HOW TO MAKE A SMART GRID AND WHY

Smart Grid Implementation; Strategies for Success
Rebecca L. Grant, May 2010 (Lexington Institute)

THE POINT
Former Director of the CIA James Woolsey recently described the U.S. electricity transmission system as ODAV: Ostrich-Designed and Awesomely Vulnerable.

The U.S. grid grew up as many localized networks designed to deliver coal-generated electricity. Over the course of the 20th century, as Big Coal consolidated its control over increasingly larger parts of the electricity market, the local systems connected one to another. Worse than being designed by ostriches, there was actually no designer except Big Coal’s ambition. Given its history, the grid works surprisingly well but, at best, it is a clumsy and fragile system, frequently functioning at the edge of failure.

Though not the subject of stimulating cocktail party chatter, the national transmission system has won the attention of important political leaders and policy makers for one simple reason: WITHOUT a better grid, getting significantly more New Energy TO consumers and getting more Energy Efficient behavior FROM them will be impossible. WITH state of the art transmission capabilities, as embodied in emerging Smart Grid paradigms, the 21st century’s New Energy economy would be a big step closer to reality. Smart Grid Implementation; Strategies for Success, by Rebecca L. Grant for the Lexington Institute, details why a Smart Grid is urgently needed and how to make it happen.

The beginnings of the implementation of a national Smart Grid are emerging around the country. Utilities and communities had scheduled the deployment of 58 million smart meters by the middle of the coming decade even before 2009’s American Recovery and Reinvestment Act allotted $4.5 billion in feed cash to further the effort. A new nationwide system can deliver more power more reliably and efficiently and incorporate much more New Energy than is now being used – but it will require much of both utilities and consumers.

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Four challenges stand out: (1) Teaching consumers how to take advantage of the Smart Grid’s capabilities; (2) Making the Smart Grid safe from cyber attacks while keeping it open at both the distributor and ratepayer ends to allow utilities and consumers the interactive opportunities necessary to streamline energy use, (3) Building a nationwide network of interactivity that is based on a single set of interoperable technical standards, and (4) Providing for the transmission of electricity from the full spectrum of sources efficiently.

Central to the need for a Smart Grid are 2 crucially interwoven facts: (1) The present transmission system is entirely inadequate to allow for significantly greater integration of New Energy and the use of more Energy Efficient practices, and (2) a Smart Grid will allow much greater integration of New Energy and the use of Energy Efficient practices by electricity sellers, distributors and consumers.

The National Institute of Standards and Technology (NIST) has defined 7 domains in which there are Smart Grid challenges that will require a spectrum of acceptances and solutions if the "smart" concept is to be translated into reality: (1) Customers, (2) Markets, (3) Service Providers, (4) Operations, (5) Bulk Generation, (6) Transmission, and (7) Distribution.

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THE DETAILS
U.S. electricity demand increased by about 25% since 1990, but construction of transmission decreased ~30%.

Electricity sales in 2008 were $363.7 billion. This kind of market simply cannot be left to the vagaries of a transmission system that can, as the gigantic blackout of 2003 demonstrated, be crippled by a tree branch in a strong wind.

Smart Grid implementation has already begun in California, Texas, Colorado, Massachusetts, West Virginia and other states. Also driving Smart Grid expansion is planning by the Western Governors’ Association of Renewable Energy Zones (REZs) that will streamline the siting and building of new transmission for New Energy sources.

Responsibility for much of Smart Grid implementation, especially for building new transmission lines, will fall to the Federal Energy Regulatory Commission (FERC). Coordination of Smart Grid interoperability will fall in large part on the National Institute of Standards and Technology (NIST).

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The 4 Challenges: (1) Teaching consumers how to take advantage of the Smart Grid’s capabilities; (2) Making the Smart Grid safe from cyber attacks while keeping it open at both the distributor and ratepayer ends to allow utilities and consumers the interactive opportunities necessary to streamline energy use, (3) Building a nationwide network of interactivity that is based on a single set of interoperable technical standards, and (4) Providing for the transmission of electricity from the full spectrum of sources efficiently.

Challenge 1: Teaching consumers how to take advantage of the Smart Grid’s capabilities.

The 2008 average residential electricity price was 11.26 cents per kilowatt hour (khw). Hawaii was highest (32.5 cents per kwh) and Idaho was lowest (7 cents per kwh). New York (18 cents per kwh) and California (14 cents per kwh) were in the middle.

