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Smart Grid, Smart Utility

The intelligent-grid vision is becoming clearer as utilities take incremental steps toward a brighter future.

Fortnightly Magazine - February 2007

and load patterns, and both have implications for the company’s vision of the intelligent grid.

“The smart grid will result in more efficient use of energy, more effective use of renewables and even will assist a transition toward electric transportation,” Lamb says. “These things will lower society’s carbon footprint, and if that is a driving force then you must also include fuel sources and the consumer’s behavior as you plan the intelligent grid.”

These considerations have immediate and significant implications for Xcel Energy, which has more windpower in its service territory than all but a handful of electric utilities, and a growing number of solar-electric installations in its Southwestern U.S. markets. And in December 2006 the governor of Minnesota—where Xcel is headquartered—set a goal to increase the contribution of renewable energy to 25 percent of the state’s electricity consumption by 2025, with “financial penalties” for utilities that fall short. Accordingly, Xcel’s smart-grid plans include concepts for effectively integrating renewable electricity, maximizing its value on the system, and giving customers better information and options for choosing renewable energy sources.

Developing a clear and comprehensive vision of the intelligent grid is particularly important, Lamb says, as the industry moves into a new phase of infrastructure investment. “If you can take the smart grid to the next level, you can deliver millions or billions of dollars of savings in transmission and generation investments, as well as the environmental impact that goes with them,” he says.

Particularly as utilities face the prospect of mandatory carbon constraints, a power grid that is intelligent from end-to-end will allow electricity prices to reflect the environmental costs of a given kilowatt of power. “I don’t see how the industry can ignore the fuel source in the smart grid, because ultimately that will drive investments and the choices consumers make,” Lamb says.

Indeed, for the industry as a whole, environmental and energy resource considerations might prove to be as important in driving the smart grid as any other motivating factor, including reliability and time-of-use pricing. “Running the grid more efficiently will pay dividends as it relates to generation and environmental costs,” says Valocchi of IBM. “Those issues are top of mind for utility executives, and the intelligent grid is an important part of managing the entire energy value chain.”

Education Mandate

Building the intelligent grid might turn out to be the utility industry’s most important challenge in the 21st century, simply because success in so many other areas depends on an intelligent electric power system. And a prerequisite for resolving this challenge is for individual utilities and the industry as a whole to clarify the intelligent grid vision, and describe that vision effectively to customers and regulators.

Such clarity might prove difficult to achieve, from a technical perspective. “The intelligent grid isn’t one thing,” says Von Dollen of EPRI. “Every company will have a different intelligent grid, shaped by the drivers of the geography, the company, and the state’s regulatory structure.” Smart-metering developments in California began with the principle that time-of-use metering would bring benefits to ratepayers and society as a