How smart should the smart grid be?

Chris Bronk is a research fellow at Rice University’s Baker Institute for Public Policy and an adjunct instructor of computer science at Rice.

Although the big energy issue during the 2008 presidential election was the debate over clean coal, the biggest development from the Obama administration's Energy Department has been its smart-grid initiative for the electricity industry.

The economic stimulus law set aside some $11 billion for smart-grid technologies, nearly double the money for any other energy initiative and roughly a sixth of the stimulus package's energy component. The smart grid was a shovel-ready project, and since the passage of the act, millions of U.S. households have seen a shiny new digital power meter show up on their houses.

The smart grid is supposed to make the electricity grid more intelligent by incorporating information technology. Basically, we are converting our 20^th-century grid from a broadcast model of electricity delivery to a two-way communication system through which electricity is produced and distributed more efficiently. At least, that’s the rhetoric.

Here’s how I see it. The new meters allow your electrical utility to charge prices based on demand in a more fine-grained manner than before. Usually, we sign up for month-to-month pricing of our electricity or lock in a rate if we don’t want to play the market. Every now and again, the meter reader comes by and sees how much electricity each of us uses, passes along that information, and we get a bill.

The smart meter allows utilities to store data on how much electricity we consume and when, down to the second. That means the once-a-month meter guy pricing model — and his job — will go right out the window, which is both good and bad. The power company could charge more at peak times, such as late afternoon and early evening when we jack up the air conditioning and flip on the TV. Also, our appliances could potentially talk to the power company and turn themselves down or off to avoid brownouts.

The big positive is that the smart grid has the potential to be truly green IT. As heavily regulated producers and distributors, most power companies increase their profits on volume. The more electricity they sell, the more they take to the bank, depending how much it costs to supply the electricity. And there’s the rub. The more electricity the power producers supply, the more coal, natural gas and other fossil fuels they must burn. More fossil fuel burning equals more greenhouse gases, global warming and hungry polar bears. So, if done right, the smart grid could allow the utilities to remain profitable while supplying us with less electricity. That’s smart.

Of course, that end-state is some distance from here. The utilities have plugged in the meters and can bill us creatively, but we could also creatively bill ourselves. As expected, the biggest concern with the smart grid is keeping the system secure from outside tampering. Here in Houston, I’d be thrilled to have an electric bill about one-tenth of what mine is at this time of year. That provides an incentive to hack my meter and have the local utility believe that I set my air conditioning at 90 degrees and have about as many appliances as the average Amish family.

The government will have to establish the plans and policy to deal with customers smart enough to figure out how to hack their piece of the grid. Well, that would be the smart thing to do, at least.