Our national power grid is inadequate and inefficient.  It suffers from transmission and distribution losses, is vulnerable to power outages, lacks strong data collection, does not communicate with the consumer, and is unlikely to meet the growing demand for electricity in its current state.  By looking at these issues, we can better understand the need to bring the grid into the 21st century with the application of digital “smart” technology–the “smart grid“.

Transmission and distribution (T&D) are a concern, as the web-like expansion of the grid from centralized power plants to end users often results in up to 10 percent power loss.  Such losses demonstrate the grid’s inadequacy, while transmission bottlenecks illustrate the age of the grid.  As more people flip the switch to power economies and lifestyles that are increasingly dependent upon energy consumption, old transmission and distribution lines are increasingly incapable of handling this demand and become congested.  While new lines could be added to alleviate the problem, bringing such a solution to fruition is not as easy as it sounds.  Building out new lines is expensive and faces political tension between state and federal governments over jurisdiction and funding.

Another common criticism of the grid is the system’s overall vulnerability, particularly with regard to service interruptions.  Nothing better highlights this issue than the great power outage that occurred on August 14, 2003.  A transmission line, compromised by contact with tree limbs, was identified as the root cause that left fifty million people up and down the Eastern seaboard without electricity.  Although power interruptions of this magnitude are rare, they are dangerous and come with a high economic price tag.

Another issue with the grid is that information on energy consumption only flows one-way: towards the utility. The price of power is generally calculated by the utility as the price per kilowatt-hour (KWh) multiplied by the number of KWh consumed over the billing cycle.  Some utilities give consumers the option of choosing a fixed rate or monthly variable rate for service, both of which are determined by the wholesale price of electricity on the market. What generally occurs, however, is the following: a consumer flips a switch, uses electricity to run the house, and alerts the utility to how much power is demanded.  Power is supplied and at the end of the month the consumer receives a bill.

Out of everything we buy in our society, there are only two main commodities that we purchase without knowing the price beforehand: electricity and water.  Given that technology now exists in which consumers could make more informed decisions on power purchasing, it can be argued that such an approach to selling power is a form of consumer injustice.  Granting consumers better information on how much power costs in real-time could alter consumption habits and lead to a more efficient use of energy.

We must also ask how the grid will be able to handle projected demand.  According to the 2009 Annual Energy Outlook conducted by the Energy Information Administration, electricity demand will increase by 26% from the year 2007 to 2030, with essentially an average annual increase of 1%.  The EIA attributes this growth in demand to three causes: population growth, an increase in demand for products and services, and the population shift towards warmer climates.  Today, we have more technological tools at our disposal to meet this growth in electricity consumption rather than solely taking the traditional path of constructing new power plants.

While it is inevitable that more capacity will be added and new T&D infrastructure must be built out, a new player is coming onto the field that will significantly alter both the future of solar energy growth and the way in which we have dealt with power issues in years past.  This player is known as the smart grid.

Next Week

The Smart Grid, Part III: Benefits