21st-Century Smart Grids Update U.S. Electric Grid

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1 www. Govtech.com 21st-Century Smart Grids Update U.S. Electric Grid - p. 1 21st-Century Smart Grids Update U.S. Electric Grid Leonard Scott January 9, 2009

2 www. Govtech.com 21st-Century Smart Grids Update U.S. Electric Grid - p. 2

3 www. Govtech.com 21st-Century Smart Grids Update U.S. Electric Grid - p. 3 One of the great achievements of the 20th century was the creation and implementation of the U.S. electric grid. The deployment was so successful that for decades most users didn't think twice about electricity. Because electricity is inexpensive and available on demand, it's widely regarded as a driver of economic productivity and prosperity. Most experts have a different view of the near future. Peak nationwide demand - 757,000 Mw - nearly taps out supply. And here's the bad news: Demand is expected to grow by 19 percent in the next decade, while capacity is predicted to grow by only 6 percent. Distribution is as much a part of the problem as generation - the wires and substations that connect electrical generators with consumers are also at or near capacity. The coming imbalance is anticipated to significantly stress the power grid. With fuel prices and other pricing pressures, electricity bills are expected to increase. Among power experts, there's a consensus that continuing business as usual - building more plants and stringing more wires - isn't really an option. Because power-generating capacity must meet peak demand, new capacity may sit idly except for certain times of the year, which reduces return on investment. Lack of transmission and substation capacity may prevent the new plants' electricity from reaching consumers. And experts agree it'd take too long to build new plants and transmission lines - if they could be built at all. The Smart Grid is envisioned as a way to generate and distribute electricity for the rest of this century. The next-generation power grid would improve upon the weaknesses of today's grid, which are that there are few ways to coordinate production, get consumer feedback and affect production. The Smart Grid relies on two-way communication to do these things and more. Power industry analysts also believe the Smart Grid is the only way to effectively integrate new power generation technologies, such as wind and solar, into the grid while matching supply to demand. Outmoded Infrastructure Today's electrical grid is a testament to the durability of 20th-century infrastructure. Its operation is fairly simple and straightforward. Electricity is generated, then transmitted and distributed to wholesale, business and retail users. This straightforward design has been scaled up to be the largest power system in the world. With more than 800,000 MW of installed capacity, America has more than twice the generating capacity of China, the next largest producer. According to the U.S. Energy Information Administration, the electricity generated in America in 2006 (the latest information available as of press time) comes from many sources, but is primarily carbon-based. But a 21st-century U.S. economy can't be built on a 20th-century electric grid. There are many signs that the existing grid can't lead us for the rest of this century: The outmoded infrastructure - much of which dates back to the 1930s - can cause transmission congestion, resulting in unreliable and inefficient operation. The feedback loop between users and generators is crude and often nonexistent. According to the National Energy Technology Laboratory, part of the U.S.

