3 Reasons to Watch the Smart Grid

October 7, 2009
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You’ve no doubt heard of the smart grid. It’s coming. And with it, we’ll be doing a lot more energy management in businesses and homes.

The smart grid is a way to enable a more efficient distribution of our electric power, and can save the United States a lot of energy that’s wasted in inefficient systems and transmission. And although a lot of it will happen behind the scenes, it will affect each and every one of us.

Here are three things you need to know:

1. The smart grid will be big.

How big is big? It is estimated that it’s a $20 billion market over the next five years, according to Greentech Media, which hosted a webinar, “Smart Grid Strategies: End to End Communications Infrastructure.

Of that, there’s $4.5 billion in funds from the American Recovery and Reinvestment Act (aka stimulus funds). These are matching funds, so about $9 billion could be pumped into the smart grid in the next few years in the United States alone.

In addition, the U.S. Department of Energy is offering $3.9 billion to support smart grid investment. And in Canada, Ontario has mandated the installation of smart meters in all businesses and households by the end of 2010.

That’s a lot of smart grid investment going on, just in our neck of the woods.

2. Energy management is key.

A lot of the smart grid investment will be used on the back end for utilities and smart grid “plumbing” to ensuring security and reliability on smart grid networks. But home energy management will be a big part of it.

After all, more than 70 percent of our energy is consumed by homes and business, with homes consuming 40 percent of the total. That’s a big piece of the energy pie.

A smart grid, the experts say, will provide homes and businesses with better energy awareness, in the form of energy monitoring, as well as the ability to respond to electricity price variations. Through two-way smart meters, utilities can vary their pricing per time of day, pricing it higher during peak-use periods, and encourage people to run high-energy appliances like washers and dryers and computer servers at different times, when the electric rates are cheaper. This is called demand response, or demand-side management.

A demand response trial by PG&E with large data centers shows 10 to 15 percent reductions in energy consumption. One company, Network Alliance, has saved $2 million by using demand response and other efficiency measures like reducing lighting and cooling, according to Cisco.

Demand response helps utilities reduce their peak load periods so they don’t have to buy more expensive power or institute brown-outs. And they can help consumers save money. Only you’ll likely need smart appliances to shut off automatically or more likely—home control systems that can interpret the data being provided from your electric utility and turn on and off devices around the house according to how you have programmed it. That’s a cool way to save you some bucks.

The Federal Energy Regulatory Commission (FERC) says the United States could save 20 percent of national peak demand from demand response. Demand response has also been called a fifth fuel, behind gas, coal, nuclear power and renewables.

You may not even go through your local utility for demand response programs. Some third-party aggregators may provide this service and sell that to the utility as energy-saving “negawatts.”

3. You’ll pay for it.

Remember that $4.5 billion in U.S. stimulus funds available in matching grants? That means that someone has to pay the other $4.5 billion, and guess who that is?

“For utilities to pay $4.5 billion in matching funds, the only place that comes from is the ratepayers, so we will be paying for the smart grid,” says Rich Geiger, director of business solutions in energy at Cisco Systems.

In other words, your electric rates will go up, which means more incentive to sign up for demand response services to run your appliances at different times, which means more incentive for you to invest in energy monitoring and home control systems.

Electricity rates are estimated to rise, anyway. And utilities could be passing more costs onto consumers from investments they make to meet possible cap and trade emissions programs and mandates.

Simply put, the impetus to save energy in our home  and businesses is growing greater and greater.

Also see my report, 4 Ways to Make Money on the Smart Grid, on CEPro.com

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