An ever growing number of suppliers, new opportunities for consumers to produce energy themselves... the complexity of the electricity market is growing. New interactive tools are available to manage these developments, provide increasingly sophisticated solutions and, ultimately, regulate power consumption.

China allocated 586 billion US dollars to an economic stimulus plan on November 9, 2008; 170 billion dollars of this was invested directly in the construction of a smart grid, to be completed by 2010. The Chinese government wants to develop alternative energies and reduce the country’s energy intensity (total energy consumption per unit of GDP) by 20% in 2010.
How can a smart grid help achieve these gains? Actually a whole series of systems and equipment, a smart grid improves grid management and efficiently integrates the activities of anyone connected to the grid, basically power generators and power consumers. "Efficiently" means saving energy, improving the security of distribution, integrating increasing numbers of alternative energies, reducing costs... The smart grid at the core of this new vision is more complex – and more difficult to manage – than the linear system we know today. It relies on control systems, safety systems, communication systems, sensors, algorithms, software... all of which make it possible for the consumer and the power supplier to interact continuously. These new tools affect everyone in the electricity market: those who produce the power in generating plants, or from conventional alternative sources like hydro or wind power, those who transmit the electricity over high voltage power lines and, above all, those who balance supply and demand. Distributors are also affected. They manage the low and medium voltage systems that bring the electricity to suppliers and consumers, and they sell and bill the electricity to the end-user.

A smart meter at home

The most visible of the new tools is found in the consumer's own home. Next-generation meters are one of the building blocks of the interactive smart grid. Every program to upgrade the power grid, whether in Europe, the North America or Asia, starts with these meters. The world market for smart grids was 42 billion US dollars in 2008, 2.7 billion of which were for the meters alone. That is expected to grow to 65 billion US dollars by 2013, according to a study published in October 2008 by Lux Research. The Italian market was the European forerunner, with nearly 30 million smart meters installed by power company Enel. Sweden will have 100% coverage in the coming months. French utilities jumped on the bandwagon in 2008, when ERDF, the distribution subsidiary of French utility EDF, kicked off a vast, 4-billion euro campaign to be carried out in two phases: first, 300,000 "communicating" meters that can remotely send and receive data will be tested in private homes. The next step will be full-scale deployment, with 35 million new meters installed by 2012.
Why now? Because several factors are converging to make grid management increasingly complex. In Europe, for instance, the natural gas and electricity market was opened to competition on July 1, 2007, allowing consumers to choose whichever supplier they want. That has brought a multitude of new power companies and services into the market in countries where only one or two companies operated before. At the same time, demand for power is rising around the globe, as are alternative energies.

Major IT companies investing in the market

Smart grid equipment can read meters remotely via electric or radio transmissions. And they act as real computer interfaces, capable of analyzing and managing complex instructions. Major IT and Internet companies are investing in this sector through targeted partnerships. IBM joined with American Electric Power (AEP) last October to develop smart solutions, and Google announced a partnership with General Electric's smart electric meter division. On a practical level, smart meters offer new functionalities: detailed, individual monitoring of electricity consumption, remote control, and the swapping of information and instructions between the supplier and the consumer. These features provide several advantages.
First, they allow operators to continuously monitor the low voltage grid, electricity quality, and fluctuations in supply and demand, among other things. The same is true for the generators, for whom smart grid deployment means a more detailed view of demand. With better information, they'll be able to manage their power plants much more cost-effectively. For the time being, the main objective is to avoid more capital investment in peak production – those power plants fired with fuel oil, natural gas and coal built to meet peak demand, which only operate a few hours a year.

Smart grids can cut electricity consumption by 10%

Over the longer term, generators are banking on the development of "demand response" systems, which have already been tested in a few California cities. The concept is simple: rather than firing up a thermal plant, the customer is asked to reduce electricity consumption to smooth out demand.
This is made possible by sophisticated meters that can exchange information continuously and manage household equipment such as lights, heating systems and appliances. And the savings are substantial. According to a report commissioned in early 2008 by GridWise, an alliance sponsored by the US Department of Energy, energy savings can average as much as 10% and reach 15% during peak demand, avoiding 120 billion dollars in capital expenditures in the United States. And smart grid deployment could reduce CO₂ emissions from 60 to 211 million tons by 2030, according to the Electric Power Research Institute (EPRI) in a December 2008 report.
An intelligent grid also allows producers to integrate and monitor distributed energies, such as the power generated by a wind turbine installed on the roof of a house. These micro power plants, deployed on a wide scale, will become an important component of the energy mix and contribute to grid stability.
For suppliers and consumers alike, these are the keys to a new energy era, one that is set to resemble the telecommunications revolution Europe went through in just ten years. With the new meters, suppliers can now really compete by offering customized services targeting individual consumer behavior. Like telephone service suppliers, each power supplier can offer its own rate structure along with a whole set of new services: prepayment, consumption only during certain periods, and even management of all electrical equipment in the house.

The future: Energy consum'actors

The consumer will also become an energy actor. Either by using demand-response systems to reduce consumption and peak demand, or by generating electricity directly that can be credited by the power supply system. Either way, he will conserve fossil fuel resources and reduce CO₂ emissions. "The electric grid is in many ways the backbone of our economy," says Dan Reicher, director of climate and energy initiatives at Google, in a November edition of Newsweek magazine. For Reicher, a smarter grid should ultimately be able to generate and distribute electricity everywhere. By using the energy generated by solar panels and home wind turbines. But he goes further than that. In his opinion, smart grids will even use vehicles as energy resources: once parked, hybrid and electric cars can not only be recharged but also send electricity back to the grid when it's needed. Thanks to smart grids, the automobile may end up producing rather than consuming energy!