Obama's Smart-Grid Game Plan

Think back to the age of telecom before the breakup of AT&T, before the Internet, before Facebook or Twitter. That's about how antiquated America's system for delivering electricity—the electrical grid—is today. In many parts of the country, the grid is so "dumb" that workers still have to walk from house to house to read the electricity meter, and utilities have no clue when the lights go out until customers call to complain.

That's why there's a growing push to build a smarter grid, in which the meters can report in, appliances can control how much energy they use, and electricity stored in batteries can supply quick jolts of energy where needed, replacing the expensive power plants now used to meet peak power needs. One of the biggest believers in that vision is the White House. On Oct. 27, the Obama Administration announced 100 grants, totaling $3.4 billion, for smart-grid efforts, using money from the stimulus bill.

The winners include Houston's CenterPoint Energy (CNP), which gets $200 million for a $639 million project to install 2.2 million smart meters and hundreds of sensors to make the system more responsive and reliable, and the city of Wadsworth, Ohio, which gets $5.4 million to add 12,500 smart meters and beef up its grid-charged electric cars. "This is a great first step toward transforming our whole energy system," says Mark Brownstein, an energy director at the Environmental Defense Fund, which like many environmental groups sees the smart grid as essential to both making the U.S. more energy efficient and boosting the use of renewable power.

At the heart of virtually every project is an upgrade to more sophisticated meters, which communicate directly with the local utility. What good are they? Listen to President Barack Obama as he announced the awards at a solar energy facility in Arcadia, Fla.: "Smart meters will allow you to actually monitor how much energy your family is using by the month, by the week, by the day, or even by the hour," he explained. "So coupled with other technologies, this is going to help you manage your electricity use and your budget at the same time, allowing you to conserve electricity during times when prices are highest."

In pilot projects of this new approach, customers gave the local utility permission to temporarily trim, say, the amount of electricity going to their air conditioners or clothes dryers, thus helping the utility meet peak loads. In return, the customers were able to cut their electricity bills by 15% or more.

Getting Paid to Charge Your Car? The smart meters are just a beginning, many experts say. But the path ahead is less than crystal clear. Just as it was impossible to predict in 1900 that electricity itself would lead to TVs, MRIs, computers—or even electric irons, for that matter—"now it is hard for us to envision what we will enable in 30 years," says James E. Rogers, CEO of Duke Energy (DUK).

One of the expected payoffs, if electric cars become ubiquitous, is not just supplying those vehicles with juice but also turning them into an essential part of the grid. In order to meet sudden peak power demands, utilities now must keep turbines spinning, ready to generate power at a moment's notice. This "spinning reserve" is expensive. But imagine if there were millions of electric cars plugged into the grid and charging. If the grid is smart enough, utilities could temporarily cut back on the power being delivered to the batteries—because the technology will know from experience that the car will still get its full charge despite the interruption—or even draw back minute amounts of electricity from each car. That could eliminate the need to keep turbines on standby, and enable utilities to actually pay people for the right to momentarily tap their car batteries.

"It is a very powerful metaphor—being able to be paid while charging your car," says Jon Wellinghoff, chairman of the Federal Energy Regulatory Commission and a strong smart-grid booster.

Getting to these more exotic applications, however, requires more than just installing smart meters. The system will have to be able to sense when (and where) a car is plugged in, adjust the flow of electricity on the fly, and manage to bill or credit the owner appropriately no matter where the car is plugged in.

"The equipment is all available, in terms of the technology," says George W. Arnold, coordinator for Smart Grid Interoperability at the National Institute of Standards and Technology (NIST). But it all has to be integrated, which is why Arnold is leading a broad effort of the government, industry, standard-setting bodies, and the engineers' professional association, the Institute of Electrical and Electronics Engineers, to develop the necessary standards for enabling all the technologies to work together. That effort is similar to what he did back in the 1980s to enable the telecom network to handle computers and the Internet, he says. "The fact that we are just getting around to it for the grid 30 years later indicates how aging the grid infrastructure is."

Utilities Waited for Stimulus Money The sheer magnitude of the task has some worried that Obama's smart-grid grants, several billion dollars though they are, only scratch the surface of what's needed. Hundreds of billions are needed to truly transform the grid. But the new federal dollars may go farther than it might first seem. Each of the awardees was required to match (or spend more than) the government handouts. And the hope is that many of the projects that didn't win awards will move forward anyway, says Katherine Hamilton, president of GridWise Alliance, a smart-grid group whose members include utilities, smart-meter manufacturers such as General Electric (GE) and Itron (ITRI), service providers like IBM (IBM), and universities. Indeed, the White House plan has actually had a chilling effect until now, since utilities and other companies had been holding off launching projects until they learned whether they would get stimulus dollars. Now that the first awards have been made, more projects will begin.

A second question, though, is more difficult to answer. Since many of the killer apps of a smarter grid are still unknown, it's hard to know what technologies to implement now. A number of utilities are breathing a sigh of relief that they didn't install previous generations of smart meters, since the current ones offer many more capabilities. But today's meters may become obsolete in a few years, like the original IBM PC did—and utilities may not be able to afford the normal cycle of upgrades and replacement common in the information technology world. The question: Will the benefits be large enough to spur continued innovation and investment?

Supporters think so. Says NIST's Arnold: "This is a once-in-a-lifetime opportunity to rewire America and rejuvenate one of our most critical infrastructures."

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