Industry Market Trends

How Can the Smart Grid Help the U.S. Achieve its Green Energy Goals?

Feb 05, 2013

Credit: Duke Energy. Credit: Duke Energy.

Though many Americans may not know it, they are part of a clean energy challenge. In his January 2011 State of the Union address, President Obama set an ambitious goal: to produce 80 percent of our electricity from clean and renewable sources by 2035. This, the president said, will establish reliable and affordable sources of energy, reduce pollution and emissions and keep the nation energy independent. While the general plan is to boost the nation's use of wind, solar, geothermal and other renewable energies, it's clear that we need a better delivery and storage system for energy. This is where the "smart grid" comes into play.

The smart grid is a collection of technologies that modernize the electricity delivery system. It's a combination of remote control and automation solutions, two-way communication and wireless technology and high performance computer networks that will link the components of the nation's grid together, from power plants to wind farms and solar arrays, to substations to energy storage facilities to homes and businesses that use the power. The smarter the grid, ultimately, the greater the energy efficiency and cost savings.

Our electric grid certainly needs modernization: utilities have been operating in much the same way for more than a century. Workers are required to roam from homes (to read meters) to electric lines, switches and transformers (to check equipment and measure voltage) to substations (to make repairs and conduct tests). With a "smart" grid, all this information would be communicated automatically over networks, analyzed by computers, and subject to periodic tests to ensure maximum operations efficiency.

According to the U.S. Department of Energy, smart grid technology can cut carbon emissions from typical electricity use by up to 15 percent a year. This is because a digitized grid can help utilities better forecast energy demand to avoid unnecessary generation. Coupled with cleaner energy sources, the benefits become even more expansive.

Some smart thermostats like this one from ecobee, come with a computer app that allows consumers to track energy usage. Some smart thermostats like this one from ecobee, come with computer and mobile apps that allows consumers to track energy usage.

In homes and businesses, installed "smart" (or digital) meters allow consumers to see real-time information on their energy use as well as insight into a utility's peak and off-peak hours. Consumers can tailor their high electricity use (running energy-intensive appliances or processes) to off-peak rates, saving them money and evening out demand. With a more predictable and regulated schedule of electricity demand, utilities can avoid costly spikes that may require them to bring older, dirtier power plants into play.

There are many who believe that the nation cannot meet its renewable energy goals without an intelligent, interconnected grid. Simply put, while renewable energy is the product, the smart grid is the delivery system that makes the best possible use of the power generated.


The nation's smart grid initiative did not begin with the Obama administration. Title XIII of the Bush administration's Energy Independence and Security Act of 2007 outlined a goal of supporting the development of a national smart grid, though the action outlined was primarily about research and tasks forces, with few funds allocated for direct action. The Obama administration put real money behind the smart grid initiative when it announced the American Recovery and Reinvestment Smart Grid project in 2009.

The program created 100 grants for smart grid projects across the U.S.: 25 large projects and 75 smaller initiatives. Approximately $3.4 billion was allocated, and those funds, combined with investments from the utilities themselves, were expected to total $8 billion for grid modernization. This, the White House said, would lead to the creation of "tens of thousands of jobs" and the installation of 18 million smart meters and one million in-home energy management displays on the consumer side, plus thousands of advanced transformers and load management devices by utilities.

So the question is - two years later - how is the smart grid program doing?

Create Jobs

The evidence of job creation by the smart grid initiative is mixed. The qualifications for a smart grid worker are extensive, and a check of national job boards shows that employers want candidates with advanced degrees plus ancillary certifications and specialized work experience, according to ZPryme Research. The few employees who can meet these standards are highly sought after, and companies are paying a lot to recruit them, offering higher salaries and hiring bonuses.

Of the $4.5 billion allocated for the smart grid in the Recovery Act, $100 million was for workforce training. The funding, released in April 2010, was given to 54 smart grid workforce training programs in in 32 states. (Find a list of them here.) It was expected that the program would train 30,000 U.S. workers in smart grid technologies. While these numbers may not have been achieved yet, there is evidence on job boards that the positions are available: there simply aren't enough trained workers to fill them.

Boost Technology Spending

The smart grid industry is certainly opening a lot of wallets. Globally, utilities spent a total of $13.9 billion on smart grid technologies in 2012 -- a 7 percent increase from 2011, according to research from Bloomberg New Energy Finance (BNEF). Analysts expect spending to increase at a compound annual growth rate of 10.4 percent over the next five years to reach $25.2 billion by 2018. According to BNEF, $7.1 billion of the $13.9 billion went for smart metering and related infrastructure and services; distribution automation was the second biggest category, followed by integrated demonstration projects in areas such as demand response, home energy management and smart electric vehicle charging.

The U.S. still holds the biggest portion of the pie as the largest world market for smart grid technologies and services, according to the research (though China is close behind), with American utilities spending $4.3 billion in 2013, down from $5.1 billion in 2011. A good sign that the nation's industry is on board with the smart grid program is the rise in spending by venture capitalists in smart grid startups.


While the benefits are obvious, not all is rosy on the smart grid front. According to a newly released report from the Department of Energy, the smart grid program has some management issues. A recent audit uncovered incidences of funds being handed out based on unreliable estimated costs, a project that was also receiving funds from another DOE program simultaneously, and programs that were drawing money without the proper documentation. The report notes that in the absence of significant improvements, the program is at risk of not meeting its objectives as well as fraud, waste, and abuse. The agency recommended the implementation of improved documentation processes and more rigorous oversight.

Another issue is the requirement for open standards. For all the various smart grid technologies to work in concert and integrate properly, they must operate on the same technology standards. As a result, utilities as well as the companies that build electric infrastructure equipment are expected to give up proprietary technologies in many cases and switch to open technology standards. This has (predictably) been a bit of a sticking point with some companies, but more importantly, a true set of standards administered by a central authority has yet to emerge.

One of the biggest hurdles for smart grid programs has been consumer outcry at being forced to pay for smart meters. Many utilities have leveraged surcharges on customers to pay for the meters, and some customers object to paying for something they believe will benefit only the utility. Other consumers dislike the "Big Brother" aspect of the monitoring, and conspiracy-minded objectors have spread rumors of government control and rationing of power usage. Another small subset of consumers fear health risks from exposure to the low levels of electromagnetic radiation inherent in the wireless technology smart meters use (a scenario medical and public health experts dismiss as groundless).

Still, the objections and hiccups are small compared to the potential benefits: by some estimates, a completed national smart grid could generate nearly $2 trillion in savings by 2030, and its reliability would reduce power outages that cost the nation $80 billion each year. There is already anecdotal evidence that new smart grid installations have shortened and reduced power outages. Given how quickly the nation's electric infrastructure was aging, it's easy to see that the smart grid is inevitable. The bonus is that it may go a long way toward helping the nation meet its energy goals.