4 www. Govtech.com 21st-Century Smart Grids Update U.S. Electric Grid - p. 4 Department of Energy's national laboratory system, 60 percent of transmission systems have supervisory control and data acquisition (SCADA) systems, a control and management solution that sends data from sensors to a central computer. However, only 2 percent of the local distribution network has SCADA. The grid is designed to ensure that supply meets demand, even at peak consumption. The result is too many power plants, some of which are used as little as a few hours per year. This helps to ensure that there's enough electricity, but unused electricity is lost and power generation facilities are very expensive. Even so, blackouts and power interruptions occur, with an estimated cost to the U.S. economy in excess of $79 billion per year, according to the National Energy Technology Laboratory. Electric generating costs are anticipated to rise as other economies compete for carbon resources that are used primarily to generate the U.S. electrical supply. More than two-thirds of U.S. electricity is generated from nonrenewable sources. Demand for electricity is rising and the electrical grid isn't keeping pace. Many U.S. regions see generation shortages on the 10-year horizon, yet there only are limited plans to expand generation and transmission facilities. The Energy Information Administration estimates that by 2030, U.S. electricity consumption will increase by 43 percent from the 2005 level, even when accounting for advances in energy efficiency. Using the existing infrastructure, additional power plants will require more transmission capabilities. With long-term rising prices for carbon-based fuels, alternative and renewable sources like wind and photovoltaic look more attractive, but many of them aren't good solutions for the current grid. Electricity from these sources is unreliable and can't be stored for use as needed. For example, wind generates more or less power according to the weather. Additional management will be needed to make these energy sources viable. Alternative energy must first be available for real-time usage by the grid. Then, the excess capacity must be able to flow to battery storage or an energy production plant, such as hydrogen generation and storage, for use when the alternate sources aren't available. With strong demand outpacing supply and the potential for increased costs as emerging economies ramp up their consumption of utilities, energy companies and state and local governments have begun to address the issue. Controlling Consumption There are numerous proposals for meeting 21st-century electricity demands. Most of them aim to improve the "intelligence" of the existing infrastructure. Stuffing power down one end of the line to ensure that there's enough to meet demand at the other end won't work much longer. The goal is to generate exactly as much power as needed, transmit and distribute that electricity with little or no loss, and adjust demand if it exceeds available supply. This requires more monitoring and greater levels of control - more intelligence.

5 www. Govtech.com 21st-Century Smart Grids Update U.S. Electric Grid - p. 5 A smart grid builds on today's existing grid infrastructure by incorporating cuttingedge power engineering, sophisticated sensing and monitoring technology, IT and communications to provide better grid performance. With a smarter, two-way communications mechanism between a power consumer and provider, both parties get more control over consumption: The consumer's electrical meter is connected into a wireless network and AMI, communicating real-time usage information between producer and consumer. The wireless network also connects to several appliances in the house, like the thermostat, water heater and dishwasher. Consumers can choose to have these appliances reduce demand or operate during off-peak demand in exchange for cheaper power. Consumer power generation, such as home-installed wind turbines or solar panels, can be intelligently tied back into the grid. The utility has a complete picture of power usage in its area, including generation and demand requirements. Additional supply - exactly the amount needed - can be brought online to meet demand. The Smart Grid will have more power generation and transmission options. This would greatly reduce or eliminate blackouts and cascading failures. Faster, more accurate meter reading and billing. Manual meter reading is eliminated, therefore reducing cost. The overall goal is to coordinate demand and supply in ways previously not possible. Smart Grid is also positioned to take advantage of new technologies, such as distributed generation, solar and wind energy, smart metering, lighting management systems, distribution automation and many more. The utility grid needs to change from a centralized generation and distribution model to a more distributed and diverse one. The Smart Grid will let utilities move electricity around the system as efficiently and economically as possible. Building the Smart Grid The Federal Smart Grid Task Force was recently established under Title XIII of the Energy Independence and Security Act of 2007 to coordinate Smart Grid activities. The effort is under way to improve our nation's electrical grid, but shortfalls are anticipated. Building the Smart Grid is expected to be a massive undertaking requiring huge investment. According to the U.S. Department of Energy, implementing the Smart Grid is expected to cost $165 billion over 20 years. There are significant capital and regulatory, and to a lesser extent, technology issues that must be resolved before the Smart Grid is completed. For example, there's little motivation for existing utilities and public utilities commissions to change. There are tangible benefits to getting started now, and the first step is upgrading the communications infrastructure. Most utilities find it difficult to justify installing a communications infrastructure for a single application (e.g., meter reading). Because of this, a utility typically must identify several applications that will use the same

