36 Part One Organizations, Management, and the Networked Enterprise What’s the Buzz on Smart Grids? CASE STUDY
he existing electricity infrastructure in the United States is outdated and inefficient. Energy companies provide power to consumers, but the grid provides no information about how the consumers are using that energy, making it difficult to develop more efficient approaches to distribution. Also, the current electricity grid offers few ways to handle power provided by alternative energy sources, which are critical components of most efforts to go “green.” Enter the smart grid.
A smart grid delivers electricity from suppliers to consumers using digital technology to save energy, reduce costs, and increase reliability and transparency. The smart grid enables information to flow back and forth between electric power providers and individual households to allow both consumers and energy companies to make more intelligent decisions regarding energy consumption and production. Information from smart grids would show utilities when to raise prices when demand is high and lower them when demand lessens.
Smart grids would also help consumers program high-use electrical appliances like heating and air conditioning systems to reduce consumption during times of speak usage. If implemented nationwide, proponents believe, smart grids would lead to a 5 to 15 percent decrease in energy consumption. Electricity grids are sized to meet the maximum electricity need, so a drop in peak demand would enable utilities to operate with fewer expensive power plants, thereby lowering costs and pollution.
Another advantage of smart grids is their ability to detect sources of power outages more quickly and precisely at the individual household level. With such precise information, utilities will be able to respond to service problems more rapidly and efficiently.
Managing the information flowing in these smart grids requires technology: networks and switches for power management; sensor and monitoring devices to track energy usage and distribution trends; systems to provide energy suppliers and consumers with usage data; communications systems to relay data along the entire energy supply system; and systems linked to programmable appliances to run them when energy is least costly.
If consumers had in-home displays showing how much energy they are consuming at any moment and the price of that energy, they are more likely to curb their consumption to cut costs. Home thermostats and appliances could adjust on their own automatically, depending on the cost of power, and even obtain that power from nontraditional sources, such as a neighbor’s rooftop solar panel.
Instead of power flowing from a small number of power plants, the smart grid will make it possible to have a distributed energy system. Electricity will flow from homes and businesses into the grid, and they will use power from local and faraway sources. Besides increasing energy efficiency, converting to smart grids along with other related energy initiatives could create up to 370,000 jobs.
That’s why pioneering smart grid projects such as SmartGridCity in Boulder, Colorado, are attracting attention. SmartGridCity represents a collaboration by Xcel Energy Inc. and residents of Boulder to test the viability of smart grids on a smaller scale. Participants can check their power consumption levels and costs online, and will soon be able to program home appliances over the Web. Customers access this information and set goals and guidelines for their home’s energy usage through a Web portal.
They also have the option of allowing Xcel to remotely adjust their thermostats during periods of high demand. SmartGridCity is also attempting to turn homes into “miniature power plants” using solar-powered battery packs that “TiVo electricity,” or stash it away to use at a later time. This serves as backup power for homes using the packs, but Xcel can also tap into that power during times of peak energy consumption to lessen the overall energy load. Xcel will be able to remotely adjust thermostats and water heaters and will have much better information about the power consumption of their consumers.
Bud Peterson, chancellor of the University of Colorado at Boulder, and his wife Val have worked with Xcel to turn their home into the prototype residence for the SmartGridCity project. Their house was supplied with a six-kilowatt photovoltaic system on two roofs, four thermostats controlled via the Web, a plug-in hybrid electric vehicle (PHEV) Ford Escape, and other high-tech, smart grid-compatible features. Xcel employees are able to monitor periodsChapter 1 Information Systems in Global Business Today 37 of high power consumption and how much energy the Petersons’ Escape is using on the road.
A digital dashboard in the Petersons’ house displays power usage information in dozens of different ways—live household consumption and production, stored backup power, and carbon emission reductions translated into gallons of gasoline and acres of trees saved each year. The dashboard also allows the Petersons to program their home thermostats to adjust the temperature by room, time of day, and season. Since the project began in the spring of 2008, the Petersons have been able to reduce their electricity use by one-third.
Xcel is not alone. Hundreds of technology companies and almost every major electric utility company see smart grids as the wave of the future. Heightening interest is $3.4 billion in federal economic recovery money for smart grid technology. Duke Energy spent $35 million on smart grid initiatives, installing 80,000 smart meters as part of a pilot project in Charlotte, North Carolina, to provide business and residential customers with up-to-theminute information on their energy use, as well as data on how much their appliances cost to operate.
This helps them save money by curbing usage during peak times when rates are high or by replacing inefficient appliances. Duke now plans to spend $1 billion on sensors, intelligent meters, and other upgrades for a smart grid serving 700,000 customers in Cincinnati. Florida Power and Light is budgeting $200 million for smart meters covering 1 million homes and businesses in the Miami area over the next two years.
Center Point Energy, which services 2.2 million customers in the metropolitan Houston area, is planning to spend $1 billion over the next five years on a smart grid. Although residential customers’ monthly electric bills will be $3.24 higher, the company says this amount will be more than offset by energy savings. Pacific Gas & Electric, which distributes power to Northern and Central California, is in the process of installing 10 million smart meters by mid-2012. Google has developed a free Web service called PowerMeter for tracking energy use online in houses or businesses as power is consumed. It expects other companies to build the devices that will supply data to PowerMeter.
There are a number of challenges facing the efforts to implement smart grids. Changing the infrastructure of our electricity grids is a daunting task. Two-way meters that allow information to flow both to and from homes need to be installed at any home or building that uses electric power–in other words, essentially everywhere. Another challenge is creating an intuitive end-user interface. Some SmartGridCity participants reported that the dashboard they used to manage their appliances was too confusing and high-tech. Even Val Peterson admitted that, at first, managing the information about her power usage supplied through the Xcel Web portal was an intimidating process.
The smart grid won’t be cheap, with estimated costs running as high as $75 billion. Meters run $250 to $500 each when they are accompanied by new utility billing systems. Who is going to pay the bill? Is the average consumer willing to pay the upfront costs for a smart grid system and then respond appropriately to price signals? Will consumers and utility companies get the promised payback if they buy into smart grid technology? Might “smart meters” be too intrusive? Would consumers really want to entrust energy companies with regulating the energy usage inside their homes?
Would a highly computerized grid increase the risk of cyberattacks? Jack Oliphant, a retiree living north of Houston in Spring, Texas, believes that the $444 he will pay Center Point for a smart meter won’t justify the expense. “There’s no mystery about how you save energy,” he says. “You turn down the air conditioner and shut off some lights. I don’t need an expensive meter to do that.” Others have pointed out other less-expensive methods of reducing energy consumption.
Marcel Hawiger, an attorney for The Utility Reform Network, a San Francisco consumer advocacy group, favors expanding existing air conditioner-cycling programs, where utilities are able to control air conditioners so they take turns coming on and off, thereby reducing demands on the electric system. He believes air conditioner controllers, which control temperature settings and compressors to reduce overall energy costs, provide much of the benefit of smart meters at a fraction of their cost. Consumer advocates have vowed to fight smart grids if they boost rates for customers who are unable or unwilling to use Web portals and allow energy companies to control aspects of their appliances.
Advocates also argue that smart grids represent an Orwellian intrusion of people’s right to use their appliances as they see fit without disclosing facts about their usage to others. A proposal by officials in California to require all new homes to have remotely adjustable thermostats was soundly defeated after critics worried about the privacy implications.