Rather than viewing the smart grid as a threat, utilities can incorporate this nascent concept and its byproducts into a business plan with the potential to decrease investment costs. For example, utilities could charge a tariff for allowing homes and businesses that produce their own electricity to hook up their micro-generators to the larger grid. By tapping the output of these independent electricity producers at critical times, utilities will enjoy a more robust grid and minimize the need for expensive oil- or gas-fired generators that they rely on now to provide extra intermediate-load electricity.
And as the smart grid becomes more popular, it is likely to encourage a broader awareness of the need for energy conservation among consumers that will trickle down to activities traditionally separate from home electricity generation — especially to transportation, as more and more people purchase hybrids, plug-in hybrids, and electric cars. The growth of the “alternative” automobile sector will put tremendous pressure on utilities to add the capacity necessary to charge the batteries and other equipment that will power the millions of next-generation cars. In one of the more ambitious projects, PG&E is experimenting with a Vehicle-to-Grid smart grid system that would use wind power, which often generates significant electricity in the dark, to fuel millions of electric car batteries plugging into the grid at night.
The utility industry and other interested parties are beginning to take tentative steps to at least investigate and discuss the benefits of the smart grid. In April 2008, the Edison Foundation, the lobbying group for U.S. electric utilities, held a two-day conference on the smart grid that featured keynote speeches by Jeffrey Immelt, CEO of General Electric, and Peter Fox-Penner, a principal partner of utilities consultancy The Brattle Group. Also in April, utilities from across the country and from as far away as Ireland, Germany, and Nigeria met for the “Metering America” conference in San Diego. In June, more than 150 state and federal regulators, consumer advocates, utilities, and technology companies met at the Demand Response Symposium in Baltimore. And that same month, the U.S. Department of Energy hosted a “Smart Grid Implementation Workshop” for federal and state agencies, consumer groups, academics, utilities, and electric-equipment manufacturers. It is crucial that these symposia and conferences continue — and that they continue to be bolstered by industry surveys, reports, and white papers making the industry’s best-case vision of the future. These insights form the basis of an argument that will invite regulators and consumer groups to join forces and chart an intelligent course toward a profitable smart grid.
Rolf Adam is a principal in Booz & Company’s Munich office. He specializes in transmission and distribution, smart grid initiatives, and clean technology for the energy and utilities industry.
Walter Wintersteller is a partner in Booz & Company’s Munich office. He specializes in strategy projects for the energy and utilities industry.