Feature Story

It Takes More Than Smart Meters to Make a Smart Grid

by Marc Gunther

The smart grid is coming, but not as fast as experts predicted. To deliver energy and cost savings, the smart grid requires smart utilities, smart regulators and, most of all, smart customers.

The smart grid is coming. It…is…just…coming…very…slowly.

In October 2009, President Obama stood in front of  an array of solar panels in a small town in central Florida to unveil $3.4 billion in federal recovery act grants to modernize America's electricity grid. About 100 companies and communities in 45 states were awarded grants.

Upgrading the grid, the Department of Energy said then, will "promote energy-saving choices for consumers, increase efficiency, and foster the growth of renewable energy sources like wind and solar."

"We're on the cusp of this new energy future," Obama said.

Nearly two years later, we're closer but still on the cusp—at best.

That's because, to do its magic, the smart grid requires smart utilities, smart regulators and, most of all, smart customers.

Florida is as good a place as any to look at how the smart grid is coming along, and not merely because that's where the president launched his initiative. The state's biggest utility, Florida Power & Light (FPL), which got a $200 million grant and played host to Obama in 2009, is rolling out Energy Smart Florida, one of the biggest smart grid projects in America.

Disqus: What do businesses need to do to make the smart grid successful?

Since then, FPL has installed about 2.2 million smart meters, said Bryan Olnick, vice president for customer service and smart grid solutions. That's a big chunk of the five million smart meters that have been installed nationwide, a number cited in a June blog post by Energy Secretary Steven Chu.

If Chu's five-million estimate is right—and grid data tends to be fuzzy--fewer than 5 percent of the nation's 110 million homes are equipped with smart meters. Early last year, however, experts forecasted that "the country will be at 20 million smart meters and 15 percent market penetration" by the end of 2010. We're not even close.

Utilities have good reason to move slowly. They saw the backlash generated by a smart grid rollout in Bakersfield, Calif., and the cost overruns that plagued a deployment in Boulder, Colo. By contrast, FPL's rollout is going smoothly because the company communicates frequently with customers and tests its equipment at every step of the way.

"We've taken a very methodical approach," Olnick said. Typically, it takes three to six months between the time a smart meter is installed at a home and the time when it is used to calculate real bills.

Once meters are turned on, customers can monitor their energy usage on a dashboard that's available online. They can compare one day's electricity usage to the next, allowing them to see what happens when, for example, they adjust their thermostat up or down. The dashboard also "predicts what your bill is going to be at the end of the month. Our folks on fixed income really like it," Olnick said.

But—and this is a problem—the meters, by themselves, do not tell customers what share of their usage they can attribute to their air conditioning, big screen TV, washer-dryer or refrigerator. Only about 500 homes are part of a pilot project where they are given home-energy controllers made by GE that give them more control over their consumption by allowing them to communicate with smart appliances.

What's more, FPL does not have time-of-day pricing, so customers who might be willing to shift their power consumption to hours when there is less demand--by, for instance, running their clothes dryer and dishwasher at night--can't get the benefit of lower rates. During off-peak hours, the utility's generating costs are lower.

Without time-of-day pricing, instant readouts of usage and smart appliances that can react to price changes, the consumer benefits of the smart grid are limited. So are the benefits to utilities. It's cheaper for them to pay users to temporarily curtail usage during peak periods than it is to build new capacity.

"Physical infrastructure isn't enough," says Truman Semans Jr., a principal at GreenOrder, a strategy and management consulting firm.  "Only an ecosystem approach is going to work."

Microsoft and Google recently shut down their Hohm and Power Meter, their energy-saving software projects, in part because consumers weren't interested. In an article at GreenBiz called How to Succeed in Energy Management Where Google, Microsoft Failed, Semans advised utilities to make efficiency "fun and fulfilling" for customers—or to make it easier by, for instance, inviting customers to sign up to have their usage automatically rationed.

Semans said: "More and more research out there that shows that a lot of people are not really interested in energy efficiency. So how do you get people involved in something that they don't care about, or isn't costly enough to make a difference on their bill?"

A new industry initiative called Grid 21 was formed, in part, to help answer that question. Its first project is an energy-saving contest called The Biggest Energy Saver in which Texas customers of utilities Oncor and CenterPoint Energy will compete to win an electric car or a suite of GE smart home appliances.

Grid 21's director, Steven Hauser, who works at the National Renewable Energy Laboratory, says the contest is one of a series of experiments the group will run to see what motivates customers to save energy. Grid 21 is also running a contest for software developers to develop consumer-facing applications to promote the smart grid.

FPL's Bryan Olnick says the utility doesn't know yet whether its customers with smart meters are using electricity any differently from those whose only insight into their usage are monthly, often-inscrutable paper bills.  "We're still in the early stages," he said. Some customers have already told FPL that the smart meters help them save money and power.

Hauser, who has been working on the smart grid for more than a decade, sees lots of signs of progress. Eventually, he says, just as the Internet gave us new ways to buy music and airline tickets and pay our bills, the smart grid will offer new ways to consume electricity.

"It's going to change pretty radically," he says. Just not right away.

The contents or opinions in this feature are independent and do not necessarily represent the views of Cisco. They are offered in an effort to encourage continuing conversations on a broad range of innovative, technology subjects. We welcome your comments and engagement.

We welcome the re-use, republication, and distribution of "The Network" content. Please credit us with the following information: Used with the permission of http://thenetwork.cisco.com/.