he Smart Grid is a transformation in the electric industry with great potential for corporate competitiveness and regional economic development, and economic developers have a key role in making it happen.
What is the Smart Grid? The current electricity grid system essentially stops at the meter on a building. The Smart Grid is able to better measure and control the energy usage within a home or business. Smart Grid is the management of electricity, not just its delivery. A new distribution and information system will predict and proactively respond to the behavior and actions of its electric power users. The Smart Grid can:
Companies that want a competitive edge will have access to data-management tools that a Smart Grid system makes possible. Regions that want to spur and manage economic development need the Smart Grid competitive advantage.
This is a new game. Transition to the Smart Grid is analogous in the telecom industry to migrating from the Princess phone to handheld devices. The magnitude of the electricity system change will be massive, and it won't be uniformly done across the country or done solely by traditional players. Economic developers with an understanding of the way the Smart Grid can serve their organizations can start acting now to help their regions be first adopters.
What major benefits does a Smart Grid bring to a region? The chief benefit is electric reliability. Blackouts and brownouts occur in part from deficiencies in the old grid, and lost power is lost money. The Department of Energy estimates a $6-billion loss from the 2003 Northeast blackout, for example. An outage at a medium-sized optics-industry plant can drain more than a quarter million dollars in losses each hour. A restaurant can lose thousands in food and materials – a significant sum for a small operation. It all adds up.
A Smart Grid can sense heavy loads and detect minor outages, even forecast them to a significant extent. "Smart Grid technologies can enable utilities to quickly address power failures providing customer dollars in productivity gains due to a lessened impact from power failures," says Mike Meikle, CEO of the management and information technology firm Hawkthorne Group in Richmond, Va. "Building managers can address issues faster with smart building systems – HVAC, security, power, water – that are monitored for a shortened response time."
A Smart Grid can reduce corporate financial risk. Grid-related tools will provide companies direct revenue opportunities and avoided costs. High quality Smart Grid applications will provide a customer portal, says John Espey, COO of Nexgrid, which offers real-time, two-way communication to monitor, manage and control the electric distribution grid. "Companies will get much finer-grained detail about how they're using power. Rather than a read once a month, they see power use in 15-minute intervals and view usage in real time. A company may learn that its peak usage occurs at a high-cost time, and usage could easily be shifted. If you don't know when the peak occurs, though, you can't do anything to change it."
Reliability and reduction of financial risks benefit economic developers, too. Prospects for expansions and relocation will go where they have more options for success. Economic developers, then, should be catalysts in the Smart Grid transition.
Tom Flynn, director of economic development for Loudoun County, Va., already has taken action. "We have a sustainable energy task force," he explains. "We recognize the need to invest in a grid poised for the future, one that hosts distributed generation as well as base load. That is a trend in electric generation, and we need to plan for it."
Last year in Loudoun County, 1.2 million sq. ft. (111,480 sq. m.) of data centers were sited. Flynn recognized the needs of this new stakeholder. He says there is a growing demand from this investor type for a forward-looking Smart Grid plan: Federal contractors and international firms are including it in the bid process. Flynn says the rapid rise in cloud computing is another driver of Smart Grid technology.
Flynn says the key is to have the right people in the room. The county has convened the utilities, large power users (such as data centers) and educational institutions so that the work force is prepared. "With this task force," says Flynn, "we have the stakeholders involved in planning the evolution of our power system. All voices who are [affected] by a better grid are being heard." Flynn says that the economic development organization is the logical convener, but external stakeholders have to be heavily involved and provide the drive.
Areas that focus on the business case behind the Smart Grid will benefit, says Jason Gates at ACME Business Consulting in Portland, Ore. "The case needs to be built on tangible, measurable business needs and associated benefits available today rather than potential future needs," he says. "Smart meter deployments provide a good example. Several utilities around the nation have struggled with regulatory approval because their business case failed to focus on direct, quantitative costs savings. Instead they relied too heavily on qualitative benefits and the promise of emerging technologies to provide future savings or at least minimize cost increases."
One approach is a pilot test. Let the decision-makers see or test drive the system. Says Nexgrid's Espey, "We set up a phase-one pilot for one of our municipal customers in about one week at a cost of $30,000. They operated the pilot for three months to evaluate how to incorporate the system into daily operations and then voted to expand the pilot to 2,500 homes."
Kansas City Power and Light's SmartGrid program focuses on several urban core neighborhoods in Kansas City, including the Green Impact Zone, a 150-square-block initiative led by U.S. Rep. Emanuel Cleaver II to focus federal stimulus dollars on a targeted geographic area. The project includes 14,000 customers, all of whom received new, advanced meters as a part of this project. In the end the project encompasses hardware, new rate options, energy-usage displays and educational materials. The company wisely put together a coalition that includes neighborhood groups, academia and businesses. From a public affairs standpoint, the company has strategic partners under one roof. By bringing new technology to a demographic that may not typically be on the cutting edge, this demonstrates outstanding corporate citizenship, too.
Think beyond electricity and into information service delivery. That's the way John Espey thinks: "Build the grid as a service offering. The true Smart Grid supports electric, water, gas, sewage, traffic light controls, public wifi networks and home automation including security, lighting and even home AV." The Smart Grid is going in that direction, so start with a broad perspective now.
The Smart Grid is a necessary ticket for growth. Espey identifies the real challenge for economic developers: "This requires a complete ecosystem of technology and project management and manufacturing providers as well as tight coordination between disparate utility providers. I think clearly there's a role, if not a mandate, for economic developers as those people who can bring together those sorts of constituents."