Smart Grid 2.0

Jack Ellis | Mar 15, 2010

Back in 2005, a couple of engineers1 used the term "Smart Grid" to describe their vision of an advanced power system. Particularly in the aftermath of the 2003 Northeast Blackout, Smart Grid quickly became a convenient, attention-getting way to label anything remotely related to grid modernization. Just as "" described anything Internet at the turn of the century, "Smart Grid" now describes just about anything related to electricity.

It's convenient to divide the Smart Grid concept into three distinct parts:

  • Transmission level elements, including sensors that provide real data on the state of critical grid elements (Phasor Measurement Units, or PMUs, and weather sensors that provide temperature and wind speed data) to help operators maximize transmission throughput without violating voltage and thermal limitations; control room displays that provide operators with better situational awareness (lack of situational awareness was a key factor in the 1983 blackout).

  • Distribution level elements, including substation automation, the ability to connect, disconnect and troubleshoot service at individual customer sites without rolling a truck, and remotely readable interval meters (AMI deployments).
  • Customer-facing elements that enable customer-owned devices to interact with the rest of the grid, including distributed generation, distributed storage, and price-responsive end-use appliances. In other words, anything that sits behind a customer's meter.
  • The last category has received a lot of attention in both the popular and industry press. After all, most journalists have never heard of PMUs and substation automation has zero sex appeal, even to those of us who have spent many years in the power industry. The ability to remotely control a toaster, however, has captured at least some of the public's imagination.

    Now that many utilities are well along in their AMI deployments, attention is being focused on other Smart Grid elements, most notably the customer-facing category. Stakeholders are beginning to think more seriously about what this piece of the Smart Grid is and isn't, which things it will do and which things it won't, how fast to roll it out, how to explain it to consumers, how much it will cost, and what kinds of benefits it will provide. Several recent articles suggest skepticism is rising as consumers and regulators ask tough questions about why it makes sense2. In an interview about Smart Grid deployment conducted a year ago, then NARUC President Fred Butler, a member of the New Jersey Board of Public Utilities, emphasized this point by stating, "before we can say yes, we need to have demonstrated benefits.3"

    The conversations are both timely and necessary. Any project with a national scope and a trillion dollar price tag can only be justified on economic grounds if it can generate benefits in the range of $100-1504 billion dollars per year. Customers and consumer advocates are no doubt beginning to realize that savings of this magnitude are not likely to be found in an industry with total annual revenues of around $400 billion5.

    Putting more intelligence behind the meter can, in fact, produce capital, operating cost and environmental benefits. The key to cost-effectively capturing those benefits is a deployment strategy that carefully targets consumers and end-use applications that can make a material difference, combined with rate structures that reward customers who are willing to invest capital and effort. Since a number of the more visible Smart Grid ideas deal with the residential customer class, that's the customer group I'll focus on in the balance of this article.

    Why Have Intelligence Behind the Meter?

    Simply put, the reason for having intelligent devices is that they can search for the cheapest energy and act upon that information. Existing devices like switches and timers can't. Moreover, the required amounts of bandwidth and computing power required to control large numbers of simple devices like switches from a central location quickly becomes impractical and cost-prohibitive. Finally, most customers won't tolerate external control over their household appliances and lifestyles. Intelligent devices in homes and businesses can do the job at as well or better than any centralized control system while avoiding the disadvantages of centralized control.

    Today grid operators dispatch existing power plants to meet a daily load profile that's fairly predictable, just as they have for about a century. On any given day, they know when demand will reach its peak and when demand will be at its lowest. Not coincidentally, energy is most costly and most valuable when demand is high, and it's cheap when demand is low.

    High penetration levels of renewable resources change this picture significantly. Operators are no longer dispatching generation to meet a reasonably predictable load profile. Instead, they're dispatching the resources they can control to meet the difference between customer demand and renewable energy production. Over the course of a day, the output of a wind farm or solar field is more variable and less certain than the output of a conventional fossil-fired power plant. The wind could blow hard right after dark on one night, and it could perfectly calm right after dark on the following day. Since prices will follow this difference between renewable energy production and load rather than just the load alone, the times at which prices are at their peak or their lowest will change from one day to the next.

    Which End-Use Applications Make Sense?

    There are only a few existing electric end-use applications that really lend themselves to some sort of intelligent management: space conditioning (mostly air conditioning and perhaps some heating), hot water heating, clothes dryers and perhaps swimming pool pumps. These applications are good candidates for two reasons; first, they are typically the largest energy-consuming appliances in a home, and second, the timing of their operation can often be shifted by anywhere from a few minutes to perhaps several hours without requiring consumers to make significant lifestyle changes. Even the most cost-conscious consumers are unlikely to read by candle light, delay using their TV or postpone dinner to save a few pennies.

    Electric vehicles of both the pure and hybrid varieties are excellent candidates for intelligent management. In fact, to the extent electric vehicles become common, charging all of them during a limited time window using available off-peak surplus energy and without requiring new generating capacity is likely to be the most important consumer motivation for adopting Smart Grid technologies.