6 www. Govtech.com 21st-Century Smart Grids Update U.S. Electric Grid - p. 6 communications infrastructure - for example, reading a meter, monitoring power quality, remote connection and disconnection of customers, enabling demand response, etc. Ideally the communications infrastructure won't support near-term applications and unanticipated applications that arise in the future. Regulatory or legislative actions can also drive utilities to implement pieces of a Smart Grid puzzle. Each utility has a unique set of business, regulatory and legislative drivers that guide its investments. This means that each utility will take a different path in creating its Smart Grid and that different utilities will create Smart Grids at different rates of progress. Municipally owned utilities that have installed AMI/AMR are seeing real benefits and solid returns on investment. Anderson, Ind.; Burbank, Calif.; and Corpus Christi, Texas, use Tropos MetroMesh routers as part of an AMR/AMI solution, allowing them to shift from unconnected mechanical utility meters by linking digital units wirelessly to the network - saving time, effort and cost, while improving service. Once the infrastructure is in place, the cities employed them for many other uses. Enabling Demand Response Demand response is a system that conveys the true cost of power, while simultaneously enabling a consumer reaction. Electrical costs can vary drastically during a 24-hour period. Generation plants of varying efficiency are used to deliver power to consumers, and those used to meet peak demand are typically the most expensive. Demand response programs use rates, incentives and other strategies to help manage electricity usage during periods of peak demand, which lowers cost and electrical bills, and reduces the frequency of blackouts due to insufficient capacity. A prerequisite to the provision of dynamic pricing is the installation of AMI. Depending on features and geography, AMI investment can cost $100 to $200 per meter, but much of that cost can be recovered through operational benefits, such as elimination of manual meter reading costs, faster outage detection and resolution, improved customer service, better management of customer connects and disconnects, and improved distribution management. There's compelling evidence that demand response works. The California Energy Commission found that customers will reduce their demand by 5.7 percent, and the Federal Energy Regulatory Commission estimates that demand response can decrease peak demand by 3 percent to 7 percent, depending on the region. Progress Energy Florida has used demand response to manage customer loads, reducing them by as much as 2,000 MW. Wireless Infrastructure To achieve the full potential of Smart Grid, a communications network must be installed that lets the existing power distribution grid monitor and measure real-time usage, visualize network performance, and create an infrastructure that engages everyone differently - from system operators to customers. The network must be able to reach

7 www. Govtech.com 21st-Century Smart Grids Update U.S. Electric Grid - p. 7 every point on the Smart Grid, provide adequate bandwidth and performance, and be deployed cost effectively. A metro-scale wireless broadband network is an outstanding technology for connecting electrical consumers into the Smart Grid. Corpus Christi worked with Tropos Networks, a provider of municipal broadband wireless networks, for its wireless network. Tropos MetroMesh routers are operating in more than 500 cities worldwide, including cities that are upgrading their electrical infrastructure. The entire wireless system is based on standards-based Wi-Fi. This dramatically reduces customer support issues, while delivering true broadband speeds - up to 6 megabits per second. Tropos routers automatically adapt and adjust to constantly changing conditions, providing optimal throughput without manual adjustment. MetroMesh wireless broadband is less expensive to operate and faster than cellular, and unlike broadband over power line (BPL), MetroMesh routers can operate from batteries or solar power, keeping the network alive when the power is out. However, there are situations in which BPL is an appropriate solution, like networking over long distances, and standards-based MetroMesh routers can easily connect with them. MetroMesh networks are easily installed. Corpus Christi installed its network, covering 147 square miles, in 18 months, and the city expects a net savings of $30 million over the next 20 years with its AMR/AMI system. Smaller installations, such as one in Rock Hill, S.C., took only a few weeks. In these cities, and many others, the metro-scale wireless network provides a secure infrastructure for citywide services. Once in place as a cost-effective backbone for AMI, a metro-scale broadband network is also available for: Mobile Public Safety: Providing public safety fieldworkers with timely access to the information they need can reduce crime and save lives. Video Surveillance: Cameras are a cost-effective alternative to adding additional personnel, such as police officers, firefighters, lifeguards and park rangers, for extending security coverage. Mobile Public Workers: Extending office IT resources to the field improves worker efficiency, lowers cost and raises citizen satisfaction. A broadband wireless network is the first step in tomorrow's utility infrastructure - the Smart Grid. A parallel analogy is when electricity was first installed to power streetlights in the late 19th and early 20th century. For this single use, the installation of the lines was very expensive. But once the electrical system was in place, it created an environment for many other uses, ultimately driving public innovation and economic progress.