The Smart Grid – The Limited Vision

There is significant fascination in the utility industry today about the future of the “smart grid’.


The expansive electric utility view of the smart grid is a means to know in real-time, in detail, how electricity is being distributed and consumed in their networks. Their view also includes some ability to use the smart grid, either through direct controls or through real-time pricing changes, to manage consumption to limit peak demand for generating capacity. To electric utilities, the smart grid concept includes functions like automated meter reading, distribution automation, and remote service connection and disconnection. Their concept also includes load management and demand response management. The overall purpose of the smart grid is to deliver a more reliable supply of electricity at lower cost – both the average cost and the marginal cost of peak demand.

An underlying element of the utility vision is that they have to establish a communications network to communicate with their infrastructure and with their customer end points (meters). A communications network is essential to the concept of the smart grid because monitoring, management and control of the network elements must happen in real-time. Almost all discussions about building the smart grid inherently include the concept of building a utility-specific communications network as its foundation (such as noted in this blog on Electricity 2.0). Most of these envisioned communications networks are proprietary, whether communicating over the existing power lines that the utilities already have deployed, or constructing some proprietary wireless network overlaid on that distribution infrastructure.

This makes electric utilities, along with the US military, among the last industries in this country that believe that they have to build their own proprietary communications network. They can not imagine any other way to reliably reach the large number of business and residential customers that they serve. Utilities are pursuing this proprietary vision largely because of their monopoly history. They believe that they have to control their entire infrastructure. For example, utilities have been grandfathered with radio frequency licenses from the FCC over which they have operated their own wireless voice communications networks for decades. The utilities believe that the only way to achieve the functionality, reliability, capacity and security that they need is to build, own and operate their own communications network.

Most plans for the smart grid do not currently envision using any of this country’s existing, ubiquitous communications networks. The telephone network is a well-known, technically mature resource that covers almost literally the entire country. The more recently deployed cellular communications networks have almost equally universal coverage, although the technologies continue to evolve. But the utilities are mostly overlooking the advantages of the existing, broadly deployed, broadly supported, low cost nationwide data communications network – the Internet.

If a smart grid is to be built that reaches to every customer meter, and to the power-consuming equipment behind the meter, it will be built on the Internet. The Internet is already broadly deployed, and it is expanding its reach into more places and to more devices every day. The Internet is already the backbone communications network for a broad range of commercial communications, whether conducting financial transactions, supporting on-line retailing, operating an integrated supply chain, or conveying medical information. The costs of adding Internet connectivity to devices, appliances, or machines is continuing to drop, and that connectivity is being built in. Utilities are wasting their money chasing the broad deployment, general adoption, and low cost of the Internet.

Load management and demand control will never operate over a proprietary utility network as envisioned by the electric utilities. Customers are not going to invest to communicate data through a smart electric meter. Particularly in commercial and industrial facilities, and increasingly even in residences, demand management of energy consuming devices is already being conducted by existing intelligent systems – industrial control systems, building automation systems, energy management systems, and even smart thermostats. All of these systems are being connected to the Internet, to the extent that they are not already. Customers will not tolerate having to connect to another network to take input from the utility, whether it is pricing or demand response requests. They will demand that information to come over the data communications network that they already support – the Internet.

Utilities may still pursue the misguided vision of building their own communications network to control their own power distribution infrastructure. They may also extend it all the way to their smart meters. Those smart meters will be the end points of any utility communications network, however, not a portal to the energy consuming equipment of their customers. The only real reason that utilities will install “smart” meters (for AMR or AMI) is so that they can track usage in real-time to assure compliance with pricing and demand response programs intended to limit peak demand. That function could be performed more easily and inexpensively over the Internet, but that will be up to the electric utilities and their regulators. The utilities’ customers increasingly conduct their data communications over the Internet, and they will require utilities to communicate with them that way too.

There may be a “smart grid” over which the utilities do a better job of managing their power distribution network. But it will never be a mechanism for communicating with their customers. That network already exists.