    Many utilities already employ switches to control air conditioners and water heaters for demand management. In California, pool pumps are typically fitted with times or switches. However, neither timers nor simple switching schemes need any more smarts than the grid already has, customer churn is a constant challenge, and these dumb devices lack the degree of sophistication required to make efficient use of existing electric supply resources by shifting demand away from periods where electricity is relatively expensive into periods where it is relatively cheap.

    Where Should the Intelligence Reside?

    Conventional wisdom says the intelligence should be invested in a single device that controls all of the appliances. Conventional wisdom in this case is wrong. In fact, the best place to put intelligence is in the appliance itself. The much talked about home area networks and other systems that attempt to "optimize" energy use will add complexity but they will not be as effective as simple strategies implemented at the device level using prices provided by the local utility or grid operator. If, as is likely, residential users continue to pay on a volumetric basis for the energy they consume6, then it's a trivial task to add an algorithm that minimizes the total cost of energy consumption. Most modern appliances already have at least one embedded microprocessor (conventional vehicles have dozens) that could probably do the job. It would be a simple matter to add a radio receiver that listens for a stream of hourly (or even more granular) prices over the balance of the day. For older appliances, a plug-in module that includes all of the necessary functionality could be built and sold at modest cost. It's important to note that consumers will still have full control over their appliances, including the ability to change programming at any time and some way to override the intelligence so that, for example, an air conditioner doesn't shut itself off in the middle of a party or an electric vehicle can be fully charged whenever the owner wants it to be7.

    Who Owns the Hardware?

    Consumers own the hardware, not their utility or a third party. If intelligent devices, whether new appliances or retrofits, are simply given away, they're more likely to either sit on the shelf or be placed in permanent override mode. If customers spend their own cash on these devices, and if the devices are engineered to be very simple and user-friendly, they're much more likely to be used. Moreover, if customers are doing the buying, manufacturers will be more likely to design and build devices that appeal to consumers rather than devices that meet utility or government specifications but are otherwise impractical.

    The Importance of Prices

    Meaningful prices are probably the most important element of any consumer-facing Smart Grid initiative. Prices provide essential information about the cost and value of electricity at different times of the day and night that help appliances and their owners decide how to provide services and products (heat, cooling, hot water) at the lowest cost that's consistent with minimal lifestyle disruption. A water heater, for example, might determine that it could actually earn money one day by operating only between 10 PM and midnight when a combination of high wind production and low electric demand drives prices below zero, while on the next day it could wait to heat up the tank until just before the family wakes up because that's when electricity is cheapest.

    A Note on Designing Intelligence

    Building appliances that are smart enough to minimize the cost of the electricity they consume without turning the household schedule upside down is going to be challenging. The user interface has to be simple and intuitive on the one hand, while providing enough functionality so that consumers don't feel they've lost control. Devices have to be both inexpensive and fairly sophisticated if they are also going to be cost-effective. Utilities and their traditional vendors are typically not equipped to build such products. This is a potentially large market. Let's hope Apple Computer notices.

    Some Perspective is in Order

    Intelligent devices are essential to unlocking the potential of the Smart Grid. Before consumers can make use of these devices, manufacturers have to build them, and before manufacturers spend money on design and engineering, well-functioning markets that provide reliable, actionable prices have to be established and proved. We've made a great deal of progress in the last 15 years but some of the parts still have to be put in place. Most wholesale markets are still working out bugs in their very complex pricing algorithms. Regulators are only just beginning to think about passing through wholesale prices directly to consumers or constructing tariffs that appropriately reflect changing system conditions.

    A bigger concern is that most consumers are either largely ignorant about the Smart Grid or they have convinced themselves it's part of a government conspiracy to control their lives. Consumers need to be educated, but this is a case where the message has to come from many voices, including policymakers and regulators. It has to be delivered in a variety for forms through a variety of media for a diverse audience over a long period of time in a way that ordinary consumers can easily understand.

    To make the Smart Grid successful:

    • Regulators and policymakers have to work with utilities, energy services companies, third party retailers and consumer electronics manufacturers to educate the public and set realistic expectations about costs and benefits. Particularly since the underlying drivers of a consumer-facing Smart Grid are driven by public policy initiatives, regulators and policymakers have to take the lead in getting the messages out and they need to be well prepared for potentially intense opposition.

  • Consumer adoption of Smart Grid technologies needs to be a consumer choice, not a policy choice. Regulators need to establish voluntary tariffs that expose consumers to time-varying prices that reflect system conditions8. Ideally, regulators would also adjust traditional fixed price/fixed volume tariffs so that they are less advantageous than they are today.
  • Utilities, energy service companies, third party electricity retailers and perhaps consumer electronics companies need to identify and engage early adopters who will help test ideas and provide useful feedback.
  • Regulators and consumer advocates must accept that the Smart Grid will produce bigger winners and smaller winners. Those who are willing to invest time, effort and capital will be bigger winners, but even those who do nothing should benefit from a cleaner environment and smaller increases in electricity prices than would otherwise be the case (or perhaps even decreases).
  • Regulators need to clearly separate the roles and responsibilities of the various market actors. Consumers should be able to maintain control of their lifestyles. Utilities should not be able to involuntarily reach into homes and businesses. Intelligent devices should not have to rely on a utility or third-party gateway or toll booth. Consumers should be able to purchase plug-and-play devices that work.
  • In the proper context, the Smart Grid is a great idea. Let's be smart about how we build it.


