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A Smart Grid Primer: Complex and Costly, but Vital to a Warming World

Transforming the archaic power network to a smart grid has taken on added urgency post-Sandy. What upgrades are needed, why and what's the holdup?

By Elizabeth Douglass and Maria Gallucci

Dec 4, 2012
(Page 3 of 4 )
Public works crews remove a large tree from power lines after Hurricane Sandy pa

The blackout killed 11 people and caused more than $6 billion in economic losses. If a smart grid had been in place, "you keep hundreds of millions of people, literally, on the grid who got knocked off," Horn said.

Who Will Pay for It?

Who pays the smart grid bill remains an open question, though some spending is already underway.

The Obama administration's 2008 economic stimulus package gave the smart grid industry its first and biggest boost with $4.5 billion in grants and incentives for projects in nearly every state.

Of that amount, $3.5 billion went to 100 smart grid projects across the country. That funding is expected to help deploy 18 million smart meters as well as other devices. The rest of the money went to help cities and utilities study the technical and economic performance of their smart grid technologies.

Private firms and investors poured $4.4 billion into those efforts during that same time, said Amin, the smart grid expert, adding that partnerships are key. "The government cannot do it alone. And industry cannot do it alone."

One way to do that is to create a national infrastructure bank, he suggested, an idea that's already received a lot of buzz in Washington, D.C. The bank would target smart grid initiatives—along with other energy, water and transportation projects—providing private investors with loan guarantees or cheap, long-term loans.

The Senate last year floated a bipartisan bill, called the BUILD Act, to create a general infrastructure bank. Policymakers called for an initial federal investment of $10 billion, which they said would help stimulate up to $600 million in private investments to upgrade the nation's infrastructure systems. The effort remains stalled for now.

Other Hurdles

Beyond figuring out how to pay for the smart grid, utilities, regulators and lawmakers will also have to grapple with a host of ancillary issues ranging from new billing schemes and the cost to low-income customers. And they will have to address rising concerns about privacy violations and cyber security issues.

Some privacy advocates worry that smart meters reveal too much personal data to utility companies, and that customers would be unable to prevent the information from being shared with other companies. Others are concerned that hackers or so-called cyber-terrorists could break into utility servers and manipulate all those remotely controlled sensors, causing widespread blackouts or explosions of grid equipment in populated areas.

Such concerns are being addressed, albeit slowly and only in certain areas.

Last year, the California Public Utility Commission passed rules requiring the state's largest utilities to regularly conduct independent security audits of their millions of wireless meters and to restrict the access of third parties to customers' personal details.

Meanwhile, the North American Electric Reliability Council, which sets reliability standards for the Canadian and U.S. transmission  systems, requires all bulk power system owners, operators and users to follow a series of cyber security rules for monitoring, assessing and managing the nation's critical infrastructure.

Plenty of money is expected to go into bolstering the smart grid's defenses. Pike Research forecasts public, private and utility investments in cyber-security technologies will total nearly $14 billion by the end of 2018.

Cooperation, the Biggest Hurdle of All

The smart grid transformation needs the cooperation of state and federal agencies, policymakers and utilities—as well as the acquiescence from ratepayers—to make sound decisions about which projects should get priority and how to get them done.  

That's not happening yet.

The lack of "coordinated decision-making is a major obstacle," Amin said.

High-voltage transmission lines and systems, for instance, fall under federal jurisdiction, while the distribution grid and metering are regulated by individual states, often through public utility commissions. So far, there's no concensus among state commissions about which smart projects, if any, are worth the cost. And many have balked at the price tags.

"National oversight may be needed" to get everyone on the same page, he said.

Some steps are being taken in that direction.

The National Institute of Standards and Technology, part of the U.S. Commerce Department, was charged under the 2007 Energy Independence and Security Act with developing protocols and model standards for how to implement smart grid technologies across the country. Its Smart Grid Advisory Committee, a group of utility executives and electricity experts, has met five times in the past two years to advise the institute on what should be made a priority and where deployment efforts fall short.

While those and other issues get worked out, climate scientists warn that the warming planet will force people around the world to contend with increasingly fierce severe weather.

"We are seeing more storms, and they are coming more frequently," said Clark Gellings, a fellow at the Electric Power Research Institute. "Every time we have an outage, more people are affected."

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