What is a smart grid?

What is the Smart Grid?

The Smart Grid is the roadmap for enhancing the infrastructure of every segment of the energy delivery system. This includes generation, transmission, distribution and consumption.

The Smart Grid provides the automation necessary to manage energy resources by improving usage, minimizing waste and delivering real-time information to both providers and consumers. It requires a modern infrastructure, one that maximizes inflow and distribution of energy and is economical to operate and maintain. This does not exist today.

• Remote monitoring and control of energy production and consumption
• Accurate and timely measurement using digital technology
• Reduced electricity costs from a more accurate and responsive and accurate
• Better decision-making by consumers about their energy use
• Two-way communication between the Grid and end-users
• More effective management of the Grid by providers
• Implementation of cyber-security protections throughout the system
• A more informed and cooperative relationship between energy suppliers and consumers

Advocates of the Smart Grid believe that it will open up new markets for large and small scale alternative energy producers like solar, wind and bio-fuels by decentralizing generation.

For a small but growing population: users with home-based power generation, reselling their home-generated power could further add to the resources powering the grid. It would allow consumers to have a much more complex relationship with their energy supplier.

Long term, the transparency made possible by the Smart Grid will open new markets, further expanding the power supply.

Our digital age makes the necessity for this transparency inevitable. Successful implementation of the infrastructure faces two monumental hurdles: global standards and cyber-security.

1. Interconnectivity demands that each part of the grid is able to communicate with every other part of the grid. It also requires that every energy provider is connected to every other provider. A coordinated framework of protocols and standards adhered to by every member of the grid is an absolute necessity.
2. Ensuring the safety and security of the Smart Grid is the highest priority. The global energy industry is expending massive resources to build cyber-security into the Grid. Some of the commercial giants involved in this initiative include IBM and Hewlett-Packard.  Industry reports estimate that approximately 15 percent of all Smart Grid investments will be spent on cyber-security. This will represent a total global investment of $21 billion over the next five years.

Utilities also need an abundance of experienced and reliable technology partners to help make the transition from isolated instances of Smart Technology-use to system-wide implementation. The task is global, urgent and long overdue. 
How Does the Smart Grid Work?

Just like the Internet, the Smart Grid links up billions of connections and devices while performing monitoring and measuring at a level of security that rivals that of the global financial community. It is a means for power producers to more accurately predict energy needs and examine real-time usage. On the other end of the transaction, it provides the technology to consumers to monitor and take action on how they use these resources and how much they pay for them.

Due to the condition of the system as we know it, the market price paid for energy rarely reflects the actual cost of its production. At least two of the factors that cause this are uncontrollable:

• The ability to accurately measure energy usage.
• The variability in demand that often requires utilizing higher-cost energy supplies, particularly when emergency resources are brought online at the last minute,

Energy pricing does not reflect the real cost of production. Instead, estimates are based on average annual costs or other constructed prices. What results is an antiquated system that does not reflect either usage or cost.

A planned architecture for the global network of energy providers will result improvements such as these:

• Monitoring and control over all components of the network.
• Greater security from cyber-attacks.
• Computer-based decision making, facilitating rapid response and resolution.
• Reduction in frequency and duration of power outages, reducing the number of regional blackouts and other problems within the network.
• Energy savings in both amount of power required and the price that is paid for it.

The economic cost of leaving the Grid in its current state is monumental. A recent estimate of the annual cost of power interruptions just within the U.S. electric grid is $80 billion, or ¼ of total annual revenues.

On the plus side, improvements in the Grid would have a significant impact on the cost to operate it, including benefits such as reduction in capacity prices, enhanced competitiveness of the marketplace, avoided additional infrastructure investments, and insurance against price volatility.