    1. According to Wikipedia, "Toward A Smart Grid", authored by S. Massoud Amin and Bruce F. Wollenberg appeared in the September/October issue of IEEE P&E Magazine (Vol. 3, No.3, pgs 34-41)

    2. See "The growing voice of the consumer" by Bart Thielbar in Intelligent Utility, February 3, 2010 (, "Misrepresenting the public isn't a very good idea" by Warren Causey in Intelligent Utility, January 29, 2010 (, and "Regulators Throw a Curve at Xcel Energy's Smart Grid City", Greentech Media, January 15, 2010 (

    3. "NARUC Chairman Charts Smart Grid Path",, January 9, 2009 (

    4. The $100-150 billion figure assumes the annualized cost of a $1 capital investment is between 10 and 15 cents, which is typical for regulated utility projects.

    5. "US Electric Industry Total Revenues by State", US Energy Information Agency,

    6. Energy-only tariffs with no demand component.

    7. The Pacific Northwest National Laboratory has already developed a Smart Charge Controller that can readily be adapted to buy electricity for the vehicle using a stream of hourly prices. See or contact

    8. A tariff that allows consumers to buy fixed volumes at fixed prices over defined periods and pay or be paid for consuming more or less at the wholesale price would provide the necessary exposure and a hedge.

    Related Topics


    This is a terrific article Jack. It takes pretty much exactly the right position on locating the solutions physically, though economically and legally I'm not so sure. Of course I realize we're just a couple of engineer types discussing a political issue but its still nice to dream.

    Of course I also have a few questions / quibbles.

    "Any project with a national scope and a trillion dollar price tag can only be justified on economic grounds if it can generate benefits in the range of $100-1504 billion dollars per year." -- I think your trillion dollar estimate is far too high by at least a factor of two, for only the customer-facing part of the smart grid, and most of the other stuff would be rendered unnecessary by the first, done well.

    "using prices provided by the local utility or grid operator" -- Excellent. This is key to achieving the benefits available now and over time. The point is that regardless of what the Ontario government might think, no-one can predict what Time-Of-Day/Week etc. the greatest requirements for load switching will occur after plug-in autos become a significant proportion of vehicles (check any Peak Oil website, then combine it with the Exportlands Model and rising economic competitiveness of developing regions. Most oil use in N. America is going away in the not-too-distant future) and intermittent renewables become their logical and economical percentage of generation. Solar electricity WILL become cheaper than coal generation on cloud-free days sometime, only question is 10 yrs or 20?

    "simple strategies implemented at the device level ... then it's a trivial task to add an algorithm that minimizes the total cost of energy consumption." -- I find this a somewhat troubling concept. Can eg. six or seven separate appliances in 100,000 homes, acting independently of each other, do as good a job as 100,000 local controllers negotiating in advance with each other for consumption rights, then trading these rights and controlling their local capabilities to stay within the grids capabilities? I doubt it. We'll only get ONE chance at this, we need to make sure we do it right. Make the appliances cheaper, eg simply capable of responding to control signals from the local controller, and the meters smarter. And for that inevitable voice which will pipe up "how about security?" I would point out that what is proposed is no less secure than a standard garage door opener, and the security consequences far less problematic.

    Another problem with independent price-sensitive appliances is market confirmation of requested actions. A system such as you propose would not be able to eliminate hot standby and emergency peaker costs by having the market controller broadcast a request for emergency load shedding in return for a high payment in an event of an unscheduled outage event because it would have no means of confirming the responses of individual appliances. I doubt that a mere rapid price spike could be made high enough to achieve the required result rapidly enough without heavily punishing granny with her dumb appliances, so the result will be that we will still need to negotiate the shutting down of our economically critical industrial facilities instead of our home air conditioners, as now, and a significant cost for rare operation of very inefficient peakers.

    The author has left off refrigerators/freezers as possible sources of intelligent management. Also the increasing number of vampiric loads we all now carry due to the proliferation of wall warts. Is it time for the 12V plug?

    Other commentators wiser than I have pointed out the problem with this whole scenario is motivation. The costs of home electricity is usually so low that all this stuff is not worth the bother to the average consumer. There is a social "good" in that a given population using say, 20 percent less electricity means that 20 percent fewer utility plants need be built, but they have no motivation to push for this. And the utility itself, being a bureaucracy, will tend toward the solution that makes it larger rather than leaner.

    By the way, it's my understanding that major even businesses and industries, which spend much more on electricity and can demonstrate much faster ROI's with changes in behavior, still do not upgrade their systems. It just doesn't affect their bottom line enough.

    Agreed, Jim. However, I would note that a LOT of what we know about people's reactions to electricity prices were learned when eg. retail in Ontario cost $0.04 / kwh, many residential and commercial spaces were poorly or not airconditioned, autos ran entirely on petroleum, etc. Does it still hold at $0.11? Perhaps the future will tell.

    Great to see an article finally that focuses on potential of more tech in the hands of consumers for their residential appliance loads. Nice article Jack. Comments from Len and Jim are right on too as usual.

