers more directly--right in their homes, in fact. New "smart meters" and interactive Web-based programs would dramatically alter the way people consume and pay for electricity, and sometimes even dictate when they can wash their dishes.

It's when those technologies come up that Butler's tone turns from enthusiastic to cautious and he mentions the second crisis. That was the push for deregulation a decade ago, and the rolling blackouts, rate hikes and ratepayer outrage that came after it. The lesson of that experience, Butler believes, is to be wary of subjecting consumers to next-big-things until the kinks are smoothed out. Instead of laying the groundwork for deregulation, "we jumped right in, with the promise of lower rates to follow," Butler says. "We cannot make the same mistake with the smart grid if we want it to succeed."

Butler's measured assessment stands in stark contrast to the hype currently surrounding the idea of the smart grid. Google and other titans of Silicon Valley are touting new grid technologies as the key to reducing greenhouse gases, lowering power bills and creating green jobs. Meanwhile, President Obama's economic-stimulus plan is pouring $4.6 billion into grid technologies. "The benefits of the grid are that we could reduce our energy costs by billions of dollars," Obama said in March. "We could set up systems so that everybody in each house has their own smart meters that will tell you when to turn off the lights, when the peak hours are, can help you sell back energy that you've generated in your home through a solar panel."

It's a futuristic vision that would challenge power-consuming habits that took a century to develop. But Butler, who is chairman of NARUC, the association of utility regulators in all 50 states, isn't sure the time is right for retrofitting the grid with trendy but untried devices. Cost is a big concern. The stimulus dollars represent a tiny down payment on a national smart grid that will cost at least $100 billion to build, and probably much more. By and large, it's state utility commissions that will have to decide how much of that tab consumers will cover in the form of higher rates. If regulators aren't careful, Butler says, they'll get the blame for saddling customers with bills for pricey gadgets they may not want or even understand how to use.

For all of technology's recent advances, the electricity business has escaped the sort of radical disruption that has revolutionized telecommunications and other industries. After Thomas Edison built the first central generating station to serve New York City 120 years ago, the electric-power industry evolved in a patchwork style. By the 1960s, separate utility grids had been linked into regional networks of high-voltage transmission lines, transformers, substations, and the local distribution lines that carry power down rural roads and underneath city streets. It's an old but durable infrastructure: Utilities continue to operate the grid with electromechanical switches and other clunky instruments that date to the mid-1900s. "It's still an analog industry," says Matt Baker, a public utility commissioner in Colorado. "Edison could walk into a control room and he'd recognize almost all of the equipment. He invented a lot of it."

The idea behind the smart grid is not necessarily to re-wire America with a new electric infrastructure. It's to take what we have and retrofit it to work in new ways. For example, the old grid operated in one direction, delivering power from giant plants to homes or businesses. The smart grid would work in two directions. Consumers could generate their own power--from rooftop solar panels, for example--and put the surplus back on the grid for others to use. Indeed, a big goal of the smart grid is to accommodate both the promise and fickleness of using renewable energy on a mass scale. When clouds block sunshine from solar plants or breezes quit spinning wind-turbine blades, utilities could shut off consumers' appliances or draw on power stored in electric-vehicle batteries. That would save the expense of firing up oil and natural gas generating stations that power companies may need only a few days a year.

Another goal is to make the electric system as a whole more efficient. Currently, almost 6 percent of electricity is simply lost as it flows across wires over long distances. A combination of linked devices for regulating voltage and other conditions more precisely can cut those losses and postpone the need for new power plants. Meanwhile, power-line companies would use state-of-the-art sensors and communications to keep minor blackouts from cascading across the grid. They would need fewer linemen to drive around doing visual inspections of transmission lines. And they could get by without meter readers roaming streets and alleys every month recording how much power homes and businesses have drawn from the grid.

Making these upgrades is more difficult than it sounds, especially in the tightly regulated environment that binds the transmission and distribution parts of the electric business. As Rachelle Chong, a California public utilities commissioner, says, the smart-grid push is "asking the electric grid to do things it wasn't designed to do." Federal and state officials hope to channel stimulus funding into pilot projects that will demonstrate what works and what doesn't. In the meantime, they're scrambling to devise some regulatory blueprints to guide the grid's evolution. NARUC's Butler and Suedeen Kelly of the Federal Energy Regulatory Commission have organized a process for coordinating federal-state discussions on the matter.

