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 / Winter 2013 / Issue 73(originally published by Booz & Company)


Waiting for the Digital Grid

A survey of U.S. consumers in 2012 by the Edison Electric Institute found that only 45 percent of respondents knew the term smart grid, and barely half of those familiar with the term felt they understood how digital grid technology worked and what it could accomplish. Consumers often take a skeptical view of new technologies they don’t fully understand. Utilities can counter this skepticism by educating customers on the benefits and risks of the digital grid (including the operational benefits it provides), setting realistic expectations, and addressing consumers’ concerns.

Smarter Is Better

The obstacles are numerous, but given the possibilities this technology offers, the widespread implementation of the digital grid should be an imperative for utilities in the United States and around the world. Here’s a look at what could happen.

Reliability. With a digital grid in place, power companies would no longer have to wait for customers to call in and report a loss of service. The utility could immediately dispatch service crews to restore power whenever and wherever the network infrastructure detected an outage. This would also avoid the costly and time-consuming process of sending restoration crews into the field to patrol power lines in search of trouble spots. At the same time, notifications would automatically go out to customers through the Web and social media, followed by progress reports with time estimates for power restoration. This is one of the first digital grid technologies being deployed today, though it is still limited in scope.

Digital technologies also hold the promise of preventing outages. Over time, utilities will implement self-healing capabilities that reduce the frequency, scope, and duration of power loss. Sensing mechanisms in the network will sniff out trouble before it can cause an outage, enabling the power company to act.

Pricing. Digitized electric networks will give customers the information they need to manage their power consumption and cut their electric bills. The system tells customers how much power they’re using at various times of the day, and how much electricity costs at each time interval. This information reveals opportunities to save money by shifting more power usage to the hours when rates are lower. Although few consumers relish the prospect of turning on the dishwasher at 3:00 a.m., home automation technology eventually will take over the chore of managing power consumption for optimal pricing. And as more people spread out their consumption, price spikes at times of peak demand could stabilize.

Supply–demand integration. Digitization turns traditional one-way power distribution channels into two-way streets. Today, most electricity is generated at a utility’s power plant and sent over the grid to customers. That will change as new technologies enable power to flow back into the grid from alternative energy sources.

Customers who install solar panels on their roof or erect a windmill on their property can offset electricity costs by selling some power back to the utility. At times of heavy demand, customers with on-site power-generating capabilities can also save by switching to their own power source, in response to a warning signal from the utility that rates are peaking.

Product and service innovation. The interactive capabilities of intelligent electric networks open the door to a wide range of new products and services that will help customers use electricity in new ways. The relationship that now ties customers to utility companies will become more open, encompassing a range of vendors that will provide hardware, software, and services for the digital grid. These offerings will help consumers understand their electricity use and capitalize on digitization to squeeze more value from the wattage they consume.

Network automation and utility efficiency. Grid digitization improves operating efficiency at utilities. Smart meters are already reducing the need to send technicians out for routine matters such as service activations and shutoffs, and, of course, meter reading. As utilities become more efficient, they can respond faster to customer needs. Greater efficiency can also slow the rise of electricity costs over the long term. As electric grids become smarter and more efficient, utilities won’t need to spend as much money on improvements to infrastructure and other projects that require significant capital investment. Cost reductions for the power companies mean customers won’t see rate increases in their bills that are meant to recoup expenditures for the utilities.

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