    I have to put in my two cents here of course. Much of what the article presents, and the comments above, assume consumers will only have the motivation, if any at all, to actively manage their largest consuming loads in the home and their plug-in cars. Since all the smaller house loads only cost pennies a day to run, these are not worth any attention or investment in technology. I will agree with this argument for the present, however imagine what will go through consumers' minds when over the next 5 or 10 years, much sooner perhaps in some regions of North America, electricity price escalation causes our energy bills to double or triple what they are today.

    Today the average tech savvy consumer may desire to invest in a smart thermostat for their air conditioner or a pool pump control that responds to broadcasted energy prices. But as rates rise faster than inflation over time, the pain in our pocketbooks will grow, and those same consumers will become interested in controlling additional loads, or at the very least monitoring the additional smaller loads in their home to at least get a handle on where their energy bills are going. As the list of controlled loads and monitored loads expands, there will be much more desire to have a central load controller in the home rather than having individual smart controllers embedded in each device that requires separate programming at the devices themselves. I myself find it a big pain-in-the-a... to have to adjust each and every digital clock in my house every time we change from Daylight Savings Time, and often dream about being able to do them all with one command from one central controller a.k.a. my home PC.

    I say there will be a growing widespread need for home area networking where intelligent load devices in the home can be monitored AND some controlled from a central home controller. The hottest products for intelligent load control devices will be the ones that can retrofit to existing dumb appliances as do-it-yourself kits, and all tie into your home PC or some other central controller display box. Microsoft and Apple, you should both indeed be listening.


    In addition to the diverse communications requirements - the Smart Grid communications network implemented by the Utility will potentially be subject to many demanding communication needs - that the Smart Grid communications network must support, the Utility faces a number of other potential challenges when implementing such a network. Similar to the Internet, the budding technology promises to give two-way communication between utility companies and customers that will allow consumers to shop for the best energy deals as electricity costs fluctuate during the day.

    The technology is beginning to catch hold across worldwide, and utility experts hope the required infrastructure will eventually result in the development of Smart Appliances that don’t merely switch on and off, but automatically hunt for energy bargains. While some parts of the technology are more science fiction than household fact, Utilities officials expect the next generation of infrastructure will be information-driven.

    Utilities experts expect smart grids will acknowledge that the cost to produce energy changes during a day. They also hope the smart grids will reduce peak usage, which is a capacity benchmark that can be costly for energy companies to maintain.

    While the consumer is pacified with the promise of lower utility costs, it is the utility company who will enforce the policies set at the regional, national and global regulators. Thus, if a neighboring system has a shortage of electricity, your appliance might automatically be turned down to compensate; if you have exceeded your monthly daytime quota of electricity, energy-consuming tasks like washing and drying clothes, could be limited to overnight hours. Meters can be monitored remotely, turned off at utility headquarters and can amass large quantities of data to show how people consume energy. Smart Grids will allow them to save money by increasing efficiency, a savings that will be passed down to the customer. For example, instead of getting out a truck and sending an employee to turn on a meter at an apartment, that function could be done remotely by clicking a mouse at utility headquarters.

    Consumers and Utilities may learn some sharp lessons about government intervention: When the government shows up on your door and offers to help you save money, everyone knows that is an contradiction. Government does not function to help people or companies to save money or to be more efficient; rather, it functions to maintain and increase its own power and control over its citizens. No one really knows the real advantages. The bottom line is: How can we be more efficient in our day-to-day operations so our rates don’t have to go up ?

    "Thus, if a neighboring system has a shortage of electricity, your appliance might automatically be turned down to compensate; if you have exceeded your monthly daytime quota of electricity, energy-consuming tasks like washing and drying clothes, could be limited to overnight hours."

    This is only feasible if the utility company controls customer loads directly. As the article states, consumers will never tolerate this, and will only broadly accept retaining control of their own appliances by programming them to respond, or not respond, to energy price changes broadcast by the utility.

    "Meters can be monitored remotely, turned off at utility headquarters and can amass large quantities of data to show how people consume energy."

    Turning off meters electronically to stop service to a customer is only possible if their smart meters are equipped with remotely controlled disconnect electronics by the meter's manufacturer - which more than doubles the cost of the smart meter by the way. Furthermore, in some jurisdictions like Ontario Canada, law prohibits utility companies from disconnecting customers at will, and forces them to go through specific protocols and warnings to customers who say for example stop paying their bills before disconnecting them.

    Finally, many utility companies have had little interest in analyzing the vast amounts of load profile data that will be amassed by residential smart meters. If they did analyze it to say go looking for high peak-demand customers, and then warn those customers they should curtail their consumption, I suspect most consumers would tell their utility company that their private use of electricity is their own business and not the utility company’s as long as it is being paid for.

    This sort of conspiracy theory promoted by Mr. Gomes is a) clearly in error certainly in any OECD nation and b) not in any way helpful to anyone. Without government is anarchy, most likely with a biker eating his dinner from your skull.

