Buzz Grows For Modernizing Energy Grid; Electricity
Industry On High-tech Cusp
Feb 1, 2009 - Paul Davidson - autochannel.com
Alternative energy is taking it on the chin this
recession, with solar and wind developers canceling
projects and laying off workers. But a far more obscure
slice of the energy sector is hotter than ever: the
President Obama has made modernizing the nation's
vast power network a key piece of his $819 billion
economic stimulus plan, passed by the House Wednesday.
Last weekend he called for the installation of 3,000
miles of transmission lines to carry renewable energy
to population centers and 40 million smart electric
meters in homes. The House bill sets aside $11 billion
to help finance the investments.
Obama's endorsement of a sweeping upgrade to the
century-old grid is jolting an industry already on
a roll. Top power companies and lawmakers lately have
called for an up to $1 trillion nationwide backbone
Meantime, utilities and venture-capital firms are
bucking the credit crisis and pouring billions of
dollars into the "smart grid."
What's that? Simply put, the electric grid is finally
following telecommunications, TVs and music into the
digital age. Consumers with smart digital meters can
better manage their electricity consumption and reduce
their monthly bills. And utilities can more nimbly
control the electricity that flows over their wires
to prevent outages such as the 2003 Northeast blackout.
"It's like the Internet for the energy economy,"
says Katherine Hamilton, head of the GridWise Alliance.
The proposal for a nationwide backbone grid is more
controversial. Big wind and solar farms are planned
for remote reaches such as the blustery Plains states
and Arizona desert. But there aren't enough high-voltage
lines to zap the power to coastal or Midwest urban
centers. That's a problem: Many states impose renewable
Some states, meanwhile, don't want their residents
to pay for lines they believe will spoil their rustic
byways while largely benefiting neighboring states.
A 2005 law gave the feds new authority to designate
special corridors for high-voltage lines and overrule
states. But the process is cumbersome, and federal
authority is murky.
Utility giants American Electric Power (AEP) and
FPL Energy, the American Wind Energy Association and
ITC Transmission are among those saying the U.S. government
should have sweeping powers to approve high-voltage
lines, especially if they're transporting renewable
energy. While states would have input -- deciding,
for instance, which route a line takes -- the Federal
Energy Regulatory Commission would have the final
say and could allocate the cost burden among customers
in various states.
"It's key to taking advantage of big swaths of renewable
resources," says Susan Tomasky, AEP's transmission
Sen. Jeff Bingaman, D-N.M., chairman of the Senate
Energy Committee, says he plans to include the provision
in an energy bill soon, adding the government "needs
to play a larger role."
Although many states oppose the idea, a consensus
is building for some type of expedited approval, says
Reid Detchon, head of the Energy Future Coalition.
Meanwhile, a smart-grid rollout is already in high
Even in last year's dismal second half, venture-capital
firms pumped $183 million into smart-grid start-ups,
as much as the previous four years combined, says
Dow Jones VentureSource. That pace is likely to continue
despite a recession that's slowing clean energy funding,
says Greentech Media analyst Eric Wesoff. "2009 and
2010 are going to be the years of ... the smart grid,"
About 70 utilities are proposing rollouts of smart
grids costing $64 billion through 2016, says consulting
While a solar-panel factory costs about $300 million,
a venture capitalist can take a big stake in a smart-grid
technology company for only $50 million. And capital
expenses are more than recouped through cuts in electric
bills, avoiding new power plants -- key as utilities
face greenhouse gas limits -- and operational savings
such as fewer truck dispatches, says Brattle Group
consultant Ahmad Faruqui.
In turn, skeptical regulators are slowly warming
to the idea of tacking charges on customer bills to
fund the initiatives, says Fred Butler, head of the
National Association of Regulatory Utility Commissioners.
Another driver: Utilities are starting to install
gear that relies on common standards, such as those
used on the Internet, instead of proprietary technology.
That's opening the market to more suppliers, says
Adam Grosser of Foundation Capital, a smart-grid investor.
Start-ups such as GridPoint and SmartSynch are developing
software and sensors to run the grids.
*Smart meters. Today, most consumers pay the same
price for electricity, day or night. Digital meters
let utilities offer variable prices to reflect wholesale
power costs, like cellphone plans. Rates are typically
highest at midday, when electricity usage peaks, and
lowest in the wee hours.
Smart meters already are in 5% of U.S. homes and
businesses, up from 1% two years ago, though many
don't offer variable pricing yet. The devices will
be linked to 40% of homes in five years, a recent
FERC report says.
Consumers that choose time-of-use pricing are prodded
to cut air conditioning use on hot days when the grid
is stressed and shift, say, their laundry to later
in the evening. Utilities avoid building plants needed
only at peak hours. Customers on variable pricing
in southern Illinois save about 10% on their bills,
says program coordinator CNT Energy.
Companies such as GE are developing appliances that
run at low levels when prices are high or turn on
only after prices drop. Trilliant's software will
even let consumers program their home networks from
*Plug-in electric vehicles. Car manufacturers plan
to roll out large numbers of plug-in hybrid electric
vehicles in a few years. But if they all charge their
batteries during the day, the grid couldn't handle
the load. So cars typically will be programmed to
recharge at night, when the grid is sparsely used
and wind turbines are spinning furiously.
By the same token, hybrids could become mini-generating
plants at midday. They could be plugged into office
garage outlets, primed to feed power to the grid when
prices surge, says Elliot Mainzer of Bonneville Power
*Utility benefits. Smart meters let utilities read
meters and turn power on or off remotely, avoiding
technician visits. Xcel Energy is putting smart-grid
technology to work across its network in Boulder,
Colo. Sensors remotely alert technicians when a transformer
or other equipment has failed -- or even when it's
about to fail -- preventing outages and doing away
with costly detective work. Substations, newly computerized,
can talk to each other so overloaded circuits hand
off electricity to underused ones. That can sidestep
blackouts and the need to build generators.
Southern California Edison has new relays that isolate
outages. Also, if voltage drops, capacitors automatically
inject more to stabilize the grid or other generators
That's critical if wind turbines suddenly shut down
as gusts taper off. And if there's too much wind or
solar power, smart batteries can store it for later