The realization that America's electricity infrastructure is shakier than a palm tree during a hurricane hits us every few years, when some blackout or rolling brownout reminds us of our electro-vulnerability. But to truly understand what we're up against, it's important to step back for a moment to see just how vast -- and how vulnerable -- our electricity infrastructure is:
The North American electric power industry comprises more than 3,000 electric utilities, 2,000 independent power producers, and hundreds of related organizations. Together, they serve 120 million residential customers, 16 million commercial customers, and 700,000 industrial customers. With about $275 billion in annual sales, the industry is one of the continent's largest - 30% larger than the automobile industry and 100% larger than telecommunications. North American utilities own assets with a book value of nearly $1 trillion, roughly 70% in power plants and 30% in the grid. The continent has 700,000 miles of high-voltage transmission lines, owned by about 200 different organizations and valued at more than $160 billion. It has about 5 million miles of medium-voltage distribution lines and 22,000 substations, owned by more than 3,200 organizations and valued at $140 billion. The North American electric power industry will purchase more than $20 billion in grid infrastructure equipment in 2005, nearly one quarter of the worldwide total of $81 billion.
That analysis comes from a just-released report: "The Emerging Smart Grid" (Download - PDF), produced by the Redmond, Wash.-based Center for Smart Energy. According to the report, as much as $45 billion is up for grabs by new advanced technologies for modernizing the electric power infrastructure. The idea of the smart grid is to make the existing grid work more efficiently -- so much more, in fact, that it could reduce the need for additional power plants, or for costly redundant systems designed to work "just in case" of peak demand. That's the vision of a growing corps of researchers and companies working on grid optimization, a term that describes a wide range of information technologies that better understand and analyze exactly what's going on in a complex energy system on a minute-by-minute basis, then optimize the system in a way that's cost-effective. This isn't entirely news. Wired magazine published a seminal piece on The Energy Web in 2001. Clean Edge suggested in its Clean Energy Trends 2003 report that "optimizing the grid" would soon propel both investors and innovators to grab onto a multi-billion-dollar opportunity. But the CSE report takes that view to a much deeper level. For starters, it offers the seven key characteristics of a modern, optimized grid:
Self-healing. A grid able to rapidly detect, analyze, respond and restore from perturbations.
Empower and incorporate the consumer. The ability to incorporate consumer equipment and behavior in the design and operation of the grid.
Tolerant of attack. A grid that mitigates and stands resilient to physical and cyber security attacks.
Provides power quality needed by 21st century users. A grid that provides a quality of power consistent with consumer and industry needs.
Accommodates a wide variety of generation options. A grid that accommodates a wide variety of local and regional generation technologies (including green power).
Fully enables maturing electricity markets. Allows competitive markets for those who want them.
Optimizes assets. A grid that uses IT and monitoring to continually optimize its capital assets while minimizing operations and maintenance costs. Several factors are driving the need for a "smart grid." For example, deferred maintenance that can no longer be ignored is mandating billions in upgrades. Regulatory changes mandate still more new hardware and software. Still another driver is the substitution of "bits" for "iron" -- using smart systems to delay or reduce the need for expensive capital assets:
Smart technologies can reduce the need for power plants, power lines, and substations. To name just four examples:
Demand response programs that shave peak loads, reducing the need for expensive (and polluting) peaking power plants
Sensors and meters that show exactly where power is being used, so utilities can expand only where needed and when needed
Electronics and control software that monitor power fl ows in real time, to run existing lines much closer to capacity without compromising reliability
Sensors and software to remotely monitor expensive equipment to know when it really needs to be replacedAccording to studies by PNNL, the Rand Corporation and others, the savings from measures like these could be $50-100 billion over the next 20 years. Skyrocketing prices for oil and natural gas are bringing a new sense of urgency to all energy issues, including the grid, and this report represents a call to action to consumer groups, trade associations, utilities, scientists, and environmental organizations, among others. As we continue to electrify everything, and increasingly feed in electricity from countless solar, wind, and other distributed installations -- and do it in a 24/7 world -- the needs for a sturdier, smarter grid will grow daily. And our failure to upgrade our electricity infrastructure could threaten our economic -- not to mention our national -- security. As we noted in our 2003 report, "Given that the cleanest energy plant is the one that you don't have to build, grid-optimization represents the ultimate clean-energy play." Joel Makower is Co-founder and Principal of Clean Edge, Inc.