    Len, the practice of broadcasting prices to intelligent load controls for residential customers is really a much more complicated version of simple Time-Of-Use billing. TOU billing alone, as it is now rolling out across Ontario, does not require ANY communication with utility prices on a continuous daily basis because the TOU prices are publicized and fixed for months at a time, as are the daily TOU periods as well. At most the TOU pricing and periods might change every 6 or 12 months. So under simple TOU, the programmable timers that already exist on many home appliances will work as is for load shifting to off-peak hours, and there is almost no need for smarter load controls.

    To broadcast energy prices implies real-time or near-real-time prices that can more closely track wholesale generation real-time prices, and are not generally fixed in price level or time periods from day to day. So if today utility companies are rolling out smart metering with the initial plan of using simple TOU billing with fixed prices and fixed TOU periods, chances are they are not equipping smart meters with the extra communication hardware and software to later handle daily price broadcasting. Indeed this is precisely what has happened in Ontario where out of the 5 million plus customers here there are literally millions of “orphaned” smart meters and AMI systems deployed without this price broadcasting capability.

    Some state governments and utilities like in Texas and perhaps California have had the foresight to mandate equipping their smart meters for this future capability. Typically this involves including a Zigbee or other secondary radio in the meter along with room for software upgrades, in addition to the meter’s own AMI network communications hardware and software. But for those utilities that are not doing so, as in Ontario, it begs the question how do they later migrate to broadcasting prices for smarter load controls. Surely they will someday want to if it is being promoted as one of the principal reasons for a smart grid.

    The orphaned-meter utilities really have only 2 choices – bear the huge cost of upgrading all the smart meters in the field by swapping them out, or find another method to communicate prices to residential homes on a 24/7 basis. The answer in my opinion will be using the internet provided the majority of a utility residential customer base is known to use an internet service provider. Using the internet conveniently divorces the smart meter from everything besides its primary function of being used for billing, which I’m sure will pacify utility people terrified of security threats to their AMI networks.

    If I’m right the consumer will need an internet gateway device in their homes to bridge the internet to their smart load controls since I doubt the smart load controls will each bear the higher cost of having an internet connection with all its higher processing and power consumption required to be on-line 24/7. And that my friend spells “PC” (or “smart phone”) for the gateway device, with a Zigbee or similar home automation network transceiver hanging off one of its USB ports, or something like a headphone jack in the case of the smart phone. The HAN transceiver could even become a standard interface option built into PCs and smart phones over time, and it also spells Microsoft and Apple developing and selling new products someday to support it.

    Now here’s the part Len you might like. If my crystal ball comes true down the road and the internet is used as the link from utility to customers for price broadcasting, and all this load control stuff is supported by the Microsofts and Apples and PC/smart-phone manufacturers, it opens up some other doors too. In this scenario an independent local generator company can much more easily adopt your IMEUC market reforms ideas. They simply tie into and sell power to the grid as any other distributed local generator, and presto, the new generator needs only to broadcast its pricing through the internet, optionally limited to as many customers’ home gateway devices as it wants. Of course it assumes the local utility company participates with now much more complex customer billing.

    You're probably right Bob. It seems quite frustrating (to me) that each customer has the perfect consumption measurement device right on their site, the utility meter, but can get no information from it....

    I agree with Bob's most recent comment. Very well expressed. (Also, the article above is also very good, even though my previous post picked at some nits.)

    It's possible in the future we'd have utility for true real-time pricing, but even then it would be most useful for unusual events like brown-out concerns or a momentary "flush" of energy (like a wind gust at a wind farm). These could be communicated with a single bit or two of information, if needed.

    All that's really needed in a meter to accommodate TOU billing is an accurate time clock and enough bins to put the energy draws into during power use. No real-time connection is needed at all! Assuming 15 minute bins, that would mean 4x24= 96 stores instead of the one they have now.

    Even seasonal price adjustments could be accomplished after the fact. Not needed for the basic data collection.


    Even though typical TOU billing will only need hourly bins of energy usage for billing purposes, with TOU prices starting and ending on the clock hours, all state-of-the-art smart meters including those deployed in Ontario already have the internal ability to log as fine as 15-minute interval usage bins. Their internal time clock is also accurately set and maintained by either special “collector meters” that co-ordinate a group of say 500 local smart meters, or by some other AMI network controller.

    The collector meters or AMI network controllers are typically backed up by a battery UPS in case of a regional area power outage. Also, a typical smart meter at each customer node has enough internal non-volatile memory to log weeks of customer TOU data in case its collector meter or AMI network or head end system goes down for some reason.

    So the potential for what you are talking about above is already installed at the smart meter level.

    Under TOU billing systems, the collector meters or network controllers will be collecting logged TOU meter data from all the meters once or twice daily, and then route the combined data back to the utility head end typically through a CATV or DSL land-line modem.

    Agreed, Jim, but such a system (TOU billing) is really a very crude means to try to accomplish what should be the real goals. 1) The system depends on regulators with all the political influence potentials and possibilities for capture of that system, to set prices. Perhaps the system might respond appropriately to future changes in market circumstances, but I wouldn't count on it. 2) A TOU system with annual or semi-annual rate structures is completely incapable of doing a "brownout response" based on real price incentive. 3) No further steps to properly incentivise more modern generation systems, eg. micro-CHP, grid-wise PHEV, smart charging autos from multiple sites, eg. parking lot at work, distributed PV, etc. etc. etc.