The Smart Grid goal is to (1) allow consumers to monitor rates and reduce their use of the most expensive peak power (demand response, DR), and (2) allow dynamic pricing (time-of-use, TOU, pricing) so that consumers have a clear incentive to change their energy-use.

The tool to achieve these goals is the Smart Meter, embedded in every home appliance. Smart Meters allow a 2-way interaction between the ratepayer and the utility. Through it, the utility could use the ratepayer-granted privilege to reduce electricity use at times of peak demand and the customer could decide to use power at times when it is cheaper.

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The success of advanced meter infrastructure (AMI), now installed in ~13.6 million U.S. homes, has been limited because customers mistrust utilities and utilities have failed to educate them. A recent survey found: (1) ~80% of consumers are “very interested” in learning how to reduce energy costs, but less than 50% want to learn more about the Smart Grid; and, (2) 80%-to-85% of customers would pay $80-to-$100 for cost-saving technology if it promised to reduce their electricity bill 10%-to-30% but only 15%-to-20% will commit to time-of-use or demand-response programs and 35% will not have utilities controlling anything in their homes at any savings.

Smart Grid implementation will, therefore, require major public information campaigns and consumer reaction will be critical to success.

Consumer reaction may be improved if utilities become more like service providers and privacy protections are guaranteed.

Challenge 2: Making the Smart Grid safe from cyber attacks while keeping it open at both the distributor and ratepayer ends to allow utilities and consumers the interactive opportunities necessary to streamline energy use.

The Smart Grid will use the internet to link data flow between utilities and customers. This opens the utility system to hacking. It makes not just a single consumer but the entire utility database of consumers vulnerable. On the other hand, Demand Response is inadequate if consumers do not have real time data to which to respond and if it is only used at the consumer end of the relationship. This means that the link between consumer and utility must remain open.

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This makes the utility’s entire grid vulnerable to external manipulation, even if the initial breach of cybersecurity comes from a single ratepayer’s impulse to roll back an individual bill. Ultimately, banks could be robbed or defense systems could be incapacitated.

Intelligence officials report that several elements of the nation’s cyberspace structure is attacked daily and has been attacked by China and Russia. But the Smart Grid would be useless as a Demand Response tool if it were encrypted like secure military systems.

NIST is presently working on a framework for interoperability protocols and model standards for information management as well as a comprehensive cybersecurity plan for the grid. Though the installation of Smart Meters and AMI infrastructure is moving forward, the NIST project remains nothing more than a working group.

It is anticipated that the world’s companies will spend $21 billion by 2015 on cybersecurity, ~10% of the anticipated ~$200 billion global investment in Smart Grid.

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Solutions now used by the military include (1) encryption, (2) limited physical access, and (3) “white hat” techniques that bar access to all but safe users. In addition, employee education and implementable cybersecurity standards from the consumer to the Supervisory Control and Data Acquisition (SCADA) level will be needed.

Challenge 3: Building a nationwide network of interactivity that is based on a single set of interoperable technical standards.

The Smart Grid will link a range of devices, from smart meters to plug-in vehicles, into a seamless flow of data. The only way to do that is to bypass proprietary software and meters. Open-architecture solutions and agreed interoperable standards are essential.

The classic example of interoperability standards is the USB port. It accepts everything from memory sticks to cameras. This is only possible because of a detailed set of standards that support physical compatibility and data exchange.

Smart Grid interoperability also faces challenges from external factors such as weather in space. Solar flares create geomagnetic storms, resulting in electricity disturbances on the Earth’s surface. Geomagnetic currents can cause line surges and/or disruption of terrestrial and satellite communications embedded in the Smart Grid. Better transformers could be a solution.

Challenge 4: Providing for the transmission of electricity from the full spectrum of sources efficiently.

Local transmission lines have expanded to today’s ~157,000 miles of high-voltage lines in 3 major sectors: the Eastern, Western and Texas interconnections, These also link to Canada and Mexico.

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Only 3,000 miles of new (230 kv) transmission lines and only 682 miles of (345 kv and larger) higher voltage new transmission lines have been put into service since 2001, most within single states. Over 13,000 miles of new natural gas pipelines running across state lines have been put in service in the same period. Progress on federally-owned land has been better. 7 projects representing 1,000 miles of lines in Idaho, California and Nevada are being “fast tracked” and could be approved by the end of 2010.

