The Future of Energy

Breaking the Efficiency Gridlock

The Smart Grid could fix a big obstacle to efficiency—us.

For a few days each year—usually the hottest ones, but sometimes the coldest—Portland General Electric fires up the "Little Beaver." Compared to the utility's other power plants, Beaver 8 is not cheap. Power from it costs about $164 per megawatt-hour rather than the usual $57, an expense that's passed on to customers. Nor is it particularly efficient. Built to supplement electricity production in the wake of the 2001 energy crisis, the Little Beaver was turned on for just two days in both 2006 and 2007.

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The Little Beaver is what's known in the utility biz as a "peaking unit." Peaking units are the benchwarmers of the electric industry, the last-resort generators that utilities turn to when electricity use surges, like a July heat wave when everyone's blasting the AC. Under federal rules, utilities must have enough reserve power plants to meet the most extreme spikes in demand and prevent massive blackouts. As our appetite for electricity grows, so has the number of peaking plants, which now constitute at least 14 percent of our 2,600 power plants. And because peak demand is growing even faster than overall energy use, that number will continue to grow. Scott Simms, spokesman for the Bonneville Power Administration, another Pacific Northwest utility, likens the peaker boom to "building an extra freeway lane to accommodate one day of Super Bowl traffic."

Steve Hauser believes there's a better way. As the president of GridWise Alliance, a consortium of businesses and utilities seeking to modernize the electrical grid, he's lobbying for a "Smart Grid" that would accommodate spikes in electrical demand not by generating more power but by spreading out the load, microadjusting how much power consumers use and when. "The system we have now is pretty black-and-white," he says. "Either a power plant is on, or it's off." In a Smart Grid, digitally equipped appliances, thermostats, and rooftop solar panels would relay their constantly shifting energy demands to a computerized hub, which would transmit usage data and rate information back to household "smart meters," allowing consumers—and their appliances—to adjust accordingly by, say, turning off a clothes dryer's heating element for a while on a scorching summer day. And all without building lots of expensive or dirty power plants.

The Smart Grid represents "the difference between flexibility and building for the worst-case scenario," says Hauser. "I heard someone say recently, 'You wouldn't pay to build a huge store and keep it stocked year-round just to meet Christmas demand.' But that's what the electricity industry is doing."

Yet the Smart Grid isn't designed just to minimize waste in the current grid. It's designed to minimize waste in us. As imperfect as transmitting power is—six percent of generated power is lost during delivery—there's no affordable way to improve that. What can be improved is what happens at the other end: the billions of kilowatt-hours fried away by a nation of wide-screen TV watchers and computer junkies. In theory, the Smart Grid offers a user-friendly way to curb our electric appetites. "The reality is that no one turns the thermostat down to 60," Hauser shrugs. The most compelling thing about the Smart Grid is that it could change the way we use energy without requiring us to do anything.

In one scenario, the utility—and eventually, our appliances themselves—would do the thinking, raising and lowering the power pulled into our houses so subtly that we'd hardly notice it. In the current "dumb" grid, information runs in one direction: from the user to the utility. As a result, there's usually no way for consumers to know about real-time rate changes until weeks later, when the added cost shows up on their electricity bill. In a smart system, usage and rate information would flow both ways and also arrive in real time.

But is the Don't Tread on Me nation ready to hand control of the thermostat over to for-profit utilities that don't always have our financial best interest at heart? (See the 2001 Enron-triggered California energy crisis.) It's not impossible. Many of us have come around to paying our bills automatically. With the appropriate protections in place, there's no reason to think that consumers would balk at a chance to save money and energy—so long as that six-pack stays cool.

Should the smart-appliance approach fail, there's an alternative scenario in which consumers would make their own power adjustments. Just as hospital patients with control of their own morphine drips tend to use less painkiller, so Hauser believes that consumers kept informed of power surges and rising rates might volunteer to turn the AC down. "You've just got to make it easy for them," he says.

So if a Smart Grid is such a smart idea, why is nobody building it? The answer is at once complex and strangely simple. While the new grid doesn't have any enemies to speak of, it lacks big-name friends. Members of Congress are not yet ready to roll out an expensive nationwide proposal. (Estimates vary, but the Department of Energy says the cost could equal "one medium pizza per household per month" for 10 to 15 years.) And then there's the new technology, which would require a substantial investment, not to mention the cost of the software and hardware that could interface with tens of millions of refrigerators and whatever else we plug in.

And here's where things get funny. In the absence of federal standards for the Smart Grid and smart appliances, any utility that dared to update its grid would have to gamble that its new features would remain compatible with next-generation technology. As Steve Hickok, deputy administrator of the Bonneville Power Administration, puts it, "No one wants to get stuck with a Betamax."

Last year's federal energy bill included a provision, pushed by Hauser and GridWise, that called for $400 million in R&D through 2012 and a plan to create five test sites. Although the money has yet to be appropriated, Hauser is optimistic that the next administration will pony up the funds.

Until then, the booming demand for energy will have to be met, somehow. What happens next will depend on whether utilities can be convinced to embrace a future that goes beyond building more Little Beavers. And whether the rest of us can be convinced to go along.