    The biggest problem is that a "dumb" TOU implementation spends 80%+ of the capital required for a proper system, but delivers only a very small portion of the potential benefits.

    Len, I agree with what you say as well. I am a fan of IMEUC. But if one can accept "real-time" as being 15 minute intervals (that should be pretty good...) then in theory a different price can be set for each of those intervals on a daily basis. They could be read off the internet. No fancy metering needed (Bob says they are already in place in Ontario.)

    The point I'm trying to make is all this fancy active communication with the smart meter is not needed. All the math can be worked out after the fact. With existing meters!

    The one bugaboo would be the case for a brownout situation or some other emergency such that very high prices are temporarily imposed. How does your house know about this soon enough to be able to do something about it? (If the house is not listening to the internet, that is.) That is why I was saying earlier that only a few bits of information needed to be communicated to the house to let it know what's going on. I have an electric hot water heater that can be turned off remotely due to a brownout situation. So presumably this bit (or bits) are already available as well.

    Jim, using the internet to communicate prices and do any other negotiation under any IMEUC type of market system would depend heavily on your local utility company to participate in real time over the internet. This would imply a major investment by the utility at end in software.

    I sympathize with Len to a large degree because if you do not communicate through the meter and use the internet instead, one ability that is lost for customers is accessing at will any instantaneous power demand readings and real-time cumulative energy data in the meter's memory (for bill tracking in real time). The interesting thing is most AMI networks have the capacity for the utility to request a power demand reading, or retrieve up to the minute energy logs from any customer on demand if say they want to examine a particular customer's meter or the customer's behavior. But normally this is a manual request from someone at the utility head end sitting in front of a computer screen of the meter administration system.

    Some AMI systems I learned have been designed to permit customers to send in a request over the internet to sample their meter data, with the data sent back to them over the internet. Sounds extremely inefficient of course, and I'm sure this approach would choke pretty quickly if thousands of customers were making requests all the same time. At best the data fed back to a customer will have inherent latency and not be true real time, but I suppose it would be OK to view energy log data that is perhaps minutes old, but instantaneous power demand in watts would be meaningless if is more than a few seconds old.

    Thanks for all of the comments. I'll try to respond to a few of the questions and quibbles here, starting with Len Gould.

    The trillion dollar figure is someone else's, not mine. I happen to think a lot of the grid and distribution-related items are worth doing, but they may not be cost-effective, especially if done all at once.

    If prices were available down to the distribution substation level (essentially substation-level markets), then having each appliance manage it's own energy use actually is the simplest, most efficient way to accomplish the task. Having 100,000 appliances negotiate with one another would take too much computing power and it would not necessarily yield a satisfactory result. If substation or feeder or pole transformer capacity is the constraint, put a price on it. Practically speaking, this idea is a ways off - we're going to have enough trouble getting the public to accept dynamic pricing and interval metering.

    The grid operator will become aware of price and demand response by observation. Since adoption is going to be gradual rather than the result of a "big bang", grid operators will have time to learn consumer behavior. If appliances have to report back to the grid operator to confirm what they've done, it will be too expensive on the customer side, it will be considered too invasive by customers, and the cost of computing and communications will overwhelm any possible benefits.

    Next, Jim Beyer:

    Motivation and a case for cost-effectiveness are important. Freezer and refrigerator loads might be worth including in the list, especially if they are large. For anything else, including vampire loads, it's just not worth the time and expense. A better policy-based solution is energy use standards. It will be cheaper to build appliances with little or no vampire load in the first place rather than trying to add or retrofit controls.

    Bob Amorosi:

    Home area networks may catch on. If, as you suggest, consumers want to control more and more appliances by setting preferences from a single console, then HANs are, indeed the right solution and there is no reason consumers should be prohibited from installing them. I think any starting point needs to be more flexible and less proscriptive than assuming a HAN is the basis for controlling loads. An internet connection to each appliance would not be necessary unless the appliance was ordering its own electricity (electric vehicles are an application where this makes sense). Instead, use the internet to send prices to a small wireless radio in each home or commercial building or factory and have the appliances listen for that price.

    One of the really poor decisions made by utilities and their regulators was to not include a KYZ port on each interval meter as is done in the commercial and industrial space. Utilities need the data for billing and research. Customers should be able to get at the data without any involvement on the part of a utility.

    Mr. Gomes:

    Two-way communication is unnecessary - the experts are wrong here. Utilities may be able to impose quotas in some parts of the world, but attempting to do so here absent a national crisis would certainly provoke one. I do think government needs to help sell the Smart Grid if it is, in fact, the national priority they seem to me making it.

    Thanks again for the thoughtful comments. This seems to be a topic of great interest.


    I will freely admit that what I am suggesting is very clumsy. Smarter meters and an integrated information system with the utility is a better way to go. But that would take a lot of money and we aren't even sure what the best strategy should be, A clumsy system using the internet (and not quite real-time) could flesh out the issues with using such a system. All the utility really has to do is provide an accessible web-page or server that provides the rate on demand. (If it only changes every 15 minutes, it needn't be accessed that often.)


