How Smart Can Your Local Electricity Grid Get?

The potential benefits are obvious: Install all kinds of monitoring equipment in personal residences, at small-business establishments, and out on the poles in the streets so that both providers and consumers know just how much electricity is being used at any given time to do what, and everybody stands to gain.

Customers who have a better idea of how they're using electricity and what they're paying for it will consume it much more judiciously. The electricity provider, with much the same information plus still more coming from the distribution network, will be able to see problems coming and fix them more quickly and economically, before they start compounding and cascading.

What's more, the provider will have tools to influence consumer behavior so that all users of the grid become cooperative partners in making the electric power system more reliable and robust.

If it all comes out right, the overall efficiency of the power distribution system will be significantly improved, so that long-term investment in new generation can be reduced.

Instead of having to add big new base-load plants that typically run on coal or natural gas, energy companies will have the option of building smaller wind farms or gas-peaking plants instead.

The only thing is, nobody really knows just how big such benefits will be, how soon they will materialize and how much it will cost to produce them.

Plugging Into the Issues

Seeking to get a handle on those issues, Xcel Energy, a Minneapolis-based distributor and producer of electricity, is in the midst of organizing an experimental project in Boulder, Colo., that it and its partner companies have dubbed SmartGridCity.

Xcel, which claims to be the largest wind generator among United States utilities, hopes to figure out how to best design interactive systems that it can install in its own electricity distribution systems and then sell to others. Xcel's partners, which make various kinds of smart-grid-relevant equipment and software, want to show potential customers around the world just how cost saving and useful their goods can be.

SmartGridCity is by no means the only project in the world flying the smart-grid flag, though it may be the most comprehensive.

Billions of dollars are being spent in the U.S. and around the world on installation of smart meters, which represent just one facet of what smart-gridsters have in mind.

Smart meters tell customers and utilities when electricity is being used, communicating wirelessly or over power lines, thus opening up opportunities for conservation and improved load management.

In principle, many billions of dollars could be spent on all manner of gadgets, from sensors mounted on wires and transformers to programmable refrigerators, washers and dryers. And that doesn't count the $4.5 billion that the Obama administration plans to spend, as part of the stimulus package, on smart-grid demonstrations, innovative electricity storage systems and transmission-system monitoring.

The Boulder Experiment -- SmartGridCity

What makes SmartGridCity different from all other smart-grid projects, programs and proposals is simply this: Xcel is spending upward of $20 million of its own money, and its partners are providing about $80 million of theirs -- to undertake the Boulder experiment.

Not a penny is coming in the form of public or private grants, and not a second has been wasted seeking such grants. Simply put, SmartGridCity is the one project in which the partners -- all of them profit-making corporations closely attentive to the bottom line -- are putting their money where their mouths are.

In principle, of course, there are hundreds of smart-grid tech companies from which Xcel could have recruited partners.

Michael Carlson, until recently Xcel's chief information officer, says it picked its handful of partners based on three or four key criteria: the viability and relevance of the technology the company had to offer, the company's willingness to invest from its own funds and a corporate culture of partnering.

From the outset, Xcel and its partners conceived of SmartGridCity as an attempt to determine exactly what needs to get done for smart-grid technology to be deemed smart business. Unless energy distributors and their regulators are persuaded that payback will be big enough and fast enough to cover costs and produce profits, Xcel reasons, the smart grid won't happen.

Wished-For Thinking?

Payback depends not only on the quality of technologies and their reception in the marketplace but also on the regulators who set the all-important rules.

"The real risk" in implementing the whole panoply of smart-grid technologies, says Xcel in a white paper, "is that these technologies that transform conservation and efficiency efforts can lead to degradation of the regulated return and uncompensated demand destruction."

In plainer English, getting consumers to use less electricity could mean, unfortunately, that their utility would make less money, unless regulators give it some kind of break.

In principle, the utility could come out well ahead, partly as a result of improved maintenance operations and savings on distribution equipment like transformers, which could be matched better to usage patterns as consumer behavior is better understood. Then, too, points out Tom Henley, a Denver-based spokesperson for Xcel, there are the potential savings in long-term investment -- not just for base-load generation but also spinning reserves (generating capacity that has to be held ready to meet sudden and unexpected increases in demand).

An old-fashioned, vertically integrated company like Xcel owns generation and spinning reserves as well as distribution networks, so if it saves on new investment in generation, it can reap rewards directly from adoption of smart-grid technology. But in a deregulated and restructured electricity system, in which the company distributing electricity is not necessarily the same company that owns generation, transmission lines and reserves, it may be that savings obtained by the distributor would actually accrue to some other company.

Because of quandaries like this, Xcel and its partners have conceived SmartGridCity not merely as a project to test and demonstrate technologies but also as an experiment that will produce lessons that they can then take to state and local regulators. They hope to do so late this year or early the next, as results come in from the fully deployed smart-grid systems.

Monitoring Your Power Usage Online

Designers of SmartGridCity hope that when consumers are shown how they are using their electricity on an Internet-based home portal like this one, there will be a "demand response."

Though its ambitions are lofty and it is one of a kind, SmartGridCity is a rather small project and is still in a rather tentative stage of development.

Only about half the relevant equipment has been installed to date, and fully interactive technology is fully operational at just a handful of consumer locations. Tangible results worth reporting to the general public and to local regulators will start materializing only toward the end of this year, at the earliest.

Were it not for the pioneering character of the project and the very big impact it could end up having -- or not! -- the project might be deemed over-hyped and over-covered. A really cantankerous curmudgeon might even call it a stacked test, based on an unrepresentative sample and therefore destined to produce unconvincing results.

The Chosen City

Xcel picked Boulder precisely because it's not your typical American town.

Situated less than an hour northwest of Denver, right where the Plains meet the foothills of the Rockies, it hosts the University of Colorado and a large, somewhat floating population long known for its New Age and slightly left-leaning inclinations.

It's the home of Celestial Seasonings, the purveyor of natural herbal concoctions, and is the only community in the United States so far to have enacted its own carbon tax. Not infrequently, Boulder is compared with the California city sometimes called the People's Republic of Berkeley.