It connects to the photovoltaic array (or any electricity generator), heaters, air conditioners, refrigerators, lights, computers, televisions, and any other electronic device in a house, allowing for remote control of all household devices. And, it can join with all of the household devices in a neighborhood, a city or a county to give a utility the ability to reduce its energy needs with a touch of a button. It’s the newest rage amongst the “in” policy circles: the Smart Grid. What can be wrong with this? It’s smart. It’s a grid which connects all of us. What’s not to like?

Actually, the smart grid concept is one that UCAN jumped aboard back in 2005. The potential benefits of the smart grid are significant for residential electricity users as well as those who wish to generate their own electricity (i.e. via photovoltaics). UCAN commissioned a report managed by the University of San Diego School of Law to examine the deployment of a smart grid in San Diego. Completed in 2006, the report painted an exciting but complicated picture for smartening up the dumb, one-way distribution grid currently used by every American utility.

A common mistake amongst the nation’s media is the confusion between building new transmission lines and deployment of a "smart grid". A smart grid does not require more grid. It is a transactive network in which all consumers can choose products and services that meet their needs and reflect their values, and all resources, renewable and otherwise, can compete for their business. It is a functionality that enables the economic value of customers’ electricity generation and consumption. Building new transmission lines might arguably increase the robustness of the grid, but it injects no new intelligence or does it serve to facilitate the benefits that a smart grid brings to the table.

Just to make sure that my bias is clear, I am a smart grid cheerleader. It could be the hottest development in electricity since the lightbulb……or even the electric can opener! What’s so hot about it? Well by transforming the electric distribution networks into a two-way, interactive street, it creates lots of new opportunities for electric customers.

When you think about the smart grid, think about what ATMs and the Internet did to banking. Think what the Internet did to shopping. The smart grid, combined with the Internet and wireless technology, will create some new gee-whiz, cost-reducing opportunities for consumers and a potential boon for self-generation.  Its game-changing promise is comparable to that of the Internet or cell phone.   So we are talking big here, very big.   But scary too.

So what’s so exciting? One example is that the home area network (HAN) can play the role of conductor and coordinate every appliance, the home’s heating and cooling, its water heater, its laundry, its entertainment (stereo, TV, DVR, game console), and all home lighting into one communication network, accessible either through a computer screen in the home or a web-based portal that can be accessed via a computer or a web-enabled mobile device. The customer – via a utility or any other company -- can communicate real-time information about the quantity of electricity consumed, the price the consumer is paying, and even the type of generation resources being used to generate the power being consumed. That company can also remotely control different devices in the HAN to change their settings in response to price changes – if the price increases from 10 cents to 20 cents during hot summer months. If price dictates, it can also reduce the temperature in the water heater by 5 degrees, and increase the thermostat air conditioner setting by 5 degrees. Even better, the HAN can help a device analyze energy consumption amongst various appliances and identify excessive consumption by any home device.

Remote access is also an important feature for consumers. They can have remote web access via the HAN, and can turn on (or off) appliances or air conditioners remotely, can monitor energy consumption, and can analyze data on the home’s electricity consumption from anywhere that there is web connectivity.

For any customer who places photovoltaics on their roof and generates their own power, there are opportunities to turn their PV arrays into little cash generators as well. Increasingly, utilities will be obligated to pay customers for power that they produce…..and that power could be extremely valuable during hot summer days when power is scarcer but PV arrays are pumping out power. The two-way smart grid enables the utility to use that PV power and pay customers who allow the utility to use that power during those peak times.

But there’s some scary stuff here as well.   Keep in mind that a very potent tool can be used for good AND/OR for evil.   The smart grid has the potential to do both. In order to inject smartness into a dumb grid, upgrades are necessary. And, unfortunately, those upgrades are to be provided by those same poorly regulated, innovation-averse electric utilities that created national reliance upon costly nuclear power plants and dirty coal plants. These utilities can be counted upon to overspend for costly meter replacement. And they’ll replace all customer meters with so-called smart meters that will be archaic a few months after they are installed. However, it is likely that regulators will require home area network functionality (HAN) to be built into the smart meters will position consumers and third party providers to offer important new in-home energy services. Google gets it. Intel gets it. GE gets it. Silicon Valley gets it. Barack Obama gets it. You better get it.

For the residential consumer, the key to the Smart Grid revolution will be the Energy Management System. This is a computer program application used primarily for controlling energy-controllable devices (e.g., pool pump, Programmable Communicating Thermostat, light switches). It may be found in a personal communication device such as a smart thermostat, computer, cable set-top box, “smart” In-Home Display, or other computing device with ability to display parameters and accept user input. Each of these devices will include a Human Machine Interface (HMI) which will provide consumers with a means to input data into an application (e.g., touch screen, keypad) and a means to output data to the consumer (e.g., In-Home Display, text message). These in-home systems will serve as the building blocks of a smart grid that seamlessly flows information on energy usage and cost from consumers to utilities and back again. They will be inexpensive electronics that can be assembled into simple home networks able to control equipment such as air conditioners, lights, water heaters and furnaces.

