Dec. 5, 2011 - Ucilia Wang - gigaom.com

Efforts to modernize the U.S. electric grid in recent years have emerged in the form of a hodgepodge of pilot projects, the installation of new technology and hefty financial backing from the U.S. government and private investors. How to plan for such a big change is a daunting task. MIT released a report on Monday that looks at some of the challenges (and opportunities for entrepreneurs, investors and utilities) and solutions to solve them.

Here are the key challenges:

1). What to do with renewable energy? The growth of wind and solar power over the past decade has been one of the biggest drivers of the conversation about upgrading the aging grid. The grid was originally designed to handle a steady and one-way flow of electricity from conventional sources such as coal, natural gas, nuclear, geothermal and hydro. In contrast wind and solar power is more likely to enter the grid at different rates and times throughout the day, depending on when the sun shines and the wind blows. That intermittency can cause a lot of problems for the grid, which runs smoothly only when there is a balance of supply and demand.

2). Central vs. distributed generation: Many utilities in the country are counting on large wind and solar farms to help them comply with their state mandates to increase the sale of renewable energy. Large power projects are more likely to be located in remote regions and require new and costly transmission line construction. Meanwhile, more solar panels are popping up on the rooftops of homes and businesses, many of which feed unused electricity into the grid. This flow of energy, when it reaches a critical mass, will require new designs for the distribution lines and may add costs to consumers’ utility bills.

3). Electric cars could become popular one day: While electric cars represent a cleaner alternative for transportation, utilities also see them as a potential burden. Consumers have to approach refueling in different ways than they are accustomed to for years – they can charge their cars at home, become members of charging networks and maybe participate in programs that draw power from their cars’ batteries to help balance the supply and demand of the electric grid (and compensate them for this service). Utilities will have to think about not only when and where to deliver more power to meet charging demand but also whether to change electric rates and making the rates easily accessible by consumers to encourage charging at off-peak hours.

4). Worries about cybersecurity: One of the biggest changes that is taking place to shape our energy use is the use of digital communication technology to allow utilities to monitor and control power supply and demand and detect problems – and fix them—much more quickly. The communication technology typically comes in the form of sensors and high-speed wireless networks that are built into the distribution grid, meters, lighting and heating/cooling systems in buildings, home appliances and electric car chargers. These devices also are meant to give consumers greater control over when and how much energy they want to use in order to reduce costs and increase conservation. These devices also add complexities to running a grid and open it up to security breaches, whether they are malicious or accidental.

MIT’s recommendations:

1). More central planning for transmission: Given that many wind and solar farms are being built in remote regions and power producers of these projects are looking at selling the electricity to utilities in different states, the Federal Energy Regulatory Commission should have a greater authority to decide where interstate transmission lines are built. Right now FERC has limited authority to review transmission line proposals, but states are typically the final decision makers.

2). Centralize planning process for cybersecurity: Attacks on the grid could cripple not just power delivery to consumers but also render the country vulnerable to other attacks. It’s an issue of national defense and already has been studied by various government organizations. Given its importance, the report recommends putting one federal agency in charge of planning and responding to cybersecurity issues for the grid, from transmission to distribution networks.

3). Match price to power delivery cost: The deployment of smart meters gives utilities and consumers more clarity on how much energy is used in each household and business at any given times throughout the day. Utilities should use the data to price the electric rates to reflect the cost of producing or buying power and sending it to their customers. Doing so encourages conservation and help consumers reduce their utility bills, and it enables utilities and grid operators to anticipate demand and reward companies that can deliver power and grid regulation services.

The report also recommends that utilities levy a fixed charge for accommodating the flow of solar and other renewable energy flowing into the grid from homes and businesses. The charge would go to cover the cost of maintaining the grid, and right now that fee varies depending on the amount of energy consumption.

4). More research and development – and sharing: Running a grid smoothly requires not just good technologies but also well thought-out procedures for power producers, transmission line operators and utilities to ensure electricity is delivered reliably to each home and business. It can take years of research and pilot projects to change or add procedures – the step-by-step process of how a task is accomplished – in the industry. So, the power industry needs to pony up money to fund research and development work in areas such as computer modeling software, transmission planning, guides for dealing with and recovering from cybersecurity breaches and programs to shape the consumer behavior in energy consumption. And, it’d be nice to share as much data from research, demonstration projects and other grid operations as possible to help build a better grid.

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