Flexibility of the system is limited. More New Energy will require more flexible high-voltage lines. Replacing existing lines with high voltage lines that use high temperature superconductivity (HTS) materials is a partial solution. HTS lines carry power more efficiently and "line loss" is cut in half. HTS technology can sometimes increase voltage carrying capacity without any new lines.

But new routes will also be needed. Delivery of electricity from New Energy sources in remote areas to the energy-hungry, densely populated urban load centers will require new transmission in new locations. The Western Governors’ Western Renewable Energy Zone project predesignates New Energy-rich areas for development. Such planning could streamline the 7-to-10 year permit-to-live-wire timeline now required for new transmission.

More lines would relieve transmission system congestion and thereby reduce line loss from 10% to 5%, a huge gain in cost-savings and greenhouse gas generation. When there is congestion, suboptimal power is delivered, threatening surges and brownouts and necessitating generation strategies that increase rates.

Obstacles to new transmission lines: (1) Ownership and interests are dispersed. (2)High voltage transmission lines often generate protest from citizen action groups. (3) The cost of new lines is huge and the payoff is unreasonably delayed. The cost of the new capacity needed in the U.S. is estimated at $200 billion-to-$2 trillion.

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Policy recommendations for advancing the Smart Grid:

(1) Congress should fund NIST’s work on interoperability standards and cybersecurity measures.

(2) Congress should facilitate communication between federal and state authorities.

(3) The White House should emphasize cybersecurity standards as part of national
infrastructure protection.

(4) The White House should push the development of new high voltage transmission lines but leave final siting decisions to states and regions. FERC could be assigned to mandate siting plans but leave the details to the states.

(5) The White House should coordinate a national Smart Grid strategy and timeline and push for regional transmission master plans that include service for New Energy resources.

(6) The Department of Energy should assist utilities and state regulators with Smart Grid public information programs.

(7) Federal tax credits for new Smart Transmission and Smart Grid development could drive growth.

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Big money is at stake. Investment of $100 billion to $200 billion is needed, according to one estimate. That’s around $8 billion per year for two decades. Another estimate says the money needed is ~$1.5 trillion between 2010 and 2030.

Morgan Stanley estimates that the Smart Grid market could be $100 billion in 2030. A 2010 Sandia National Laboratories/Lockheed Martin report said there could be $220 billion added to the U. S. economy between 2010 and 2020 in energy storage projects and concepts alone.

The advent of the Smart Grid suggests a revamped U.S. electricity market in which consumers and suppliers change how they manage power. This will likely be driven by a sense of opportunities and benefits. It will go faster if political leaders see the opportunities and benefits and institute supportive policies.

International competition for Smart Grid economic opportunities and benefits is growing. China and South Korea have aggressive national policies, seeking the fast-growing market for manufacturing and exporting New Energy and Energy Efficiency components. China has put 1.2 million people to work in New Energy and is adding 100,000 new jobs per year.

South Korea is investing $17 billion per year in New Energy, 2% of its GDP. It intends to create 1.5 million jobs.

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QUOTES
- President Barack Obama: “Today, the electricity we use is carried along a grid of lines and wires that dates back to Thomas Edison – a grid that can’t support the demands of clean energy…This means we’re using 19th and 20th century technologies to battle 21st century problems like climate change and energy security. It also means that places like North Dakota can produce a lot of wind energy, but can’t deliver it to communities that want it, leading to a gap between how much clean energy we are using and how much we could be using. The investment we are making today will create a newer, smarter electric grid that will allow for the broader use of alternative energy…”

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- From the Smart Grid implementation paper: “Smart Grid implementation will generate more data, over longer periods of time, and spread it more widely. Gone are the days of once-a-month meter readings fed into the computer doing the billing. Smart Grid devices will churn out data on activities in the home, and that data in aggregate form will be coveted by those developing applications for Smart Grid…Aggregated data may play a vital role in application development and monitoring of trends, much as it has done for decades. But the highly refined and personal data emanating from Smart Grid practices must be safeguarded…”

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- Eric Schmidt, Chair/CEO, Google: “China, who is the competitor here, has decided to become the world’s leader in all the piece parts and all of the necessary hardware and supplies to do this globally. To that end, they are spending more than $100 billion on the same thing that today, the largest awards we have done in America, the private sector plus the government, will invest $8 billion. You can see the gap...”