Fix the Grid, Now

Power to the People: 7 Ways to Fix the Grid, Now
By Brendan I. Koerner 03.23.09

Photo: James Day 7 Ways to Fix the Grid, Now:
Generate Electricity Everywhere
Deliver Clean Energy to Distant Cities
Store Power in Super Batteries
Monitor the Electrons in Real Time
Trade Electricity Like Pork Bellies
Think Negawatts, Not Megawatts
Make Conservation Simple (and Easy)

Filthy coal-fired power plants spew carbon into the air. A mish-mash of 9,200 generators streams vital electrons along 300,000 miles of aging, inefficient transmission lines and one untrimmed tree in the wrong place could plunge a quarter of the country into darkness. This is our electric grid. A whopping 40 percent of all the energy used in the US—be it oil, gas, wind, or solar—is converted into electrons that travel over these wires. Any attempt at energy reform must begin here.

But this keystone of our 21st-century economy has yet to advance much beyond its 19th-century roots. Considering how wasteful, unresponsive, and just plain dumb the grid is, it isn't surprising that outages—which have been increasing steadily over the past quarter century—cost us $150 billion a year. The real shock is that the damn thing works at all.

Now consider what we will ask the grid to handle in the near future: Demand for electricity is expected to increase by as much as 40 percent in the next two decades—more than twice the population growth rate. To meet that need, we will have to generate an additional 214 gigawatts, a feat that would require the construction of more than 357 large coal plants. We also want to plug in dozens, if not hundreds, of gigawatts of wind and solar power harvested from the most remote corners of the country. And we will want to recharge millions of electric vehicles every night, without fail.

That is why we must fix the grid—reinvent it to be reliable, efficient, responsive, and smart. Washington is already on the case: President Obama has called a new energy agenda "absolutely critical to our economic future," and his stimulus package directs more than $40 billion toward that goal—the largest single infusion of government capital to the energy sector in US history, more than half of which will go to grid-related projects. In the short term, this bonanza aims simply to create jobs. But in the long term, it lays the groundwork for the grid of the future. (About $400 million will go to fund ARPA-E, a sort of Darpa for energy research.) And this is just the beginning: Congress is considering additional legislation in the hope of remaking our energy infrastructure.

Private enterprise is on board as well. Just take a spin through General Electric's Smart Grid Lab in Niskayuna, New York, which will simulate an entire electric system—complete with the kind of state-of-the-art meters, software, and communication tech that will enable a smarter grid. Or check out Google's new PowerMeter, a Web app designed to give consumers instant information about their energy usage.

But technology alone won't solve this mess, because fixing the grid is not a technology problem—it's a system problem on the broadest scale. Political gridlock, broken markets, and shortsighted planning have created a slew of bottlenecks that can't be solved with a bunch of smart meters and fancy routers.

Here, we show how utilities and businesses have begun to tackle those obstacles—from installing new transmission lines to empowering consumers. If we're serious about remaking our energy infrastructure, we'll need to encourage these kinds of fixes and replace our current system of misplaced incentives. Right now, that system encourages everyone involved—customers, utilities, and private industry—to neglect the grid. We have to give those stakeholders new reasons to turn on, engage, and transform.

Go ahead, blame Edison. He's the guy who invented the business model that got us into this mess. Edison Electric Light, founded in 1880, was a vertically integrated monopoly that controlled everything from generation to distribution. (It even owned the bulbs in customers' homes.) As utilities sprouted across the country, they saw no reason to deviate from Edison's successful blueprint.

For its first century, then, the electricity industry was a simple affair. Most states anointed a single utility to provide all the power to its citizens. These utilities owned the plants that generated the electricity, the transmission lines that carried it to substations, and the wires that distributed it to customers. When more power was needed, they simply built another coal-fired plant and spliced it onto the grid. Rates had to be approved by a public-service commission, but otherwise the utilities were autonomous. (They linked their systems to neighboring grids, but mostly for backup.) Electricity was inexpensive and abundant, and the system's reliability was the envy of the world.

What it wasn't? Efficient. Since the utilities had a captive market and seemingly unlimited access to cheap fossil fuels, they had no incentive to upgrade their leaky old plants. No one complained as long as energy was seen as plentiful and harmless. Then came the fuel crisis of the 1970s, along with the rise of environmentalism. In 1978, Congress began chipping away at the utilities' dominance by forcing them to buy electricity from independent generation companies that met efficiency goals. Fourteen years later, the government went much further, ordering the utilities to open their transmission lines to all comers.

The result was utter chaos. Many utilities got out of the generation business and morphed into middlemen, shopping for the cheapest power—often from areas with low labor costs and lax environmental oversight—and transporting it hundreds, even thousands, of miles to their customers. This meant using the links between grids, which hadn't been designed to accommodate such heavy traffic. The grids of distant states thus became closely intertwined, so that an outage in one rural county could affect millions of far-flung customers.