A necessary first step in this revolution is the deployment of millions of smart meters that communicate wirelessly -- replacing traditional electro-mechanical meters that must be read manually. Once a home or business has an smart meter in place, it has a two-way communication path allowing information to be shared with utilities or pulled into the home where other devices can respond. It will give consumers the ability to precisely control use and effectively see how consumption drives cost.

Sales of home devices like the thermostats are expected to take off as utilities talk up ways to cut energy bills and consumption. For instance, many utilities plan to roll out pricing plans that give consumers price breaks for moving consumption away from peak times. And to get the devices out to the market as quickly as possible, equipment manufacturers should make them available through utilities, online and at retailers.

One of the reasons why the smart grid is generating so much interest right now is its ability to integrate renewable energy into the electric power network. There is a real potential for this intelligence to accommodate renewable by incorporating the power generated by distributed generation technologies (e.g. photovoltaics) into the grid. A smart utility could monitor and count on distributed power to boost its local reserves, thus reducing the amount of power that it’d need to buy, maintain or import. During a hot summer day, this could lead to millions of dollars of savings.

But for all of its potential, a number of question marks remain. It'll be important to monitor and participate in the development of standards and protocols in four unresolved areas:

Real Time Rates.   There are quite a few utilities and regulators who envision a world where all residential customers will be subjected to mandatory real-time pricing that will impose high charges upon customers who use electricity during peak times.  Such an injudicious pricing regime would end up backfiring as it would punish many, if not most, residential customers who simply have no option but to use air conditioning during hot summer days.   The most likely victims:  stay-at-home seniors, young families and low-income communities.   Elective real time pricing could prove to be a useful tool in promoting reduced peak usage.  But once it turns mandatory,  smart meters become an instrument of inequity and iniquity.

Physical Communications: such as the media over which components will transmit and receive information.  This includes networking (the language that components will use to address, route, and share information as well as applications and devices  (including standards for consumer electronics, distribution system equipment and visualization system mapping, among many others).

Standards.  Since the smart grid is broad in its scope, the potential standards landscape is also very large and complex. Utilities, vendors, and policy-makers are actively engaged. There are already mature standards that are applicable to some aspects of the smart grid; much of the new work on emerging standards and cybersecurity can be leveraged from what already exists. A number of organizations, including the National Institute of Standards and Technology (NIST), the GridWise Architecture Council (GWAC), the American National Standards Institute (ANSI), the Institute of Electrical and Electronics Engineers (IEEE), and the ZigBee Alliance have been in partnership for standard, protocol, and agreement development. Open standards and a long-term plan for incorporating interoperability are most likely to remain durable as communications and security requirements evolve.

Security.   Privacy or security is the cross-cutting theme in standard-setting, affecting communications, networking, and applications.  There are cybersecurity protocols being set by the North American Electric ReliabilityCorporation (NERC), which has by requirement, tended to focus more on the cybersecurity of existing electricity distribution systems, and less at the implications of joining the properties of data networks to these systems and to the applications that will be linked to it.

In concept, smart grid provides so many improvements in situational awareness, prevention, management, and restoration that in spite of new vulnerabilities introduced; it fundamentally makes the electric system more secure. However, new vulnerabilities and new points of access to create intentional disruption should be taken extremely seriously.  The industry is currently wrestling with safeguards that allow the network to be impregnable, even if devices connected to it are compromised. Three areas that they are currently focused upon include:

• Hardware improvements in performance and their impact upon security;

• Firmware must be updateable to prevent quick obsolescence, but must be protected, for example with encryption, certification and authentication; and

• Software must be deployed in a way so that even if an attack is successful, it will be unproductive, unappealing, unprofitable, and traceable.

Even with these protections, the network must be designed to assume data is interceptable, and have an overall design with resilience as a core principle.  These are issues that have been addressed by Internet and wireless industries with some degree of success.  Whether utility regulators keep the utilities' feet to the fire is unclear but if they don't the potential for evil increases dramatically.

So there's lots of potential, no doubt about it. And it will be more costly than it should be because utilities will demand top-dollar to deploy the necessary infrastructure. Regulators will need to push utilities to create systems that are open-architecture and readily available to third-parties to provide services to consumers. The risk-averse power utilities can be expected to create road blocks and bottlenecks designed to slow the adoption of these potential energy management services. And that is why, without effective regulatory oversight, the promise of the smart grid will be unfulfilled and unfulfilling for residential and small business consumers.