Not so long ago, electric utilities generated and sold electricity and customers consumed it. The customers paid the same kilowatt-per-hour price for the electricity, regardless of the time of day or the time of year. The utilities had no idea what the homeowners used the power for or when they used it. Their meters measured only total consumption. For decades, the system worked well.
But as homeowners began to acquire more electronic equipment and the majority in most service areas installed central air conditioning, the utilities came to dread days when the temperature topped 100 degrees, the humidity was off the charts and everyone sought relief by cranking up the air conditioning to the max.
To meet their peak-load demand during a summer’s 100 unbearably hottest hours, the utilities bought electricity from their competitors at a premium price or ran their own peak-load generators, which are highly polluting and expensive to operate. Compared with conventional generating equipment, peak-load generators are about eight to 10 times as costly to run.
The peak-load problem could be solved if utilities had a way to encourage customers to use less electricity on the hottest days, and if the customers knew in real time what the power was costing them on the hottest days as well as during off-peak periods.
The solution has been the “smart grid,” a digital two-way communication system between utilities and customers. In 2003, installation of the first smart grid began in Austin, where the green building movement began in the early 1990s. It took Austin Energy five years to complete the project. Today, many electric utilities around the country are planning or installing a smart-grid system.
How does a smart grid work? In each utility’s smart grid, every household has a “smart meter” outside and a display of consumption information inside. Depending on the system, a household can follow its consumption online in real time or within a few hours, or on a digital-display dashboard. The consumption information conveyed to customers can be extensive. At a minimum, it includes the amount of electricity being consumed, its cost per kilowatt hour, and the household’s accumulating total in the billing period. The information can also include the household’s accumulating electricity expenditure for the year and the size of the household’s carbon footprint for the billing period, the year or both. Pilot studies have shown that when households can follow their electricity consumption and its cost in real time, rather than receiving a bill weeks after consumption, they tend to use 5 to 15 percent less power.