    Sadly the cost to implement just about any approach is viewed by many as too high to swallow. Plus no one really believes consumers will embrace real-time prices having been accustomed to fixed regulated ones for so long, so most won't really want to deal with them. The predominant thinking of most consumers is they would want technology to deal with real-time data by "setting it and forgetting it". As Jack Ellis says above too, it's going to be a tough job getting the public just to accept simple TOU billing let alone anything more sophisticated.

    I'll repeat here though that if energy bills escalate faster than inflation as I predict they will, and they become double or triple what they are today in less than 10 years, the "motivation and cases for cost effectiveness" as Jack says are bound to appear in favor of more technology in consumers' hands.

    I am obviously also a fan of Len's IMEUC proposals, but as long as the utilities own their meters, and as long as they view them as sacred to be used primarily for billing purposes and not be given on-demand access to the public, I doubt IMEUC as Len describes it - using the meters for the market communications - will ever see the light of day. Consumers would have to own the meters which would take draconian measures over our utility companies to realize on a large scale. Not likely to happen in my lifetime I’m afraid.


    One can hope. Remember when the phone company owned all the phones?

    Jack: "If prices were available down to the distribution substation level (essentially substation-level markets), then having each appliance manage it's own energy use actually is the simplest," -- An interesting concept. I'll need to chew on that one for a while. ... I gather that the concept is to avoid IMEUC's complexity of having a lot of smart local controllers and two-way communication from them to central by reducing the size of any market to the smallest granule which can have a reason for any price differential from its neighbour, eg. the substation. Would it still deliver the benefits of full market participation of micro-CHP / solar / grid-wise PHEV's ? (storage. load curve levelling, load matching to eg. wind / solar / tidal generation, automatic emergency response etc) Would you really be saving anything given that all modern AMI systems from here on out will likely include the two-way communications necessary for central reading / connect / disconnect on command?

    We get only one chance to do this right..


    I do indeed remember the phone company owning the phones, back in the 1970s I think. The deregulation of the telephone industry was nothing short of revolutionary for consumers. The one small difference was that the phone wasn't used for any sort of billing tool, since any measurement of call duration e.g. for long-distance billing, happened at the central office, not at the consumer's phone.

    Here's a glimmer of hope and some wild dreaming. Smart meters are steadily coming down in price. My first experience with them about 5 years ago they were selling to Ontario utility companies for around $100, and later had come down to less than $80 in bulk volume deals. I was told back then they were headed even lower as eventually all of North America, and many other parts of the world, would eventually be buying into them. Their steadily increasing mass volume production along with competition from only a handful of major manufacturers drooling over the huge business opportunities would drive meter prices down to under $50, perhaps even $40.

    At these price levels what's to prevent consumers from buying their own version of a smart meter that say was much smaller (not the same form factor as the utility meter), with no numeric display, made for indoor use only so as to integrate in the home’s service panel, and had all the necessary communications built in. This consumer version could potentially cost even less than the utility’s meter.

    Modern digital smart meters tend to have accuracies rated at 0.5 percent, and in practice many do better than this. In order to guarantee the consumer’s version of the smart meter takes energy readings that match their utility company’s meter over time, the consumer’s meter can automatically calibrate itself to the utility’s because the utility will be feeding back energy consumption data from its meter to the consumer over the internet. The latter is mandated to every utility company in Ontario to provide the feedback on a daily basis for the previous day’s cumulative energy consumption, including web presentment tools to show us our hourly TOU bins.

    The only big obstacle would be the cost to install the consumer version in existing homes’ service panels. However to the manufacturers of the service panels, it might be a juicy feature added to their products that new home builders could buy into for new homes, or for the consumer market segment that plans to swap out their old panels on existing homes for other reasons.

    It works, Bob, but seems really uslessly redundant. Readings from meters should be available to the customer, else we've got to start asking "what are they hiding"?

    I totally agree it would be technically completely redundant.
    The only way to get consumers access to their utility’s meter data on demand in Ontario is through the daunting task of persuading the Ontario government to force the utilities to permit it. The metering manager of my local utility company told me about 4 years ago that they are only prepared to do what the government legislates them to do, even if they think the idea is a good one, because they are strictly regulated. In addition, the government must either permit them to add charges to our bills to recover any money spent to enable new customer systems, or pay directly for it with grants. He suggested I talk to Ontario’s Ministry of Energy, which I later found was like talking to a brick wall. I suppose if I was instead a large corporation talking to them with the prospect of creating hundreds of new jobs in Ontario somehow, they then probably would have had something to say to me.

    Needs political pressure, Bob. Our problem is we're not very savy in that territory.


    The cost and complexity of trying to individually negotiate with even a modest number of individual nodes would be quite high, and formulating the "optimization" so that it encompasses the universe of likely consumer preferences would be daunting.

    Price is a simple, straightforward coordination mechanism. Developing prices at the substation level would take a bit of thought, but once the method for establishing and moving the price up or down is established, the amount of intelligence required at each node to react to a price or set price is pretty small, and the algorithms become much simpler.

    Moreover, I doubt any of the AMI networks are equipped to deal with large volumes of data from a group of nodes, let alone just a few.


