What exactly is a Smart Grid?

2009 is turning into the year of the smart grid. Company press releases, government announcements and new subsidy programmes for smart grid technologies are appearing everywhere.

Many smart grid companies are focused on the transfer of information between households and utilities via wireless networks and the Internet. Essentially providing instant information on energy consumption to both the user and the provider of electricity. The idea of the smart grid is to modernize the electricity industry by overlaying digital communications onto the grid.

Smart meters in a person’s home, for example, can communicate energy usage to utilities in near real time. The utility will be able to more efficiently manage the electricity supply and potentially allow a consumer to take advantage of cheaper rates. For example, start-up company EnergyHub’s smart meter is a digital display that sits on your kitchen counter to give consumers real-time information and control over their energy usage, appliance by appliance.

Last year, American Electric Power chose IBM to be the systems integrator for its gridSmart initiative, which is designed to upgrade the distribution grid to better handle distributed power generation, storage, and efficiency programs.

This quarter has seen a number of announcements between energy management software companies and telephone companies who will benefit from increased data traffic on communication networks. In the United States, AT&T and SmartSynch (smart meters, comms, data management) announced a new smart grid solution that combines a suite of service plans from AT&T for machine to machine communications with SmartSynch’s smart grid solutions already deployed across the US.

SmartSynch solutions allow utilities to retrieve daily load profile and power quality data for commercial and industrial customers.

Much of the hardware supporting the backbone of the Internet is provided by Cisco Systems. Last week Cisco announced that they are investing into networking technology that will serve as the platform of a smart, more secure energy grid. Cisco estimates the “communications portion” of the smart grid to be worth $20 billion annually.  The smart grid “network” could be 100 or 1,000 times larger than the Internet as some homes have Internet access and some don’t. Since all homes in the US have electricity access, all of those homes could potentially be connected to the smart grid.

Even though many vendors expect a lot of money to be spent on modernizing the grid, smart grid technology is for the most part still in the testing phase at utility-sponsored trials. Cisco’s position is that the communications over the grid should be done using IP (Internet Protocol) in conjunction with existing industry protocols and standards.

Not all smart-meter companies use IP to communicate information and the utility and IT industries are still defining a number of different standards. For example, the Ambient Smart Grid™ communications solution is a modular network overlaid on the medium-voltage and low-voltage segments of the power distribution system allowing real-time insight into the operations of the electrical distribution grid while supporting any IP-based application. Ambient provides a communications platform that enables data from residential and commercial smart meters, appliances and other applications to be transported via IP-based technologies over a utility’s smart grid system.

The U.S. Department of Energy plans to distribute more than $3.3 billion in smart-grid technology development grants and an additional $615 million for smart grid storage, monitoring and technology viability, as part of the American Recovery and Reinvestment Act. Equipment is being developed from a raft of smart-grid start-up companies as well as IT companies, including IBM, Cisco, and Intel, looking for more revenue in the utility industry.

In June, the Institute of Electrical and Electronics Engineers (IEEE) will convene its first meeting to discuss what interoperability standards are required for smart-grid technologies. It will be held at Intel’s headquarters in Santa Clara, Calif., and bring together representatives from the IT, communications, and power industries.

Even the management consulting firms are joining the smart grid movement. In March, Accenture formed the Accenture Intelligent City Network designed to bring together city authorities and utilities who are committed to deploying smart electric grids.

The newly-formed network aims to encourage executives and leaders to share their experiences, challenges and advantages of smart-grid technology. Initial members include Xcel Energy, East China Grid, Russian Interregional Distribution Grid Company of Centre and Dutch utility Alliander.

In March, the mayor of Miami together with utility Florida Power & Light (FPL) announced a smart grid intiative called Energy Smart Miami that will roll out 1 million wireless smart meters to every home and most businesses in Dade County. Miami mayor Manny Diaz proposes to use federal economic stimulus funds to help spur the $200-million investment in “Smart Grid” technology and renewable energy over the next two years. General Electric (GE ) is supply the meters, Cisco the network and Silver Springs the communications.

Smart grids do not appear related to the heavy infrastructure upgrades that are required to allow transmission lines to more efficiently transport electricity produced by wind and solar farms to the cities where the electricity will be consumed.

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