For example, to prevent technical snafus, the NARUC-FERC team is working with government standard-setting agencies and electrical equipment manufacturers to rush out technical criteria that will make sure snazzy new devices can perform as advertised and operate in tandem. Regulators also are starting to think through a new set of thorny questions, such as how to keep the smart grid secure from hackers. Meanwhile, utilities are jockeying with Google and others over who should control all the potentially marketable data smart meters will gather about how private homes and businesses use electric power.

Ultimately, whether the smart grid lives up to its high hopes could be determined in state capitals at rate-setting proceedings before public utility commissions. Currently, utilities charge most of their customers flat rates for power used at any time of day. With the new grid, rates would need to be dynamic: Consumers could get rate breaks for running washing machines and dishwashers at night, when power demand among all consumers is low--and pay premium rates for running appliances on hot afternoons when power demand surges. "A smart grid doesn't do you much good without smart rates," says Ken Toole, a public service commissioner in Montana. "And right now, we've got pretty dumb rates."

For the most part, the smart grid exists only in the future. But a few of the nation's biggest utilities have begun ripping old-fashioned meters with spinning wheels and dials out from millions of homes. In California, the public utility commission has given the three biggest private utilities the go-ahead to install smart meters for their customers. Pacific Gas & Electric signed up 10,000 customers for a pilot "SmartRate" program that charges variable rates depending on power demand. The results demonstrate the promise and political peril of the transition to the smart grid. On one hand, PG&E reports that participants cut their power usage by an average of 17 percent on nine critical peak days last year. Yet consumer groups protested when regulators allowed PG&E to add $1.7 billion to its rates to cover its meter costs. Later, when the utility switched to an even more sophisticated meter, regulators approved an extra $467 million to change the meters again.

San Diego Gas & Electric is testing an even more ambitious concept: developing a local "microgrid" in the desert town of Borrego Springs. The utility plans to equip 2,500 residents with interconnected smart meters, solar panels, two backup generators, and a huge $3 million storage battery. On 110-degree summer days, SDG&E sometimes curtails power delivery to keep overheating lines from sparking wildfires. But Borrego Springs could simply disconnect itself from the rest of the grid and turn to its own resources to keep essential services running.

The most ambitious experiment is going on in Boulder, Colorado, where Xcel Energy is piloting what it calls "Smart Grid City." The utility will help 60,000 customers connect appliances to smart meters and learn how to use a Web site for tracking power usage. Xcel also is upgrading its Boulder distribution system with four smart substations and sensors that can measure power flowing from rooftop solar panels--and make adjustments to protect the grid against damage if the juice drops suddenly when clouds roll in from the Rocky Mountains. Manufacturers are donating meters and appliances, while Xcel will cover its $1.3 million expense without asking ratepayers to chip in.

Utilities and regulators alike are watching the Boulder experiment for signs of how the technology works and how consumers respond to it. But Boulder, a town with a highly educated populace known for environmental activism, is hardly a typical place. The pilot "allows you to see how deeply the technology can go, but you won't be able to transfer Boulder to the entire state," says Matt Baker, who calcuates the cost of equipping the whole state at somewhere near $2 billion. "The commission would be very sensitive to what those costs look like."

Outside of customers' homes, utilities also are beginning to experiment with new technology on the long-distance transmission grid. Pepco Energy Services plans to incorporate smart-grid features in a 230-mile transmission line it's planning to carry Virginia power to Maryland, Delaware and New Jersey. Southern California Edison is equipping transmission lines with sensors to spot outages in time to keep them from spreading. And in California's capital city, Sacramento, the Municipal Utility District has started rewiring substations to centralized computer controls.

Unsexy as these behind-the-scenes improvements may sound, it's where NARUC's Butler would like to see utilities focusing most of their smart-grid energy right now. Blackouts are preventable. But the political firestorm that could arise if consumers think regulators are telling them how to use their appliances--and charging them for the privilege--would be hard to stop. Butler believes the smart grid at home needs time for mayors, governors and President Obama himself to make the case that the costs of installing smart meters will eventually pay off. Once residents see electricity rates jumping again, "they are more than likely not going to be pleased," Butler says. If ratepayers rebel at the cost, "the smart grid may be just another good intention."


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