Smart Grid’s Growth Now Depends on States

Now that Congress has directed $4.6 billion in stimulus spending toward developing a “smart” electric grid, it will be up to the states to get consumers on board and adjust rates to pay for the technology.”

The state role is crucial. We’re the ones who know how ratepayers react. We’re the ones that know the bumps in the road. We’re the ones who know how what their tolerance level is for innovative things,” said Frederick Butler, president of the National Association of Regulatory Utility Commissioners.

The improvements, backers say, will change nearly every part of the nation’s aging power transmission system – from how power plants distribute power to how consumers use it at home.

The idea behind a smart grid – parts of which are already being introduced in Los Angeles, Boulder, Colo. and Austin, Texas – is to install devices that, working together, can save energy by increasing efficiency, reduce blackouts and cut customers’ bills.

Smart meters, for example, could instantly report to customers the cost of electricity at any moment. Penny-pinching consumers could then turn off the air conditioning on a steamy August afternoon or run their clothes dryers at night to save money. Some appliances even could be programmed to turn off automatically if power gets too expensive.

Behind the scenes, new tools will also be able to quickly divert electricity around highly congested power lines, reducing the risk of costly and inconvenient power outages. Jesse Berst, the managing director of GlobalSmartEnergy.com, told a panel of governors in Washington, D.C., in February that the August 2003 blackout in the Northeast left 50 million people in eight states and Canada without power and caused $6 billion in damages. And it happened in just 9 seconds.

Sensors also could better direct repair crews to the site of a downed power line, and utilities could remotely test a customer’s connection to determine whether a power outage at a home is the result of a grid problem or wiring in the customer’s house.

But for the plans to succeed, state regulators must overhaul the rules they have used for decades to determine electric rates.

“You can’t have a smart grid and dumb rates. We have been used to – for over 100 years – rates that are the same all day, every day. That’s not the way electricity is produced,” Butler said.

Regulators likely also will be asked to approve rate hikes to pay for improvements to the grid. Much of the $4.6 billion in the stimulus plan likely will be matching grants. State regulators could be asked to step in and approve rate hikes to cover the remaining costs.

Already, states are pushing for major tests of smart grids.

After the 2001 energy crisis that led to rolling blackouts in California, regulators there pressed for changes that would help them respond better to future emergencies. The need for a smart grid increased as California enacted new policies to cut greenhouse gas pollution, increase use of wind and solar power and promote the use of plug-in hybrid cars.

As a result, Southern California Edison, which covers a 50,000 square-mile area outside of Los Angeles, began distributing new electric meters to its customers last year. By 2012, it expects all 5 million of its smaller users to have the smart meters. The utility’s largest customers – which use 60 percent of its power – have been using similar technology since 2003.

“That was the result of looking at what happened in the energy crisis. Had we had some reduction in the overall demand, we probably could have avoided a lot of the problems that happened,” said Paul De Martini, vice president for advanced technology at the power company.

Smart meters are probably the most visible component of the smart grid, because they are in customers’ homes.

But the technology is most effective when combined with other improvements. A utility has to be able to communicate fluctuating electric rates instantly, for example, for customers to save money by buying cheaper power.

Butler, the New Jersey regulator who heads the national group of commissioners, cautioned that states and utilities should focus on other improvements first, like improving the reliability of their grids, before moving to smart meters. Rolling out the meters too soon could lead to sticker shock for customers, especially if their rates go up to pay for the meters but they don’t see immediate benefits, he said.

“You’ve got to be very careful in how you deploy these things in a way that end-use customers … understand why it’s worth paying a little extra for this meter,” he said.

De Martini of Southern California Edison said that approach is a “bit oversimplified” because of different priorities among utilities.

While his company is working on getting smart meters and appliances to customers, it’s also pushing for upgrades that will help it better monitor its transmission system to get ready for new wind and solar plants in the area, De Martini said.

In Colorado, one utility is trying to combine many of the much-hyped smart grid technologies in Boulder to see whether the smart grid lives up to the promises of its supporters.

Xcel Energy designated the university town of roughly 100,000 people as “Smart Grid City.” Xcel will compare customers with smart meters and those without to see whether the meters really pay off, said company spokesman Tom Henley.

The project includes improvements to store energy from Colorado’s booming wind and solar industries, so that customers can use the electricity when they need it later.

Many of those technologies are on display at the University of Colorado chancellor’s house. Rooftop solar panels collect electricity during the many sunny days; that electricity is then stored in the batteries of a plug-in hybrid vehicle.

So far, Boulder residents have welcomed the upgrades and frequently talking about addinghigher-end features such as solar panels and plug-in hybrids, Henley said.