Though power companies were demanding more from the grid, they had no incentive to upgrade it. Every penny a utility spent on grid improvement would potentially benefit plants owned by rivals. And states that exported cheap energy resisted plans for costly new transmission projects, fearing they would lead to higher in-state rates—and angry voters.

As a consequence, the grid has fallen into disrepair, with few major efforts to fix it. Today, utilities allocate just 2 percent of revenue to research. "For God's sake, we contribute less to R&D than the pet food industry does," says Jeffrey Byron of the California Energy Commission. So the grid remains hobbled by unreliable electromechanical switches and analog controllers. During the early minutes of the Northeast blackout of 2003, the Ohio utility whose damaged hardware started the cascade couldn't even monitor its own wires; employees had to phone a regional overseer and beg for updates. By that time, it was too late.

Regulators, meanwhile, have done a terrible job of mandating grid upgrades. Maybe that's because nobody is really in charge. The industry-run North American Electric Reliability Council appoints eight regional agencies to manage grid standards, but they clash with state agencies, which constantly angle for more authority. Adding to the muddle are the quasi-governmental independent system operators and the regional organizations responsible for ensuring open access to transmission lines. Meanwhile, the Federal Energy Regulatory Commission, created in 1977 to supervise regional and national electricity sales, has proven inept at mediating interstate disputes. This thicket of regulation and competing interests strangles any ambitious initiative. As a result, despite ever-increasing electricity demand, fewer than 700 miles of interstate transmission lines have been built since 2000.

To fix the grid, then, we don't need another layer of oversight. We need to tweak the system so that companies are rewarded—not punished—for investing in the grid. Take the case of Duke Energy. Like most utilities, the North Carolina company is not known for its environmentalism. (It has been accused of flouting the Clean Air Act, for instance.) But in 2006, Duke announced its Utility of the Future initiative. This billion-dollar program is designed to smarten up Duke's portion of the grid by deploying customer meters and network-level gizmos that facilitate speedy, two-way communication. It's exactly the sort of upgrade that will help make the grid stable enough to handle wind turbines and plug-in hybrids.

How did the giant utility come around to embracing the smart grid? Probably not out of the goodness of its corporate heart. The costs of building new generation facilities—and the tumbling prices of plug-and-play gadgets—likely made raising the grid's IQ a more efficient way to improve Duke's long-term prospects. Look at the company's recent push toward IP-based open standards for all its grid hardware. Open standards will help operators communicate with one another regardless of utility—turning the grid into an Internet-like ecosystem rather than a scattered network of proprietary islands. But there may be another reason for Duke to become an evangelist of the approach: Open standards would make it easier for the large utility to gobble up and incorporate smaller rivals, since their systems could be integrated with minimal effort.

Duke isn't the only utility to grasp the financial upside of smart-grid projects. Minneapolis-based Xcel Energy is building SmartGridCity, a $100 million effort in Boulder, Colorado, that will allow customers to monitor their electricity consumption via the Web, as well as pump wind and solar energy into the grid. If SmartGridCity is a success, Xcel hopes to persuade public utilities nationwide to invest in similar systems.

This type of investment benefits the grid tremendously and must be encouraged at every turn. According to Roger Anderson at Columbia University's Center for Computational Learning Systems, tweaking the grid's communications capabilities can increase transmission efficiency by 50 percent—no additional wires necessary.

Self-interest has a long, noble history of spurring some of America's greatest infrastructure projects. But it must often be nudged along by cleverly crafted government incentives. The transcontinental railroads, for instance, got a crucial boost from a federal land grant program. These grants, often located in barren quarters of the western US, weren't worth much at the time; the railroad companies laid track through the land in hopes of increasing property values. Energy regulators already have some experience creating similarly ingenious carrots. In the early 1980s, states began to realize that utilities wouldn't become more efficient until their revenue was no longer tied directly to the sheer amount of energy produced. So regulators in dozens of states began to implement decoupling, a policy that rewards utilities for coming in below generation targets. Suddenly, companies could profit by promoting efficiency.

With similar policies, we can push energy companies to make the grid better for everyone. For example, utilities have not been eager to incorporate renewable power from customers' rooftop solar panels or backyard wind turbines. They would be more likely to do so if they were allowed to hike rates or were given tax breaks for making the necessary accommodations.

The grid took more than a century to grow into the unwieldy beast it is now. Given the urgency of climate change, energy independence, and economic demands, we have only a fraction of that time to fix it. But the solution won't spring forth fully formed. This, the greatest engineering challenge of our era, must be solved the same way it was created—piece by piece, with utilities and consumers acting in their own interests. For too long, those interests have been misaligned. It's time for a reset.

Contributing editor Brendan I. Koerner (brendan_koerner@wired.com) writes Wired's Mr. Know-It-All column and blogs at microKhan.com.