    I'm afraid to say to Len that your doubts are valid ones. Most AMI networks will be handling large volumes of data but not at high data rates, and certainly not at high data rates to large numbers of nodes simultaneously. The network controllers or collector meters are bottlenecks for groups of 500 to 1000 nodes, and are far from the high bandwidth routers we have come to know used in the internet or our office computer networks.

    AMI networks would have to be completely redesigned including new software throughout to handle internet-like fast response performances. Even the meters themselves are limited because the single microcontroller in them must spend most of their (software) time performing real-time power demand and energy consumption calculations, they are purposely limited in their AMI network communications so as not to interrupt this primary function for any great length of time. To have the communications we’re talking about would require a more sophisticated processor (or dual processors, one for metering and one for the communications). Furthermore, it becomes a massive cost to replace all of meters if they are already deployed in the field, which no one wants to swallow.

    I should point out also to everyone that for meters equipped to communicate with a customer, i.e. for a real-time in-home display or demand-response load control, they typically must be equipped with an additional Zigbee or similar auxiliary radio at extra cost to the meter, typically with its own communications processor embedded in it. This is again to avoid placing extra demands on the meter's central processor functions

    At least one meter manufacturer (Elster) has made available their proprietary AMI radio under license third parties to incorporate into an in-home device product (BlueLine Innovations’ in-home display). This approach allows the in-home device to literally become an additional node in the AMI network, but again due to limitations of the AMI network design, it would be limited to one new in-home device per customer and only one. To enable a Home Automation Network in this fashion would require that device to function as a gateway device to a separate HAN network.

    Jack: "I doubt any of the AMI networks are equipped to deal with large volumes of data from a group of nodes" -- probably true Jack, but that simply reinforces my position that present AMI designs are simply a waste of money long-term. It is a brain-dead strategy now to install ANY communication system with less than astate-of-art performance.

    One of the most important points about seeking out solutions that make a difference and are cost effective has been touched on here, but needs much more emphasis. Who can learn and iterate, learn and iterate ... better, Google or the government? More to the point, Google and Apple dueling it out with others attempting to usurp market share, or those historically quick witted and super smart regulators? Oops, smart regulators will have to be invented to give them an active role in a smart grid. I think it is obvious that opening things up to tech savvy innovators is the only way to get worthwhile results. Len needs to decentralize his system to let it be, to let a thousand flowers bloom ... to get around the regulators and politicians. Price signals do have that wonderful subversive quality, once the are wrested out of regulators' hands. It is the right price for a situation that will be negotiated between customers, ancillary services providers (which includes end users) and generators, grid operators, etc. Through millions of iterations the right price for various conditions will become as predictable as the load at 4:00 PM is today.

    Dean: You may be surprised that I agree with you entirely. The only caveate I would offer you is that someone needs to set up and operate the market, which is IMHO the only purpose of present regulators.

    I wonder at what point battery power becomes cheap enough that homes will simply charge batteries during off-peak hours to use the power as they wish during peak load times?

    Really it's two merging trendlines isn't it? Increasing electrical cost (which, in Ontario is still only half of New York state and about a third of California's) and decreasing battery cost.

    Paul Stevens

    "I wonder at what point battery power becomes cheap enough that homes will simply charge batteries during off-peak hours to use the power as they wish during peak load times? "

    The answer to your question depends largely on the size of average differential between on-peak and off-peak prices. Here's some slide rule math that illustrates how you might think about it.

    The annualized cost of a battery is somewhere around 15% of its initial cost. Let's assume the best case, in which it can discharge for 6 hours per day, every day of the year, or about 2200 hours total. At the current $1500/kW cost for sodium sulfur batteries, savings would have to amount to about $225/kW/year to recover the cost of the batteries. That requires a 10 cent per kWh differential between average on- and off-peak energy costs - except that spreads in North America are well below that level. At $600/kW installed cost, the required differential would be closer to 4 cents, and that might be feasible based on today's wholesale prices, but battery prices are still far above $600..

    I once spoke with an analyst who surmised that much peak shaving could be accomplished with smart HVAC systems. Instead of using batteries (for example) an office building makes ice at night for use in cooling the building during the day. This is a less universal solution than a battery pack, but since cooling uses such a large part of electricity production anyway (especially at peak times), such a directed solution still has merit.

    Our little hill-billy electric co-op puts out a monthly magazine. The issue just arrived has a story about smart meters. The story is mostly devoted to telling the cost of various available readout devices and whether they can be installed by an individual (wireless) or need an electrician's services.

    I found it interesting that they found people who used readouts installed on a hallway wall or kitchen counter reduced their consumption by 1 to 3 percent. After a couple months the novelty wore off and they seldom looked at them - but they continued to use less electricity. I don't know if those with readouts were typical of the general population.

    Until I became an electric Co-op member I had no contact with my power companies. They sent me electricy and and I sent them a monthly check.

    Now i usually attend an annual meeting - actually most people call it a picnic with kids running everywhere. Everyone gets as much fried chicken, baked beans, rolls,cole slaw. ice cream and pop as they care to eat. And there is live entertainment in a pavilion in a county fair park. Anyone interested can observe, listen to and vote at the business meeting.